History/ Introduction
Conveyancing Prior to Torrens
 Until the creation of the Torrens title system, land ownership was based on the “common
law” system of conveyancing under English law, now known as “old system”
o Land ownership and title under the old system is known as “old system title”.
 When land is transferred or mortgaged under the old system, a separate deed is drawn up
between the parties. That deed is then lodged for registration with the Registrar-General at
the Department of Natural Resources, Mines and Energy (DNRME)
 Unlike Torrens title land, old system land is not guaranteed by the government
 Title was derivative, thus the validity of documents was crucial.
o Historical investigation of chain of title: Accordingly, a number of processes and
checks should be made by a lawyer advising on any dealing with old system title
land.
o This includes reviewing the abstract of title to prove the chain of title and
considering whether the conversion of the title to the Torrens title system is
preferable.
 Public ceremony
o Current owner and new owner gather on the land or near it and the current would
speak words (the ‘fifthment’) which indicated intention to convey the land
o Delivery of seisen was act of current symbolically giving to new owner (e.g. cutting
twig from land and giving to new owner)
Problems of ‘Old System’ Conveyancing
 Forgery made conveyancing very difficult, needed high degree of specialist knowledge
 Queensland adopted a 30 year rule for chain of title, whereby a prospective purchaser
would only need to look back on the title for the past 30yrs in order to establish good title
to the property. However, this change did not give validity to title, and if fraud or any
invalidity was proven to have occurred prior to the 30yr period the title would still be found
to be invalid.
 The development of the system of registration did not change the conveyancing process but
rather just provided a register where all the documents were compiled. This meant that it
was easier to trace through title through this informal register, but there remained a need
to look at priority disputes and invalidity still passed through transfers of title.
Old System title conversion to Torrens title
 Old conveyancing systems were complex and uncertain. After Sir Robert Torrens was
elected to the SA Parliament, the first Torrens legislation was introduced in 1858.
 This was adopted in Queensland through the Real Property Act in 1861 (which has now
been repealed).
 Prior to this, freehold land granted by the Crown was dealt with under the now repealed
Registration of Deeds Act 1843.
 Unlike other states, all identified “old system land” in Queensland has now been converted
to Torrens title.
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Key Features of Torrens System
 Certainty and ease of transactions
 Each grantee would become a fresh grantee from the Crown
 Lord Watson in Gibbs v Messer
o The main object of the Torrens system is to save people from dealing with registered
proprietors from the trouble and expense of going behind the register, in order to
investigate the history of their author’s title and to satisfy themselves of its validity
o This is accomplished by providing everyone who purchases, bona fide and for value,
from an RP, and enters the deed of transfer or mortgage on the register, shall
acquire an indefeasible right, regardless of the infirmity of the author’s title.
 The Torrens system is not a system of registration of title but a system of title by
registration. The title it certifies is not historical or derivative, it is the title which registration
itself has vested in the proprietor (Barwick CJ in Breskvar)
 Indefeasibility is the foundation of the Torrens system of title (Bahr v Nicolay)
o Indefeasibility of title is a description of the immunity from attack by adverseclaim to
the land or interests which a registered proprietor enjoys (Lord Wilberforce in Frazer
v Walker)
o Cannot be attacked by someone who says that they were previously dispossessed by
land title by fraud
Principles of Torrens System
 Mirror principle
o register of title is a mirror which reflects accurately and completely the accurate
facts of a person’s title (don’t need to worry what is not reflected back at you)
o Burdens on title can be registered on it
 Curtain principle
o register is sole source of information, don’t involve trusts and equities that lie
behind the curtain
 Insurance
o Compensation provided where registration is not conclusive and results in loss
Torrens System in Queensland
 Modern legislation: Land Title Act 1994
o Does not completely override the common law but works beside it
Registration of a lot
 ‘Lot’ – separate, distinct parcel of land (sch 2)
 An indefeasible title for a lot is created on the recording of the particulars of the lot in the
freehold land register (s 37). An indefeasible title…is the current particulars in the freehold
land register about the lot (s 38)
The Register and Registrar
 Registrar (s 6) and registry/register (s 7)
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 ‘A register in the land registry may be kept in the form (whether or not in a documentary
form) the Registrar considers appropriate’: s 8(1)
o Register is now computerized – documents stored in digital form after paper
documents are used for purpose of registration
 Anyone may search the register (subject to a fee): s 35
Interests and Instruments
 The main ‘interests’ capable of registration are:
o A transfer of a lot (eg. when a lot is sold);
o Mortgage;
o Easement;
o Lease;
o Statutory covenant.
 An ‘interest’ is recorded on the register through registration of the appropriate ‘instrument’
(eg. an instrument of transfer, an instrument of mortgage)
Registering an instrument
 Registration occurs when the Registrar records in the register the particulars necessary to
identify the instrument (ss 173-174)
 A registered instrument forms part of the register from when it is lodged (s 175)
 Instruments affecting a lot must be registered in the order in which they are lodged (s 177)
Formal requirements for an instrument
 Must be executed by both transferor/person creating interest AND transferee/person in
whose favour the interest is created: s 11(1)
 Must be executed correctly and sealed with company seal (company) or witnessed
(individual): s 161
 Obligations of a witness: s 162
Consequences of registration
 Once registered, an instrument forms part of the freehold land register (s 31)
 An instrument does not transfer or create an interest in a lot at law until it is registered (s
181)
 On registration of an instrument the interest is transferred or created, is registered, and
vests in the person identified in the instrument as entitled to the interest (s 182)
 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)
 The registered instrument operates as a deed (s 176)
 Indefeasibility
 Applies regardless of whether valuable consideration is given (s 180)
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Indefeasibility under the LTA
 The indefeasible title for a lot is the current particulars in the freehold land register about
the lot: s 38
 Indefeasibility is conferred by ss 184-185 of the LTA
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Deferred vs Immediate Indefeasibility
 Immediate indefeasibility = the transferee obtains indefeasible title upon registration of title
 Deferred indefeasibility = the transferee obtains indefeasible title when they transfer the
title to someone else
 Previous HCA authority supported deferred indefeasibility: Clements v Ellis
o In Frazer v Walker the Privy Council (appeal from NZCA) supported immediate
indefeasibility
o Breskvar v Wall HCA confirmed that indefeasibility is immediate
 Subsequent Qld cases have generally applied immediate indefeasibility
 Possible ‘fictitious person’ exception? - see Gibbs v Messer
o Applies to a very specific scenario, in limited circumstances where strict application
of torrens produces results that are nonsensical
Gibbs v Messer
 The owners of land moved and left power of attorney and certificate of title to their lawyer
o The document was used to transfer title to a fictitious person and, on behalf of the
fictitious person, the lawyer entered into the mortgage with another party
 Owners returned and sought a cancellation of title and a new title issued free of this
mortgage
 If immediate indefeasbibility acquired then owners only get compensation, but fictitious
person and the lawyer would get title
o No valid mortgage because fictitious person did not exist, thus no indefeasibility
o Indefeasibility would vest if the fictitious person transferred to a real person
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Fraud Exception
Relevant Statute
 Pursuant to s 184(3)(b) of the LTA, fraud on the part of the RP engenders an exception to
the indefeasibility of title set out in s 184(1).
Identify the parties
 The defendant will be the RP (of the interest allegedly obtained by fraud)
 Identify the plaintiff – is the alleged frau against the previous RP/ Registrar of Titles/ holder
of unregistered interest?
What is fraud?
 ‘Fraud’ is not statutorily defined, therefore it is necessary to consider common law
definitions
 Case law identifies fraud as ‘actual fraud, i.e. dishonesty’ (Mere Roihi; De Jager), or ‘moral
turpitude’ (Bahr; Latec Investments; Butler), which may involve a ‘fraudulent
misrepresentation (Loke Yew) or wilful blindness (Scorpion Hotels)
 In Russo, the Supreme Court of Victoria held per Batt JA that fraud requires ‘dishonesty,
moral turpitude, a want of probity, and a wilful and conscious seeking to defeat or disregard
another’s rights’
 These general indicia are supplemented by s 184(2)(a), which establishes that an RP is not
affected by mere notice, thus cases of fraud must surmount this threshold
Does the act amount to fraud? Argue by analogy
 Forgery of signature falsely witnessed by bank employee = yes (Hedley)
 Knowing registration of false attestation = yes (De Jager)
 Unknowing registration of false attestation = no (Russo)
 Less than meticulous ID practice = no (Grgic)
 Solicitor did not follow up signature confirmation = no (Young)
 Only one transfer to avoid 2x stamp duty = no (Davis)
 The Court in Davis reconciled the prior authority by holding that recklessness is the deciding
factor in establishing the presence of fraud
Can the fraud be brought home to the RP (or their agent)?
 Fraud ‘must be brought home’ to the RP (Mere Roihi; s 184(3)(b)). As a result, the RP must
have either committed the fraud or known of fraud in the transaction
o It will suffice if the fraud can be brought back to a person acting as the RP’s agent
(Schultz)
o However, the agent must be acting within the scope of their actual or apparent
authority (Schultz)
o In cases of false attestation by an agent, knowledge of falsity is essential (De Jager;
Russo)
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When did the fraud occur?
 It is generally accepted that fraud must occur prior to registration. However, in Bahr, Mason
CJ and Toohey J held that fraud can occur after registration
o As the Court was split (2:2 with Brennan J abstaining from discussing fraud), the
original position stands but it may be subject to change in the future
Does the careless mortgagee exception apply?
 A mortgagee must take ‘reasonable steps’ to confirm identity (s 11A(2))
 ‘Reasonable steps’ includes compliance with LT Practice Manual (s 11A(3), LTPM [2-2005])
o Under these provisions, mortgagors must keep a written record of steps taken, and
originals/copies of documents for 7 years (s 11A(4)
 Failure to keep the required documents may attract a maximum penalty of
20 units (s 11(4))
 In most cases, compliance with the Cerification of Identity Standard would satisfy the
‘reasonable steps requirement’ provided that a prudent lender would be satisfied that the
person who is the mortgagor under the instrument is, or is about to become, the registered
owner or holder of the interest to be mortgaged (LTPM [2-2005])
o 100 points of identification check
 Photograph
 Signature
 Face-to-face meeting with bank to provide these documents
o Mere mechanical compliance with the Verification of Identity Standard, without
attention to detail, is not sufficient (LTPM [2-2005])
o Paragraph 9 of the Verification of Identity Standard requires a mortgagee to
undertake further steps to verify the identity of the Person Being Identified where
they ought reasonably to know that:
 Any identity document is not genuine
 Any photograph on any identity document is not a reasonable likeness of the
person
 The person does not appear to be the person to which the identity document
relates
 A mortgagee does not obtain the benefit of indefeasibility if they failed to comply with s
11A(2) and the mortgage was executed other than by the person who was the RP of the lot
(s 185(1A))
 In Perrin it was held that the bank did not take reasonable steps to deal with Mrs Perrin,
when her husband forged her signature to place securities over her properties
o As a result, the mortgages were removed
o A bank will not be compensated if it did not take reasonable steps (s 189(1)(ab))
Remedies
 If fraud is by the RP – potential cancellation of title/correction of register (s 187)
 If RP is innocent – compensation:
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o If a person is deprived of their interest in a lot because of the fraud of another
person they are entitled to compensation from the State for the deprivation (ss
188(1)(a), (2))
 Application to Supreme Court (s 188B)
 Perpetrators of fraud (when not the Registered Proprietor) can be charged with criminal
fraud outside of property law (s 391 QCC)
Reconciling the cases
 De Jager vs Grgic
o Grgic: bank did not do anything wrong because they were not on notice of any
forgery and it was legitimate for them to assume the mortgagor’s identity
o De Jager: the bank specifically knew that Mrs De Jager’s signature to the mortgage
had not been witnessed
 Russo
o Subjective elements – age and experience of the law clerk, lack of dishonesty
 De Jager vs Young
o In neither case did the bank know about the forgery, it just failed to comply with
procedures
o In De Jager the bank failed from making inquires for fear of learning the truth,
whereas in Young the bank asked for identification and verification documents and
sought to follow these up but failed to do so
Davies
 It will be enough if an officer of the
interested party which h as become
registered knowingly or recklessly certifies
so that the registration is effected (De Jager,
Hedley)
 It will not be enough if some officer of the
person who obtains registration without any
moral turpitude or intention of depriving a
person of an interest in land makes a false
attestation (Russo)
 Recklessness might be the critical element
in false attestation cases
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In Personam Exception
Fraud vs In Personam
 It is common practice to argue the in personam exception parallel to a claim in fraud. The
remedies available for fraud are preferable to a plantiff, however the threshold for a finding
of fraud is extremely high and rarely met. As a result, in personam has emerged in common
law to accommodate claims that do not meet fraud.
o Fraud is more straightforward to prove, but a much higher threshold
 Applicable for cases falling short of fraud (such as Grgic and Gosper)
 Not applicable for knowing receipt of trust property (Farah)
 If an RP is found to be bound in personam and subsequently sells the land to an innocent
purchaser, that new purchaser would not be bound by the same undertaking as the
defendant because the plaintiff’s right to have the undertaking upheld does not run with
the land (Valbirn)
Relevant statute
 Pursuant to s 185(1)(a) of the LTA, an RP does not obtain the benefit of indefeasibility
conferred by s 184 if there is an equity arising from the act of the RP
Is the conduct capable of forming the basis of a cause of action at law or equity?
 Indefeasibility ‘in no way denies the right of a plaintiff to bring against an RP a claim in
personam, founded in law or equity’ (Frazer)
 Conduct capable of forming basis of a cause of action:
o Breach of contract, fiduciary obligation, trust, breach of duty, taking title subject to
an obligation, misrepresentation
Is there an undertaking to be bound by an obligation?
 The Torrens system in no way abrogates from the ‘conscientious obligations’ entered into
by RPs (Barry)
 Obligation to be bound is opposed to mere notice, which has no effect on indefeasibility (s
184(2))
Is unconscionability necessary?
 The majority of the court in Tomasel found that unconscionability is not a necessary
element
Knowing receipt of trust property
 If a third party receives trust property with knowledge that it is trust property, an
knowlegde that their receipt of it is in breach of trust, then the property will be held on
constructive trust by the third party for the beneficiaries (Barnes v Addy)
o Two limbs: knowing receipt or assistance with knowledge of trust property
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 If the property is registered under the Torrens system, can a knowing receipt of trust
property enliven the in personam doctrine?
o The holder of a registered mortgage over a property that is subject to a trust,
registration having been honestly obtained, will not be treated as having received
trust property (Macquarie Bank).
o Mere notice that property is trust property is not enough (Macquarie Bank)
 However, in Garner, the majority of the court held that knowing receipt of trust property
was able to enliven the in personam doctrine, with Davies JA dissenting
 This conflict was resolved in Farah, where the court applied Tadgell JA’s reasoning from
Macquarie Bank. The majority decision In Garner is now doubted, especially since Tadgell
JA’s reasoning was also applied in Bli Bli
Remedies
Fraud
 If there has been fraud by the RP, the Supreme Court may make the order it considers just
(LTA s 187(1))
o The court may, by order, direct the registrar to cancel or correct the indefeasible
title in the register or make any other order it considers just (LTA s 187(2))
In personam
 Establishing in personam does not provide a right to have the register corrected, the
plaintiff will need to rely on their own personal rights and remedies
 S 187 does not apply to claims made in personam, however the court may make another
type order, such as a vesting order under the Trusts Act (Turner)
Other exceptions
Short lease exception
 Leases for more than 3 years must be registered for legal validity (s 64 LTA, ss10-11 PLA)
 A ‘short lease’ is a lease for a term of 3 years or less, or from year to year (or shorter period)
(sch 2 LTA)
 A ‘term’ runs from the first entitlement to possession until the last entitlement to
possession (sch 2 LTA)
 An unregistered short lease is an express exception to indefeasibility under s 185(2)(b)
which runs with the land and thus automatically binds a successor in title
o Whereas, if a long lease is unregistered, the interest does not run with the land. It is
merely a contractual entitlement but not an exception to indefeasibility. Though, the
RP may be bound by the longer lease in personam (Valbirn)
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 Options to renew within 3 years are also protected
by the short lease exception (s 185(2)(b))
o Options to renew extending beyond the 3yr
period are not protected (e.g. 2yr lease and
2yr option to renew – law only protects the
2yrs lease)
Omitted or misdescribed easement
 An easement must be registered on both
dominant and servient titles, if it is not registered
then only a contractual obligation will exist, the
interest will not run with the land
o This is unless the successor in title undertakes to recognise the right, in which case
they will be bound in personam
 ‘ommitted’ is narrowly defined to include three circumstances:
o Easement not recorded when land was initially registered
o Easement was recorded, but is now omitted
o Error of Registrar
Other Exceptions/ Overriding Statutes
Adverse Possession
In Queensland, the general position is that registration under the Torrens system provides
complete security for the RP’s interest to the land in question (s 184 LTA). However, that is subject
to certain exceptions. Notable, in this instance, is the provision set out in s 6(c) PLA, which states
that an interest in land can be acquired by ‘virtue of taking possession’. Moreover, pt 6 div 5 LTA
provides for an application to the Registrar of Titles.
Common law elements
 Factual possession
o ‘the question of what acts constitute a sufficient degree of exclusive physical control
must depend on the circumstances’ (Powell)
o In Mulcahy factual possession was held to be satisfied if possession was ‘open, not
secret, peaceful, not by force, and adverse, not by consent of the true owner’
 Animus possidendi (intention to possess)
o Fencing or enclosing the land in some other way and paying rates have traditionally
been seen as exerting intention (Kirby; Forbes)
o Factors of intention to possess were outlined in Abid Angelo as: i) have they taken
full and complete control of the property? Ii) can others walk on the land or is it
enclosed? Iii) have they maintained or repaired fencing around the area? Iv) have
they paid rates? V) have they managed the area akin to that of the paper title
owner?
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Relevant time periods
 As stipulated by the Limitations of Actions Act, there are specific time limits that dictate a
claim for adverse possession:
o True owner may bring an action to recover land (s 19(1))
 Time only begins to accrue when there is someone who can be sue/be sued
(Gill)
 Whether the owner knows they have been dispossessed is immaterial (Rains)
o The right expires after 12 years (s 13(1))
 Disability extension (ss 29, 5(2)) – if the RP suffers from a legal disability at
the time the cause of action accrues, they may bring an action until 6 years
after they cease to be under the disability
 If the true owner is not known then there is a 30 year limitation period (Re
Johnson)
 There must be continuous, unbroken possession
o After 12 years (or 30 years) and no action, the title of the original RP is extinguished
(s 24(1)
Statutory process under LTA
 Stage 1:
o Lodge an application to be registered as owner (s 99(1))
o Supply relevant information (s 99(2), LTPM [14.2290])
 Evidence of title (if available),
 Statutory declaration of particulars of possession, manner and extent the
land was used and occupied, manner the land was enclosed, improvements,
acts of ownership etc.
 Statutory declaration by two disinterested persons setting out the use and
improvements to the land
 Evidence of rates paid
o Registrar assesses the application (s 102) and
 Refuses it (s 102); or
 Institutes the second stage of the process
 Stage 2:
o Register and applicant must give specific written notice of application to RP of the
lot, RPs of adjoining lots, and anyone with an interest in the lot (s 103)
o Applicant gives general public notice of application (s 18(3))
o Opportunity for a person claiming an interest in a lot to lodge a caveat (s 104)
 No caveat – applicant may be registered and a new title created (ss 108(1)(a),
108B)
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o If a caveat is lodged the Registrar has to decide whether the caveator has an
enforceable interest in the lot, and whether that interest has been extinguished (s
105(1))
 If the registrar decides they DO have an enforceable interest, and are within
time, they can refuse to register the adverse possessor (s 107(1)(a))
 If the registrar decides they DO NOT have an enforceable interest, the
caveator has 6 months to institute proceedings (s 105(4))
 After 6 months the caveat lapses (s 105(2),(3)) and the applicant is
registered as the owner (s 108)
Errors on the register
 An RP does not obtain the benefit of indefeasibility under s 184 if:
o (s 185 (1)(e)) There is another RP making a valid claim under an earlier existing
indefeasible title for all or part of the lot
o (s 185 (1)(f)) There are 2 indefeasible titles for the same interest in the lot and the
inconsistency has arisen through failure on transfer to cancel, wholly or partly, the
indefeasible title of the first RP
o (s 185 (1)(g)) The lot described in the indefeasible title wrongly includes land in
which the other RP has an interest
Earlier existing indefeasible title
 Earlier existing indefeasible interests will defeat later in time indefeasible interests (s
185(1)(e); Esperance Land Co)
o Commentators on Esperance have suggested that reference to the earlier title is to
be interpreted to apply at the time when the error first occurred
 This exception does not apply if the earlier title is cancelled (MBF v Fisher) as this would
derogate from the principles underpinning Torrens
Failure to cancel following a transfer
 Applies where an earlier title should have been cancelled. The transferee prevails in such a
case, and the original RP’s title will be cancelled by the registrar.
Wrong inclusion of land
 If additional land is wrongly included in the title, the registrar has that power to correct the
indefeasible title pursuant to s 186(1), and any party affected by this correction may apply
to the Supreme Court within one month of the correction to have it set aside.
Errors on the register – Remedies
Registrar’s power to correct the register
 The Registrar has power to correct the register if it is incorrect, and the correction will not
prejudice the rights of any interest holder (s 15(1); Equitiloan Securities)
 The Registrar may correct the register even with prejudice if:
o Subject to a Supreme Court order (s 15(3)(b))
o An easement has been omitted or misdescribed (s 15(3)(a))
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o The right holder had actual/constructive notice that the register was incorrect (s
15(8))
 The registrar may correct the register if:
o It is incorrect due to an incorrect recording of an interest (s 15(2)(a))
o An inquiry has been held and it has been determined that the register is incorrect
(e.g. due to fraud) (s 15(2)(b))
 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))
 A register that has been corrected has the same effect as if the relevant error had not been
made (s 15(7))
Supreme Court Orders
 If section 185(1)(e), (f) or (g) applies, the Supreme Court may make the order it considers
just, including (s 187):
o A Cancel or correct the indefeasible title or other particulars in the register
o B Cancel, correct, execute or register an instrument
o C Create a new indefeasible title
o D Issue a new instrument
o E Do anything else
 ‘The order it considers just’ 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 (Perrin)
Compensation
 Available when an exception to indefeasibility cannot be made out
 State compensation is available if a claimant is deprived of an interest in a lot (s 188), or
suffers loss or damage (s 188A), because of:
o Fraud of another person (ie. not the RP);
o Incorrect creation of an indefeasible title in the name of another person; or
o Incorrect registration; or
o An error in an indefeasible title or in the freehold land register; or
o Tampering with the freehold land register; or
o 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
o 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
o The exercise by the registrar of a power in relation to an application or dealing with
which the person had no connection.
Exclusions
 S 189 – no entitlement to compensation in cases where:
o Breach of a trust or fiduciary duty
o Claimant is a mortgagee and failure to take reasonable steps
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o
o
o
o
o
o
Person, agent or lawyer caused or substantially contributed
Corporation – improper use of seal
Correction where land was mistakenly included
Error in location/boundaries etc.
Matter that the registrar is excused from inquiring about
Omitted/misdescribed easement
Procedure for claiming compensation
 Claim to registrar
 If not resolved, apply to Supreme Court s 188B
 12 year time limit (s 188C)
Torrens assurance fund
 Compensation provided by ‘state’
 Reflects Torrens principles
o Reflects insurance principle underpinning torrens, that recognises that loss may be
suffered due to the operation of the torrens system
 Registration fees – portion diverted to fund
 Loss spreading
Measure of compensation
 To put the claimant in the position they would have been in had they not suffered loss,
damage, or deprivation
 Loss of land – market value of land
o date of deprivation or date of judgment?
 Court can apply flexibility in applying damages – can use earlier or later date
 Mortgage over property – amount to discharge mortgage
o If mortgage registered that cannot be removed – damages enough to discharge
mortgage
Overriding statutes
 The clash between Torrens legislation and overriding legislation is what poses the greatest
single threat to the operation of the Torrens System (Quach)
Differing approaches in the cases
 South-Eastern Drainage: pure statutory interpretation approach, if there is inconsistency
between two statutes the later in time will prevail
 Miller: Regard had to the intention of the legislation, as opposed to purely which legislation
came later in time
 Pratten: Public vs private rights approach, where a public act will override Torrens, which
deals with the private rights of individuals
o Quach: Reluctant following of Pratten
 Hillpalm: The HCA did not engage with the issue or try to resolve what test should be
applied, however Kirby J (dissenting) placed emphasis on the public interest, pure ‘later in
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time’ statutory interpretation, and the specificity of the act
 Golden Paradise: The two statutes could operate together
 Kogarah: The two statutes could operate together
Status of Unregistered Interests
 An instrument does not create a legal interest in a lot until it is registered (s 181)
o However, the unregistered antecedent instrument/agreement, though in itself not
effective to create a legal or equitable estate or interest in the land before
registration, is not voided by Torrens or rendered inoperative. It will be effective to
bring into existence an equitable estate or interest in the land (Chan)
Priorities
 Types of priority disputes:
o Legal interest followed by legal interest
o Legal interest followed by equitable interest
o Equitable interest followed by legal interest
o Equitable interest followed by equitable interest
o Mere equity followed by equitable interest
Legal interest followed by a legal interest
 Once registered, the holder of the interest has indefeasible title which cannot be affected,
except by other legal interests (s 184)
 A later-in-time legal right will trump an earlier extinguished legal right unless an exception
to indefeasibility applies (e.g. unregistered short lease) or unless the two legal interests can
co-exist (e.g. mortgagee and owner in fee simple)
o In cases of multiple legal interests of the same type, priority will be granted
according to the time of registration of the interest, whereby the later in time will
have priority
Legal interest followed by an equitable interest
 A legal right will prevail over an equitable right, absent an exception to indefeasibility
o E.g. A had legal title as RP, C has later in time equitable title (by virtue of B’s forgery
of A’s signature) – A will prevail
Equitable interest followed by legal interest
 An RP is not affected by actual or constructive notice of an unregistered interest affecting
the lot and, unless an exception to indefeasibility applies (e.g. in personam), the legal
interest will prevail (s 184(2)(a)))
Equitable interest followed by an equitable interest
 Competing priorities of equitable interests are resolved by reference to general equitable
principles of whether there is notice and, if not, which party has the better equity
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Notice
 The 1st interest holder will get priority if the 2nd interest holder had knowledge of the prior
interest (Lapin), unless the 1st interest holder, by act or omission, does something to
deceive the 2nd interest holder into thinking that, at the time when they acquired the
interest, the prior interest was not in existence (Dillon)
o If the holder of the subsequent equity acquired it with notice of the prior equity, his
claim for priority necessarily fails (Lapin; Dillon)
 Notice can be actual (within purchaser’s own knowledge), constructive (would have come to
the purchaser’s knowledge), or imputed (come to, or would have come to, the knowledge of
the purchaser’s solicitor or other agent) (PLA s 346; Dillon)
o An objective test of constructive knowledge: would have come to their knowledge if
inspection/queries that ought reasonably to be made by them were made (PLA s
346)
No Notice (competing equities)
 The court must consider the nature and condition of the parties’ respective equitable
interests, the circumstances and manner of acquisition, and the whole conduct of each
party with respect thereto, and broad principles of right and justice (Rice)
o Priority in time is the last resort after considering all facts and circumstances (Heid)
 ‘Disentitling/postponing conduct’
o The claimant who is first in time may lose his priority by any act or omission which
had or might have had the effect of inducing a claimant later in time to act to his
prejudice (Buttler)
o A failure to lodge a caveat is not determinative, but is a relevant factor to consider
when establishing whether it is inequitable that the prior equitable owner should
retain his property (Heid)
 However, it can be in certain cirucmstances (Clark)
o Failure to do a title search will not be found to be disentitling conduct if the title
search would not have revealed the earlier interest anyway (Clark)
Mere equity followed by equitable interest
 Mere equity = less than an equitable interest as it needs the assistance of the court to be
enforceable
o Without notice: later equitable interest will prevail
o With notice: mere equity will prevail
 A mere equity, meaning a claim to have an equitable interest which can only be enforced by
succeeding in some claim to a court for equitable relief, does not participate in competitions
of priorities with equitable interests which have been acquired in good faith for valuable
consideration (Double Bay Newspapers)
Caveats
Lodging Caveats
17
 A caveat neither confers nor takes away any right, it is simply a statutory injunction (Owen
CJ, Dwyer)
 S 121 formalities to be adhered to
 A caveat may be lodged by (s 122):
o A person claiming an interest in the lot
o The Registrar under s 17
o The registered owner of the lot
o (1)(d)-(e): A person to whom a court has ordered that an interest in a lot be
transferred
 Wide interpretation of ‘court order’ (in circumstances where the ‘order’ was
essentially a record of an agreement – court-sanctioned agreement) (Re
Worrell’s Caveat)
 A ‘person claiming an interest in a lot’
o It must be an interest in the land (contractual and personal interests do not suffice)
o Legal or equitable estate, or a right, power or privilege over property (sch 1 Acts
Interpretation Act)
o Re Henderson’s caveat

o Broad range of circumstances, including:
 Purchaser under unconditional contract
 Person claiming a security interest
 Purchaser under an option to purchase land
 Other interests:
o Re Dixon’s Caveat: A mortgagee’s interest in the land = caveatable interest
o Griffiths: creditor’s charge over land to secure payment of a debt = caveatable
interest
o Re Bosca: contracted interest in proposed lot = insufficient
o Re Henderson: conditional contract of sale = caveatable interest
 Re Henderson’s caveat:
o An equitable interest in land can exist when a claimant is entitled to something less
than a full decree of specific performance ordering conveyance (i.e. if they are
entitled to injunction or other equitable remedy to maintain or protect their
interest)
o A full equitable interest in land is not necessary to have a caveatable interest, which
has been given a wide interpretation by the court in Re Henderson’s Caveat
After a caveat is lodged
 The registrar must give written notice to each person whose interest is affected (s 123)
 The lodgement of a caveat will prevent registration of an instrument affecting the lot from
the date and time endorsed by the registrar (s 124(1))
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 Exceptions under s 124(1)
o Instruments the caveat does not apply to, or the caveator consents to
o Some mortgage instruments
o An interest that will not affect the caveator’s interest
Cessation
 A caveat has effect until it lapses, or is cancelled, rejected, removed or withdrawn (s
124(1A)
 The caveator must start proceedings before a court within 3 months otherwise the caveat
will lapse. If the caveatee serves notice on the caveator to start proceedings, then the
caveator will have 14 days to bring the matter before a court (s 126)
 A caveator may withdraw a caveat by lodging a request to withdraw it (s 125)
 A caveat may be cancelled by the registrar if it is satisfied that the interest claimed by the
caveator has ceased or was withdrawn (s 128)
 If the caveatee cannot wait 14 days for the caveat to be removed, they may apply to the
Supreme Court for the remoal of the caveat. The Court will remove the caveat if the
caveator cannot prove that there is a serious question to be tried (s 127)
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(3))
o The onus is on the caveator to prove that the caveat was lodged with reasonable
cause
o The question 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 (Brooks)
o Sufficient if the caveator had an honestly held belief that their interest was
caveatable (Brooks)
o Court will have regard to whether the caveator was angry and seeking revenge
(Brogue Tableau)
Priority notices
 Priority notice is a mini caveat – recognises some vulnerability on part of person who pays
purchase price before they are RP
o Caveat is an onerous process
o Priority notice to protect interest in specific circumstance – recorded on title but not
officially registered
 A priority notice for a lot may be deposited by or for any person who is, or will be, a party to
an instrument that is to be lodged, and will affect the lot: s 139(1)
o Formal requirements in s 139(2)
Effect
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 Prevents an instrument affecting the lot or an interest in the lot being registered until the
notice lapses or is withdrawn, removed or cancelled: s 140(1)
 Instruments lodged, but prevented from being registered by a priority notice, are taken to
have been lodged (in the order in which they were lodged) immediately after lodgment of
the directly related instruments specified in the notice: s 148
Cessation
 Lapses - when the instruments related to it are lodged, or after 60 days: s 142
 Withdrawal: s 143
 Cancelled by the Registrar or by Supreme Court order: ss 144-145
 Compensation for an improper priority notice: s 146
MORTGAGES
Torrens mortgages
 Torrens mortgages do not involve a transfer of land (as did Old Sytem mortgages), but are
mere security interests in the land
o As defined as ‘a charge on a lot or an interest in a lot for securing money’ (LTA sch2)
 A lot may be mortgaged by registering an interest of the mortgagee (LTA s 72), whereby the
mortgage operates as a charge on the property (LTA s 74)
 An unregistered mortgage will only take effect as an equitable mortgage, however it must
still satisfy formality requirements (i.e. it must be in writing and for consideration)
o Equitable mortgages can be created by leaving the certificate of title with the
mortgagee
 There can be more than one mortgage over land, and priority is afforded according to the
date of lodgement (ss177-178)
Formal requirements
 The mortgage must be validly executed, contain a description of the lot, the debt, and the
interest to be mortgaged (s 73(1))
 The mortgage instrument must be executed by the transferor and transferee (s 11), and
witnessing requirements must be adhered to (ss 161-162)
After a mortgage is lodged
 A mortgage will be registered after the particulars are recorded in the register (ss 173-174).
A legal interest will thereupon be created in the mortgagee (s 182) and they will acquire
indefeasibility under s 184
 The mortgagee (through transfer of mortgage) will attain an indefeasible mortgage, which is
not affected by the conduct of the original mortgagee (Costello)
 The mortgage interest is indefeasible, but the content may still be considered (Small; Yazgi)
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Rights/duties of mortgagor
Duties of mortgagor
 Mortgagors are bound by a covenant to pay, this duty exists either expressly under the
mortgage instrument or impliedly under s 78(1)(a) PLA
o Mortgagors have a right to pay out the mortgage in full at any time, including
interest charges applicable to date (NCC s 82)
o There is statutory relief provided against acceleration clauses which require full
repayment of the mortgage upon missing a single repayment (s 95 PLA; NCC ss 88,
93)
 S 95 PLA provides protection against acceleration clauses provided that the
mortgagor pays whatever amount is overdue and continues to pay
instalments as normal
 If the mortgagor cannot pay, then the mortgagee can resort to other
remedies
 Covenant to protect property: in the even of default, the mortgagee has the right to sell the
property to recoup loss, so the mortgagor is under a duty to ensure that the property is
maintained in good condition (s 78(1)(b))
Rights of the mortgagor
 Equity of redemption – once mortgage obligations are discharged, the mortgagor had a right
to clear title
o Any ‘clogs’ on the equity of redemption may be void:
 Extinguishment of the right to redeem (e.g. an option to purchase)
 Postponing the right to redeem
 Collateral advantages
 Extinguishment of the right to redeem
o No contract between a mortgagor and a mortgagee made at the time of the
mortgage and as part of the mortgage transaction can be valid if it prevents the
mortgagor from getting back his property on paying off what is due on his security
(Samuel)
 Once a mortgage always a mortgage
 National Credit Code rights:
o Pre-contractual disclosure (ss16-17)
 Amount of credit, how interest is calculated, amount of interest, how to be
paid, fees, whether insurance is required etc.
o Some clauses/mortgages are void (ss 44, 45, 49)
 Mortgage that does not identify property, mortgage that charges all property
(not specific property), mortgage that the person will get in the future,
mortgage that is secured by something worth more than the loan
o Opportunity to remedy default prior to mortgagee bringing proceedings (s 89)
 In addition to rights under PLA
Rights/duties of mortgagee
 Exercise of power of sale
 Sue on personal covenant
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 Entry into possession
 Foreclosure
Power of sale
 The mortgagee has the power to sell the mortgaged property under s 83 PLA
o Examples:
 Bank is owed $200,000, property sells for $500,000
 Bank gets $200,000, owner gets the remainder (or other creditors in
line)
 Bank is owed $600,000, property sells for $500,000
 Bank gets $500,000, has to rely on contractual right to sue for the
remainder
 Pre-conditions (s 84(1)):
o There must be a default either in payment or some other provision of the mortgage
o Notice has been served (it may be in the approved form s 84(2))
 The notice ought to enable the recipient to understand with reasonable
certainty what he is required to do, as a question of fact and degree (Fox;
followed by Clarke)
o The default continued for 30 days
 Duties
o Common law duty to act in ‘good faith’: Forsyth
o Reasonable care to ensure that the property is sold at market value: PLA s 85(1)
 This has replaced the common law duty of good faith in Qld: Cameron
 Market value – “what would a person desiring to buy the land have had to
pay for it on the day to a vendor willing to sell it for a fair price but no
desirous to sell”: Spencer
o To satisfy the duty of ‘reasonable care’, there must have been an independent
bargain where the mortgagee and purchaser at auction were controlled by different
people (Bangadilly)
 Reynolds summarised the case law into a list of principles governing what is
‘reasonable care’:
 The duty cannot be delegated to agents or auctioneers (Nixon)
 The 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 (Nixon)
 Advertisement of the auction is obligatory and must contain clear
property details (Pendlebury)
 Outlet and timing of the advertisement are relevant (Pendlebury)
 Advertising error is not determinative unless it lead to a depressed
price (Tyler; Stone)
 An independent written valuation must be acquired (Stockl)
 Genuine offers to buy must be considered (Stockl)
 If property is advertised and conducted, then offers and bids are
evidence of market value (Stockl)
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
Even if the process was deficient, if there was a sale at market value
then the mortgagor can have no remedy (Apple Fields)
 Prescribed mortgages: mortgage over residential land, and the mortgagor’s home is on the
land (PLA s 85(10), PL Regs 2013, reg 3)
o If a mortgage is a prescribed mortgage, the mortgagee has a duty to (s 85(1A) PLA):
 (a) adequately advertise the sale; and
 (b) obtain reliable evidence of the property's value; and
 (c) maintain the property, including by undertaking any reasonable repairs;
and
 (d) sell the property by auction, unless it is appropriate to sell it in another
way; and
 (e) do anything else prescribed under a regulation.
 When the mortgagee decides to sell, it must sell for the current market value. But this
obligation is only enlivened when they decide to sell, they have no positive obligation to
exercise their power of sale at a particular time (China; Tyler)
Effect of Sale
 Mortgagee exercising a power of sale has the power to transfer the land mortgaged and all
the interest in the land mortgaged (PLA s 86)
 Title vested in transferee, free of mortgage obligations (LTA s 79)
 Purchaser’s title not affected by breach of mortgagee’s duty, improper exercise of power,
etc: (PLA ss 85(3), 87), the act of registration cures any defects in the process (s 184)
Distribution of sale proceeds – PLA s 88
 Costs of sale (real estate agent etc.);
 Discharge of mortgage (in order of priority);
 Other mortgages;
 Remainder to person entitled (mortgagor/trustee in bankruptcy)
Remedies
Damages
 Person damnified by the breach of duty has a remedy in damages against the mortgagee
(PLA s 85(3))
 A mortgagee exercising its power of sale by way of auction must exercise reasonable care in
fixing the reserve (Cameron)
o Its duty goes beyond simply commissioning a report from an expert valuer
o It is obliged to consider the whole report, to seek clarification as necessary and not
to adopt the valuation in the absence of a reasoned case in support of it
o Failure to do so = damages payable
Injunction
 Injunction to restrain sale – Consider whether pre- or post-sale (ie. third party purchaser
involved), and whether there was a defect in the process
23
 Pre-sale (no third party purchaser involved)
o No defect in process: equitable right to redeem (may need to pay money into court)
(Inglis)
o Defect in process: inadequate notice (s 84), failure to take reasonable care with
advertising etc (s 85)
 At the discretion of the court, but a trend away from requiring payment
 Post-sale
o Post-contract, pre-registration
 If the mortgagee does not exercise the power of sale "in good faith" and the
purchaser has knowledge of the facts which show the lack of good faith purchaser cannot obtain a right superior to the right of the mortgagor
(Forsyth)
 Slightly unclear – see PLA s 87
o Post-registration
 Exception to indefeasibility?
Sue on personal covenant
 Sue for breach of obligation to repay (express, or implied by PLA s 78(1))
o Personal action – not against property
o Can use in conjunction with power of sale (where sale does not net enough money
to discharge obligation)
Entry into possession
 LTA - mortgagee may enter into possession of the land if the mortgagor defaults: s 78(2)(a)
Foreclosure
 Alternative to power of sale – title in satisfaction of debt
o Mortgagee may choose: PLA s 89(2)
o 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
EASEMENTS
 Definition
o Non-exclusive right over land
o Distinguish from leases and licences
o Must be two parcels of land
 Terminology
o Dominant tenement/land/owner – receives the benefit
o Servient tenement/land/owner – takes the burden
Re Ellenborough Park elements:
 Must be a dominant and servient tenement
 Easement must accommodate the dominant tenement
24
 Must not be owned and occupied by the same person
 Easement must be capable of forming the subject matter of a grant
o a.) the rights must not be too wide or vague,
o b.) the rights must not amount to rights of joint occupation,
or would
substantially deprive the owners of proprietorship or legal possession, and
o c.) must not be mere rights of recreation, possessing no quality of utility or benefit
 Re Ellenborough Park
o Elements 1 and 3 were easily satisfied
o The park ‘accommodated’ the houses – made an analogy to a private
backyard/garden
o It was capable of forming the subject matter of a grant – it was specific, it did not
deprive the owners of proprietorship, and it possessed utility (benefits for exercise,
domestic purposes etc)
PERSONAL PROPERTY
Legal Ownership
 ‘Ownership’ is said to be the greatest right or bundle of rights and incidents that can exist in
relation to property (Coretrack)
 The most salient question in law is ‘who has the superior possessory right?’
 An assertion of possession is tantamount to ownership, whereby possession is not merely
evidence of absolute title but it confers a title of its own. This ‘possessory title’ is as good as
the absolute title as against every person except the absolute owner (Russell)
 Title is derived from being either the original owner or the derivative owner, whereby the
fundamental nemo dat rule operates so that the transferee of goods can receive no better
title than that of his transferor.
o Though the nemo dat rule is subject to statutory exceptions (SOGA ss24-27)
Effect of Affixation/ Intermingling on ownership
 The overriding principle is that the common intention of the two owners of the goods in
their original form prevails. But where the intention is unclear, the default is that the
ownership of the joined parts is presumed to remain in both parties severally so long as the
parts remain distinguishable ()
25
o Where the two parts become indistinguishable, where the smaller item cannot be
removed without substantial injury to either itself or the principle item, the general
rule is that the owner of the larger thing owns the thing in its new and enlarged state
(Rendell; Hendy Lennox)
 However, if both parties’ homogenous goods are, by consent, mixed into one
indistinguishable whole then the resultant product of this commingling situation is
presumed to be owned by both parties as ‘contributing owners’ in common in proportion to
the value of their respective contributions (Coleman)
o Where intermixture is wrongful, the mixture is held for the respective owners in
common in proportion to the original quantities owned by each of them, and any
doubt as to the original quantities is resolved in favour of the non-consenting owner
(Coleman)
Possession
Different kinds of possession
 There three different kinds of possession:
o Actual (or ‘factual’) possession
o Possession vested in interest but not in fact
 = a right to take actual possession which right may be ‘immediate’ or
‘qualified’ (i.e. a future or reversionary possessory interest only
o Constructive possession
 Possession is effected by delivery of the means of control (e.g. keys)
 Ownership can be transferred by way of gift if there are clear words of gift/symbolic delivery
(intention to transfer) or a change in possession (Lock; In Re Cole)
Actual possession
 Two elements are required to establish actual possession: actual physical control of the
property and an intention to exclusively control it (Pierson; Young)
Physical Control
 Control must be exclusive for the purpose of establishing actual possession. There must be a
complete taking, a sufficient occupation to exclude strangers from interfering with the
property (Pierson; Young)
 However, what constitutes control is relative and depends on the kind or nature of the item
of property involved (Pierson; Young)
o Possession requires some unequivocal act that the whole world could understand as
being a physical taking or capture of the property in question (Pierson)
o Near enough is not good enough, there must be consummation of the taking
(Young)
Physical control – abandonment
Intentional abandonment
26
 A lack (or loss) of possession does not negate title unless there has been abandonment
through an act of renouncing or deserting property without hope of recovery or the
intention of returning to it (Re Jigrose)
o Loss of the right to recover possession might also occur through effluxion of time (ss
10, 12 Limitation of Actions Act)
 In establishing abandonment, what is important is the owner’s intention to totally give up,
desert or relinquish absolutely the item in question. Even termination of the search for a
lost item does not necessarily imply abandonment (Keene)
 In sustaining an inference of abandonment, the court will consider (Keene:
o The value of the item
o The circumstances under which it was lost (nature of the place – public/private)
o The length of time for which it has been lost or out of the owner’s possession
o The attempts the owner has made to ascertain its whereabouts
 There is a general presumption against ‘abandonment’ (especially when the goods are
involuntarily taken from one’s own control), the rebuttal of which requires clear and
convincing objective evidence (Columbus-America Discovery)
o The evidence must show an unequivocal intention to abandon the thing, whereby
mere inactivity is usually too equivocal to sustain an objective inference of
abandonment (Moorhouse)
o Abandonment may be inferred if there is a very old wreck, but this inference would
not be proper if a previous owner appeared and asserted his ownership, instead
clear and convincing evidence would have to be shown to prove abandonment
(Columbus-America Discovery)
Intention to exercise continuing control
 After there is an intentional act of abandonment of a chattel the chattel is without an owner
and is in the global commons. In order for the next occupier to appropriate the chattel,
there must be a manifest intention to exercise control over it and an outward intention to
exclude others from it (Re Jigrose)
 Intention generally presupposes ‘knowledge’ in the way of knowledge of controlling
something and knowledge of its contents (Warner)
 One need not have knowledge of the contents provided they fall within the general class of
things of which the defendant is prepared to take charge (Moukataff)
 Although acceptance of a parcel usually indicates possession of its contents, a person may
not be deemed in possession if they were mistaken as to its contents and would not have
accepted possession of it if they had known (Warner)
o Control is strong evidence of possession (it raises a presumption), but absence of
knowledge may negate the inference
o But any mistake must go to the nature of the contents and not merely the quality
Law of Finds
27
 Finders cases involve an evaluation of the relativity of the respective rights of a finder and
rival claimants, such as:
o The original owner
o A subsequent true or documentary derivative owner
o A subsequent possessor
o The occupier of the premises where the item was found
o The employer or principal of the finder
 Whoever has the superior possessory title, relative to another, succeeds in the contest,
regardless of the fact that the finder is not the absolute owner of the chattel. Where the
finder’s right starts from the absence of any de facto control by someone else at the
moment of finding (Armory)
Policy
 Social rules are fashioned so as to implement the governing social policy of locating the true
owner and reuniting them with the lost item. Without such rules, the right to lost property
would be subject to a ‘free-for-all’ in which victory would go to the strongest or most
devious
Things found on the land
Parker Rules (rights and obligations of the finder)
 The finder of a chattel acquires no rights over it unless it has been abandoned or lost and he
takes it into his care and control
 He acquires very limited rights over it if he takes it into his care and control with dishonest
intent or in the course of trespassing
o A thief obtains a good possessory title as against a wrongdoer against him but if
possession is lawfully divested from him and vested in another, his prior possession
will not avail him to recover possession (Costello)
 A finder, whilst not acquiring any absolute ownership in the chattel, acquires a right to keep
it against all but the true owner or one who can assert a prior right which was subsisting at
the time the finder took the chattel into his possession
 Unless otherwise agreed, any servant or agent who finds a chattel in the course of their
employment or agency and not wholly incidentally or collaterally, takes it into his care and
control on behalf of the employer or principle, who acquires finders rights to the exclusion
of the finder
o It Is not enough that the employee/agent happened to be going about his duties
when he found the chattel, the performance of his duties must have been the cause
of the finding and not merely accidental (Byrne)
 A person having finder’s rights has an obligation to take such measures as in all the
circumstances are reasonable to acquaint the true owner with the chattel and to care for it
meanwhile
28
o It is a question of fact as to what, in this connection, should reasonably be done in
the particular circumstances. Regard may be had not only to what the finder does in
relation to the goods but also what he does not do that might reasonably be
regarded as consistent with the actions of an honest person finding the goods
(MacDonald)
o Considerations (MacDonald):
 Examine goods to see if it gave any clue to its owner
 Avenues reasonably open to the finder to locate the owner
 Person who has lost the goods may retrace his steps, and so leaving the
finder’s name and address at the place of discrovery may be one means of
locating the owner
 finder would know that police will receive lost property handed in and take
care of it accordingly, and that the ‘loser’ would contact the police regarding
the item
 newspapers publish ‘lost and found’ columns
Parker Rules (rights and obligations of the occupier)
 An occupier of land/building has rights superior to those of a finder over chattels in or
attached to that land/building, whether the occupier is aware of the presence of the chattel
o If such an intention to take the item into his care and control is manifested, the
occupier enjoys a superior claim to that of the finder, but subject always to a claim
of the true owner (assuming no abandonment) (Flack)
 An occupier of a building has rights superior to those of a finder over chattels upon or in it,
but not attached to it, only if, before the chattel is found, he has manifested an intention to
exercise control over the building and the things upon or in it
o A mere right to exercise control over things found on the land is insufficient, the
occupier’s intention must be manifest and its right actually exercised (Donaldson LJ,
Parker; Tamworth; Flack)
o It is necessary to look at the individual circumstances of a case to determine whether
there has been a ‘manifest intention to exercise control’ (Parker)
o There is a presumption in relation to private residences that the occupier will
ordinarily manifest the necessary intention to control chattels therein. They are
presumed to exercise control over each and every part of the residence, even if it is
not known that certain items were in the residence (Parker)
 An occupier who manifests an intention to exercise control over a building and the things
which may be upon or in it, so as to acquire superior rights to a finder, is under an obligation
to take reasonable measures to ensure that lost chattels are found and to acquaint the true
owner of the finding and care for them meanwhile
 An occupier of a chattel (caravan, boat etc.) is to be treated as the occupier of a building for
the purposes of the rules
Things found in the land
 The occupier’s position is much stronger for things found in the occupied land, whereby it is
deemed that the occupied has possession of anything buried in the land or incorporated in
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anything that is part of the land (e.g. a building) (Sharman)
 The degree of control is not so important, as the occupier will automatically have
possession. The occupier’s de facto possession is constituted by their general power and
intent to exclude unauthorised interference with the land (Sharman)
 The owner of the land is entitled to any chattel that may be in the land, even where the
finder is excavating the land with the licence of the owner (Webb)
 A tenant of the land had de facto possession of the chattel found in the land, however this
may be defeated by a contractual clause in the lease agreement reserving ownership of
items found in the land to the freehold owner (Appleyard)
The right to possession: Possession vested in interest only
 Immediate vs Qualified right to possession
Immediate right to possession
 A vested right to recover possession immediately (Wilson)
Qualified right to possession
 There is some precondition to recovery, the possessor’s right to possession is suspended or
deferred (Ward)
Bailment
What is a bailment?
 A bailment arises when one person (the bailee) is willingly and with authority in possession
of tangible personal property that belongs to another (the bailor) who has better title
o The necessary authority may be supplied by the bailor’s consent, express or implied,
or by operation of law
 Bailment represents a transfer of possession in goods without a transfer of ownership: it is
the lawful separation of ownership and possession that is vital (Marks J in Ross)
o The bailee has actual possession (possessory interest), whilst the bailor has
ownership (typically involves a reversionary interest)
o It suffices simply that there is possession severed from ownership – the absence of
an obligation or undertaking to redeliver the goods is not fatal to the concept of a
bailment (Webb)
Original classification of bailments
 Gratuitous deposit for safekeeping (depositum)
 Grauitous loan (commodatum)
 Loan for hire (location et conductio)
 Goods delivered as a pawn (vadium)
 Delivery of goods for reward to do something with them (e.g. carriage)
 Delivery of goods without reward to do something with them (mandatum)
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Has the bailor parted with possession, and the bailee assumed sufficient control over the goods?
 In order for there to be a bailment, it suffices that there is possession severed from
ownership (Shipbuilders; Webb)
o Whether a party has acquired sufficient possession or control to be constituted as
bailee is sometimes nuanced and required a careful balancing of the facts
(Shipbuilders)
 Has the person leaving the property relinquished, for a duration of the relation, exclusive
possession, control and dominion over the property, so that the person upon whose
premises it is left can exclude, within the limits of the agreement, the possession of all
other? (Zweeres in Shipbuilders)
 There must be indicia of control indicating a relationship different from that of a licence
passively granted by D as a licensor to P (Heffron)
o Retention of car keys (Johnson; Adams; Heffron)
o Presentation of ticket to remove car from facility (West; Heffron)
o Provision of attendant (Heffron)
o Practice of depositing keys with night porter (Heffron)
Has the bailor consented to the bailment?
 The bailor must authorise/consent to the bailee’s possession of the goods, expressly or
impliedly (The Pioneer Container)
o Would be implied in a ‘finding’ situation or if bailor was rendered unconscious and
taken to hospital, or if engaged in risk-assumption (e.g. illegally parking car in towaway area)
 Consent of the bailee is also required, whereby possession must be voluntarily assumed
o In regard to unsolicited goods, the duties of an ‘involuntary bailee’ in relation to the
goods are minimal but not absent altogether; they must still do what is ‘right and
reasonable in all the circumstances’ (Mortgage Express; Campbell)
 Modern courts tend to deny that the bailor’s consent to the transfer of possession is
necessary; all that really is required is the bailee’s consent. It sufficed that the bailee had
voluntarily assumed possession of another’s goods in order to owe to that other the duties
of a bailee (The Pioneer Container; State Rail Authority; Cambridge)
Are there other items in the main bailment item?
 A person does not become a bailee of goods concealed in another item when the
unconcealed item is delivered to them and that person would not consent to receiving the
hidden items if they had known of them (Mortgage Express; Campbell)
 If the concealed item falls within the class of things one would reasonably expect to find in
the main bailment item, it will be considered a bailment (Moukataff)
Loss of identity
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 The very idea of bailment involves the redelivery of a specific thing in its original or some
altered form to the bailor, there cannot be a bailment of a thing which does not remain
identifiable (Chapman Bros)
If it isn’t a bailment, what else could it be?
 Licence – consent without control (Ashby)
 Sale – transfer for value of entire interest to another (Randell)
o Sale and bailment are not necessarily inconsistent with each other, if instalments are
not paid, the goods go back to the bailor under the terms of the bailment, but if the
goods are paid for, the bailment ends (Webb)
 Debt – a personal obligation for the repayment of a fixed sum of money (Evans; Chapman
Bros)
 Trust – no title passes, the bailee cannot treat the goods as their own but must respect the
bailor’s superior title
What is the standard of care?
What type of bailment is it?
 Does the party accommodating the other receive a corresponding benefit?
 Gratuitous bailments/bailments for reward
o If a bailment is gratuitous, the bailor’s action will sound in tort and not contract,
accordingly the bailee may avail itself of defences in tort (e.g. volenti non fit injuria
and contributory negligence) (Walker; Perkins Estate)
 Volenti presupposes the bailor having choice in the matter (e.g. not required
by law to store goods with D) (King)
o If there are continuing arrangements made between a particular bailor and bailee
under which the bailor becomes patently aware that there are certain risks attached
to the goods being stored in a particular way, then it may be that there is evidence
available from which it could be found that the bailee’s responsibility is diminished
or extinguished (Sinclair J in McDonald)
 Incidental bailments
o If a bailment is part of the service it will be for reward, but if it is an independent
transaction (for which no part of the consideration is apportioned), it will be
gratuitous)
Modern approach to standard of care
 The modern approach has been to de-emphasise the distinction between bailees for reward
and gratuitous bailees and to favour a general negligence-style duty as based on the
individual circumstances and merits of each case (Houghland)
 Necessary to make a global assessment of such matters (Tottenham):
o Value of the bailed goods
o Location of the place of bailment (how populated/opportunity for theft)
o The quantum of fees (if any) paid by the bailor
o The bailor’s knowledge of the circumstances of storage
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o The practicality of adopting the required security measures
o The history of problems associated with the storage location
 Bailees for reward: the standard is negligence
o The exercise of reasonable care for the safety of the chattel in the circumstances
 Gratuitous bailees: the standard is the ‘care that a reasonable person would use in looking
after his or her own chattels of the same kind in the same circumstances’
o Approximates ordinary negligence
 These obligations are nearly identical (Conway)
Is the standard of care met?
Onus of proof
 The bailor needs to establish a) the existence of a bailment; and b) loss or damage to the
goods (during the course of the bailment) or failure to redeliver them in specie
Onus shifts to the bailee
 The onus shifts as the bailee is most likely the best person to know what happened to the
goods while in his/her possession (Conway Cockram Motors; Shipbuilders; Hobbs)
 The bailee must negate liability by (Shipbuilders):
o Establish that all reasonable precautions were taken (i.e. no fault)
o Even if fault, there was no causal connection between the bailee’s negligence and
the bailor’s loss (i.e. the loss would have occurredeven if the bailee had taken due
care)
o Where applicable, show that the bailor is bound by an exclusion clause that covers
the bailee’s causative negligence
Is the loss/damage known?
 The bailee is not required to identify the cause of the damage and negative fault in regard to
that particular cause (Shipbuilders)
o If the cause is unknown, the bailee can negative fault by establishing that its general
conduct and practices were reasonable
o If the cause is known, then the reasonableness of the bailee’s conduct may be
assessed in relation to that particular cause
 If, when the bailed goods suffered damage, the bailor was the only person present on the
premises where the goods were stored, the onus will remain on the bailor to establish that
the loss was caused by the bailee’s negligence (Shipbuilders)
o If there was shared occupation of the premises, the entire onus cannot be placed on
the bailee, the bailor’s responsibilities must also be considered (Shipbuilders)
Was the damage/loss caused by an employee of the bailee?
 A bailee may discharge its duties through its employees or the employees of a sub-bailee to
whom it has given possession of the goods
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 If the goods are lost or damaged through the fault of their employees there are two
alternative approaches:
o Vicarious liability
o Express or implied term of the bailment (direct liability)
 An employer is liable for the dishonesty or fraud of its employee if it was done within the
course of the employee’s employment, regardless of whether it was done for the benefit of
the employer (Lloyd; Morris).
o The employer is only vicariously liable for the fraudulent conduct of the employee
whose duty it is to take care of the goods, they are not liable is the employee was a
‘mere opportunist’ (Morris)
 Vicarious liability is strict, and not fault-based
Are there any exemption clauses?
 Subject to the ACL, bailees may limit or exclude liability for breach of their bailment
obligations if (West):
o The limitation or exclusion is assented to by the bailor, either by their signature on a
contractual document containing the exemption or in some other way (bailor having
adequate notice of the exemption and acquiescing in it)
o The words of the exemption are sufficiently clear to cover the particular default in
question
 Even if the bailee may have been negligent, it may be excluded from all liability upon the
existence of a properly worded exclusion clause (Shipbuilders)
o Does the language of the clause negate negligence? Does it cover all items inside the
bailment? Does it extend to bailees as well as owners?
 The phrase ‘at owner’s risk’ has been held sufficient to protect a bailee from the
consequences of its own (or its employees’) negligence, given that a bailee is not liable apart
from negligence (Shipbuilders)
 Deliberate acts (such as employment theft) which constitute a ‘fundamental breach’ require
express wording to effectively exclude liability (Heffron)
 Ambiguities are construed contra proferentem (against the party who drafter the
clause/contract)
Bailee rights and obligations
Bailee’s rights against the bailor
 Subject to statute (ACL), the common law position may be modified by contract (e.g. limiting
liability)
 If the bailment is for a term, the bailee may have possessory rights against the world
including the bailor
 Bailment under a lien or pledge: the bailee may sell goods if the bailor fails to pay the
agreed sum to the bailee
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Bailee’s rights against third parties
 Since the bailee has possession (possession gives title – an absolute and complete
ownership) , they may potentially sue in (The Winkfield):
o Conversion
o Detinue
o Trespass
o Negligence
 The wrongdoer cannot plead jus terii (that someone other than the plaintiff is the true
owner or superior title holder)
o Though earlier cases allowed the defendant to plead jus tertii for the purpose of
limiting damages (Claridge; Brown), these cases were overruled in The Winkfield
(applied in The Premier Group) where it was held that D must treat the possessor as
the owner of the goods for all purposes irrespective of the rights and obligations as
between him and the bailor
 Damages the bailee can claim against the wrongdoer:
o The bailee is entitled to a complete equivalent for the whole loss or deterioration of
the thing itself. But the bailee may, irrespective of fault, have to account to the
bailor for damages received in excess of the bailee’s personal loss, which amounts to
the value of the bailor’s reversion (The Winkfield)
Bailee’s defences against successors of the bailor
 If the bailor sells their interest in the goods bailed while they are still in the bailee’s
possession, attornment may operate as an alteration in control over the goods without any
change in their physical possession (a form of constructive delivery)
o Attornment consists of any overt or positive acknowledgement (by words or
conduct) by a possessor that they now hold the goods as bailee for someone other
than the party who originally bailed them to the bailee
o It signifies a change in the character of the bailee’s possession, as well as marking a
change in the identity of the legal person for whose benefit the goods are held
 Once the bailee has attorned to someone other than their original bailor, the attornment
operates as an estoppel, whereby the bailee cannot subsequently deny the attornee’s title
to the goods comprised in the attornment, and hence their duty to take care of them
o The other consequence is that the purchaser of the goods, to whom the current
bailee has attorned, is subject to the same exclusions of liability as are contained in
the original bailment between the seller and the attorning bailee (HMF Humphrey)
Bailee’s obligations
 There are three primary bailee obligations arising from the bailor-bailee relationship:
o To exercise a standard of care in respect of the bailed goods (safeguard them from
loss, damage or destruction)
o To use the bailed goods only within the terms of the bailment, and not to convert,
make unauthorised use of, or misuse them
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Bailee’s obligations – redelivery of the goods bailed
 At the end of the bailment, to redeliver the bailed goods in specie or deal with them
according to the bailor’s instruction (this is not an absolute duty)
o A bailee’s duty to redeliver goods is not absolute but rather qualified, whereby if D
could show that failure to redeliver was not caused by its negligence (or its servant’s
negligence), then D will not be held liable (Hobbs)
o An exception to this is where the failure occurred because of the bailor’s own misdelivery/conversion, even without fault (not a third party taking the goods, but
giving possession to a third party) (Jackson)
 If the bailee is late or delays in returning the goods, she or he becomes an insurer of the
goods and is strictly liable for any loss or damage that occurs during the period of lateness
or delay (Mitchell)
Bailee’s obligations in regard to selling uncollected goods
 A bailee cannot sell uncollected goods unless there is an agreement or statutory provision
authorising sale, or the facts otherwise justify an inference that the uncollected goods have
been abandoned by the bailor in all the circumstances (Re Arcabi; Miklos)
 A statutory power of sale may exist after six months by virtue of the Disposal of Uncollected
Goods Act in relation to ‘goods accepted by a bailee, in the course of a business, for
inspection, custody, storage, repair or other treatment
Circumstances which influence bailee’s liability
 Special skill and judgement possessed by the bailee
o If the bailee holds themselves out as possessing special skill or knowledge, this may
affect the bailor’s expectations and be reflected in a higher standard of care (Wilson)
o The bailee’s duty may be negatived (reduced) if the bailor overrides the bailee’s
judgment (Harper)
 The bailee deviating from the terms of the contract of bailment
o If deviation from the conditions exposes the goods to different risks than originally
accepted by the bailor, liability for damage or loss will be strict (operate regardless
of fault)
o A limit is where the loss would have happened regardless of the deviation
Bailor rights and obligations
Property rights against bailee and third parties
 Trespass and Conversion
o Bailor must have possession, either actual or an immediate right thereto
 Detinue
o Bailor must have an immediate right to possession (The Premier Group)
 Negligence
o Possession or ownership will suffice (Candlewood Navigation; Aliakmon)
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 Owner may sue in trespass, conversion or detinue for permanent injury to his ‘reversionary
interest’ in the goods for damage that will remain when the goods are due to be returned to
the owner (Dixon J, Penfolds)
Trespass
 Committing, without lawful justification, any intentional act of direct physical interference
with another’s possession of goods (Wilson)
o Unaccompanied by an intention to exercise dominion over the goods
o Typically used in cases where there has been damage to the goods but no loss or
destruction (although the tort is actionable per se)
 The general rule is that an immediate right to possession is insufficient to support an action
in trespass, there can be no trespass without actual possession (Dixon J, Penfolds)
o However, the exception to this exists where the person whose actual possession was
violated held the property as servant, agent or bailee under a bailment at will on
behalf of the person having the right to immediate possession. But the wrongdoer’s
act must still be wrongful as against the servant, agent or bailee (Dixon J, Penfolds)
Conversion
 Depriving, without lawful justification, P of their continuing possessory rights to his or her
tangible goods by asserting, intentionally, a temporary or permanent dominion over them in
a manner inconsistent with P’s possessory rights thereto (Kuwait Airways; Allan)
Detinue
 Continuing wrongful retention of personal property by D following a specific and
unequivocal lawful demand by P for return of the goods (Bunnings Group)
 Overlaps with conversion in practice
 P can either get damages and/or an order for delivery up of the item if it is revocable
Obligations of the bailor
 The bailor may be liable for delivering unsafe goods to the bailee: duty to warn so as to
avoid harm to the bailee (Gillson)
 The bailor must have sufficient authority by virtue of their own possession of the goods to
give possession to the bailee
 Where the bailee is a hirer or interested in the goods as future owner, then the bailor has a
duty for the condition, fitness and quality of the goods
o If bailee is a ‘consumer’ the statutory guarantees under Pt 3-2, Div 1 ACL may also
apply
 Bailor cannot interfere with the bailee’s possession in breach of the bailment (e.g. it cannot
repossess the goods until the bailment expires if it is a bailment for a term)
o If bailee is a ‘consumer’ the statutory guarantees under s 52 ACL may also apply
 Bailor may have an implied duty to reimburse the bailee’s costs and expenses (Winson)
37
Termination of a bailment
 If it is a bailment for a term, then the bailment will end at the expiry of that specified term
(or earlier if by agreement or mutual release by the parties). The bailor only has a qualified
right of possession (only sue in negligence) (Ward)
o Insufficient to bring an action based on possessory rights
o It may convert to a bailment at will if term or purpose of the bailment has expired
o Or the bailee destroys the basis of the contract of bailment, or repudiates or
disclaims it (Union Transport Finance)
 A deviation short of repugnancy or disclaimer of the bailment does not mean
that the bailee loses all title based on possession, and so the bailee may still
sue third parties for wrongs committed against that title (Tynn Motors)
 A bailment of will means that the bailor is entitled to immediate right of possession (which
affords a sufficient standing for an action in conversion and possibly trespass)
o Bailor is entitled to immediate return of the goods on demand – sufficient standing
for an action in conversion and possibly trespass
 Generally, the bailment will end when the bailee is no longer in possession of the goods
either because the bailor had re-taken possession, or the bailee has delivered the goods to a
third party at the bailor’s direction and retains no reversionary right to possession
 By repudiation
o The act that is necessary to terminate the bailment must be a very serious act and
one which is virtually a disclaimer of the contract of bailment. A deviation short of
repugnancy or disclaimer of the bailment does not amount to the bailee losing all
right to possession (The Anderson Group)
o Upon termination of the bailment, the right to possession is then restored in the
bailor
o A bailment will also be terminated by and upon destruction of the goods (Chapman
Bros)
Sub-Bailment
When answering questions, start with the sub-bailee and work your way backwards. Who is the
sub-bailee liable to? Who is the bailee liable to?
What is a sub-bailment?
 Where a bailee entrusts custody of the goods to a third party and retains a reversionary
right to possession this creates a sub-bailment
o Owner/head bailor > head bailee/sub-bailor > sub-bailee
 Both owner and head-bailee have concurrently the rights of bailor against the sub-bailee
according to the nature of the sub-bailment (The Pioneer Container)
Owner v Sub-bailee
38
 A pre-condition of the sub-bailee owing duties to the owner is that the sub-bailee must be
sufficiently aware that an interest of a person other than the bailee exists in the goods being
taken into custody (The Pioneer Container, adopted in QLD in The Premier Group)
 If the owner expressly or impliedly consented to the bailee making a sub-bailment, then
they will be bound by the conditions contained in the sub-bailment, but not otherwise
(Morris; The Pioneer Container)
 A collateral bailment will result when it is the sub-bailee only (and not the head bailee) who
is consenting to receiving goods belonging to the head-bailor (The Pioneer Container)
o The consent/authorisation of the head-bailor is relevant to whether the head-bailor
is bound to terms of the arrangement between the sub-bailor and sub-bailee
 The bailee will remain liable for any default of the sub-bailee, this is unless (Westrac
Equipment):
o Excluded under the terms of the head bailment
o The head bailor agreed to/contemplated the sub-bailment, so that the parties
intended that the sub-bailee would become, in effect, the bailee
 The bailee will not be liable unless they were negligent in choosing the subbailee
Owner v Head bailee
 An unauthorised sub-bailment constitutes a deviation (and possibly conversion) (Ellis)
 Implied authority to sub-bail depends on the terms of the original bailment (the contract of
bailment may include an express right to sub-bail), the subject matter of it, and other
material surrounding circumstances (Martin)
o Test: ‘if the bailor had been asked, would they have agreed?’
o An important factor is whether the arrangement is personal to the bailee (e.g. the
bailor is relying on a particular skill or expertise of the bailee, personally) (Edwards)
 Contracts for storage cannot be sub-bailed (Edwards)
 However, even if a bailee is authorised to sub-bail, they must still exercise due care in
selecting a competent sub-bailee and may be liable in negligence for a failure to do so
(James Buchanan)
 The owner may be unable to sue the head-bailee if:
o they are in contractual privity but there is an effective exemption clause in place
o there was simply no fault on the part of the head-bailee (Morris)
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SOGA – the passing of title
Introduction
 SOGA only governs ‘sales’ of goods and not gifts, barters or exchanges, loans for
consumption, hires or leases of goods
 The Act is said to be a ‘codification’ of the law in the area, but s 61(2) nevertheless provides
that the rules of the common law, insofar as they are inconsistent with the express
provision of the act, continue to apply to contracts for the sale of goods
 Many rules in the Act are ‘default rules’, whereby they apply only in the absence of a
contrary intention disclosed by the parties’ contract or course of dealing or usage
o ‘freedom of contract’ thus generally prevails in the sale-of-goods context
 The Act governs a number of aspects of the sale of goods:
o The nature and formation of the contract of sale
o The terms of the contract (including implied terms)
o The transfer of the property from seller to buyer
o The performance of the contract
o Remedies for breach of contract
Nature and formation of the contract of sale
 S 4 of the Act provides that for a sale of goods there must be:
o A contract
o That transfers (or agrees to transfer) ownership
40
o Of goods, and
o A money consideration called the price
Contracts of sale as distinguished from other transactions not falling within the act
 Barter or exchange contracts
o Not a contract of sale as there is no money consideration (THL Robina)
 Hire-purchase agreements
o Not a contract of sale, as there is no immediate or conditional transfer of property.
The hirer merely has an option (not an obligation) to buy the goods at the end of the
hire period – thus no agreement to buy
 Commercial leasing agreements
o Not a contract of sale, as there is only a transfer of possession (i.e. a bailment)
 Contracts for work and materials
o Not a contract of sale, as what in substance is being purchased is the skill/expertise
of another, not the end product of that skill/expertise and effort – the contract is in
essence one for the provision of services (where goods may be incidentally supplied)
o The substance or essential character of the transaction must be determined as a
matter of fact in each case (Hewett)
 Service contracts (where goods may be incidentally supplied)
o Not a contract of sale, as what in substance is being purchased is the skill/expertise
of another, not the end product of that skill/expertise and effort
o However, it might be possible that a contract may be divisible into a contract for
services and a contract for the sale of goods
Sale vs agreement to sell
 S 3(1) of the Act confirms a ‘contract of sale’ includes an agreement to sell as well as a sale
41
What constitutes ‘goods’?
 S 3(1) of the Act defines goods as including all tangible property other than land
 Excluded from ‘goods’ would be:
o Money (currency)
o Choses in action (shares, debts, negotiable instruments, intellectual property rights)
o A mere ‘right’ to enter land and remove something from it (Morgan)
o Blood by way of blood transfusion (Australian Red Cross Society)
o Real property (such as land and things that are ‘part and parcel’ of the land) (Symes)
Money consideration or ‘price’
 There will be no ‘sale of goods’ in the absence of a money consideration or price, which
includes both the actual payment of money (executed consideration) as well as the promise
to pay money (executory consideration) – money must be involved (Esso Petroleum)
 The price need not be wholly satisfied by money, it suffices that part of the transaction
includes a money consideration, even if another part involvs an exchange of goods or other
property (Saul)
 The price may be fixed by the contract, left to be fixed in the manner agreed under the
contract, or determined by the course of dealing between he parties (s 11(1)). Otherwise a
‘reasonable price’ must be paid (s 11(2))
42
Formation of the contract of sale
 The capacity to buy and sell is regulated by the general law concerning capacity to contract,
and to transfer and acquire property (s 5(1))
 No formalities are required as a precondition to enforceability of the contract of sale
 An enforceable contract of sale may be made:
o In writing
o Orally
o Partly in writing and partly oral
o By inference from the conduct of the parties
Classification of goods
 The difference between ‘ascertained’ and ‘unascertained’ goods is critical, as a contract to
sell unascertained goods is not a sale, merely an ‘agreement to sell’ and property in the
goods (i.e. ownership) cannot pass until the goods have been ascertained and the
agreement has converted into a sale
 Existing goods:
o Goods that are in existence and owned or possessed by the seller at the time of the
contract of sale
o They may be specific or unascertained
 Future goods:
o Goods that are to be manufactured or acquired by the seller after the making of the
contract of sale (s 3(1))
 Specific goods:
o Goods that are identified and agreed upon at the time the contract of sale is made
(as the very goods to be used by the seller in performance of the contract) (s 3(1))
o No substitution, not even with goods that are identical to the contract goods, is
permissible
Unascertained goods
 Goods that are sold under a description and no particular goods are identified and agreed
upon at the time when the contract was made (goods that have not yet been specifically
appropriated to the contract)
 Three types:
o Future goods
o Generic goods of a class as described:
 the goods are sold on terms that preserve the seller’s freedom to decide how
and from what source they will obtain goods answering the contractual
description (In re Goldcorp)
o Quasi-specific goods (or ‘goods sold ex-bulk’)
 An undifferentiated part of a specific bulk (a ‘fixed and predetermined source
from within which the seller may make their own choice…but outside which
they may not go’) (in re Goldcorp)
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
Not yet identified and separated from the bulk from which it is to be
drawn/ has not yet been earmarked for the buyer, but the specific
bulk has at least been identified
 Ascertained goods
o Goods that have been identified and unconditionally appropriated to the contract of
sale after the time the contract of sale is made (hence their differentiation from
specific goods)
o When in a contract for the sale of unascertained goods, the parties agree which
goods are to be subject of the contract, the goods become ascertained
Transfer of property from seller to buyer
 Transfer of the ownership in the goods does not depend on delivery of possession to the
buyer: a change in ownership may occur without a change in possession
 Important to know exactly when property in the goods passes from the seller to buyer
o Risk generally passes with ownership, and so this becomes important should the
goods deteriorate or become lost or damages without the other party’s default
o If one party becomes bankrupt or goes into receivership, it is necessary to know
whether the goods will form part of the bankrupt’s assets available to satisfy the
claims of creditors (Re Wait)
o
Available remedies:
 if ownership has passed to the buyer, the seller may sue for the price of the
goods if the buyer wrongfully refuses to accept or pay for the goods
(otherwise only a claim for damages for non-compliance will lie
 if ownership has passed to the buyer and the seller wrongfully disposes of
the goods to a third party, the buyer may sue for conversion of the goods
(but if ownership has not passed, can only claim for damages of non-delivery)
o the party who has ownership of the goods can pass ownership to a third party (even
if the first party has not yet paid for the goods or is not in possession of them)
o if ownership has passed to the buyer, the buyer cannot reject them for breach of
condition – they can only treat the breach of condition as a breach of warranty and
recover damages accordingly (s 14(3))
 The general rules as to transfer of property between seller and buyer are contained in Pt 3,
Div 1 of the Act (ss19-23)
o Goods must be ascertained
o Property passes when the parties intend for it to pass
o Risk generally passes at the same time as property
o The effect of romalpa/retention-of-title clauses
Unascertained or future goods
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 i.e. goods are defined by defined by description but not identified or in existence at the time
of contracting
 s 19: no contract in the goods passes from seller to buyer unless and until the goods are
ascertained
o as long as the contract remains one for the sale of unascertained goods, it is merely
‘an agreement to sell’
o s 19 appiles regardless of what the parties happen to agree as to the passing of
property
 Jansz: despite the agreement purporting to pass property in the whole
amount immediately, the court held that the contract was not a sale, merely
an ‘agreement to sell’ because the goods had not been ascertained and
appropriated to the contract in a manner binding on the parties – property in
the goods could not pass
 Healy: H&S ordered 20 boxes of fish and by the time it receivd the fish they
had spoiled. Because the precise 20 boxes had not been specifically identified
and unconditionally appropriated to the contract before the fish went off,
the goods were unascertained when they became of unmerchantable quality
(risk lies with seller)
Specific or Ascertained goods
 The fundamental rule is that the contract governs when property in the goods passes,
whereby parties intentions are to be ascertained with regard to the terms of the contract,
the conduct of the parties, and the circumstances of the case (s 20)
 It is only if the parties have not expressed any intention as to when property passes, that
the five prima facie rules contained in s 21 are used to ascertain intention
o The first four rules relate to specific goods
o The fifth rule is directed at unascertained or future goods
Rule 1 – when goods in a deliverable state
 When there is an unconditional contract for the sale of goods in a deliverable state, the
property in the goods passes when the contract is made, and it is immaterial whether the
time of payment or delivery, or both, are postposned
o ‘in a deliverable state’ = ‘are in such a state that the buyer would under the contract
be bound to take delivery of them’ (s 34)) – e.g. seller has performed final
adjustment or alterations or packed the goods pursuant to the contract
 Kursell:
Facts
o Parties entered into a contract for the sale of timber of a specified dimension
growing in a certain forest
o Buyers, who paid in advance, began to cut timber and were given 15yrs to cut and
remove it
o One month after the contract date, the government rendered illegal the continued
performance of the parties’ agreement
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o Sellers could not recover additional payments for the timber unless (at the time
when the contract was frustrated) the property had already passed to the buyers
Findings
o The contract was not one for the sale of specific goods in a deliverable state as the
goods in question were neither identified nor agreed upon
o Property in every tree in the forest was not to pass to the buyers, only property in
those trees that were ‘merchantable’
 The timber was thus not in a deliverable state until it was measured and cut
 Buyers could not be bound to take delivery of an undetermined part of a tree
that was no yet identified
o Property had not passed immediately at the date of agreement, when the contract
was frustrated the timber was not at the risk of the buyers
Rule 2 – act to put into deliverable state
 When there is a contract for the sale of specific goods and the seller is bound to do
something to the goods for the purpose of putting them into a deliverable state, the
property does not pass until such thing is done and the buyer has notice thereof
o (as well as rule 3) complements the ‘deliverable state’ requirement in rule 1
 Underwood:
Facts
o The parties contracted for the sale of an engine that was bolted into the concrete
floor of the seller’s premises
o Contract required the seller to detach and dismantle the machine and load it onto a
railway truck for delivery to the buyer
o Seller detached the machine but it was damaged during loading, buyer refused to
accept it
Findings
o The seller could not recover the price because property never passed to the buyer –
the machine hand’t been safely loaded onto the truck, as the seller was bound to do
it was not in a ‘deliverable state’ when the damage occurred
Rule 3 – act to ascertain price
 When there is a contract for the sale of goods in a deliverable state, but he seller is bound
to weigh, measure, test, or do some other act or thing with reference to the goods for the
purpose of ascertaining the price, the property does not pass until such act or thing is done
and the buyer has notice thereof
o Like rule 2, rule 3 only applies when it is the seller who must do what is required it
does not apply when it is the buyer who must do it
o If it is the buyer who must do the act (with the full authority of the seller), the goods
will be deemed to be in a deliverable state
Rule 4(1)(a)
 1) When goods are delivered to the buyer on approval or ‘on sale or return’ or similar terms
the property therein passes to the buyer:
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o A) when the buyer signifies the buyer’s approval or acceptance to the seller, or does
any other act adopting the transaction
 This will include any act or conduct indicating unequivocally an intention to become
purchaser, as well as an act that is inconsistent with the continuation of the buyer’s power
to return the goods
 Kirkham:
Facts
o P sent a large consignment of jewellery to a buyer ‘on sale or return’ terms
o Buyer went out and pledged the jewellery to D pawnbroker and disappeared
o P brought an action against D for return of the goods/their value
Findings
o P’s action must fail: whe the buyer pledged the goods he ‘adopted the transaction’
within the meaning of rule 4, because once the goods were pawned they could not
have been recovered without repayment of the sums advanced by the purchaser,
which is inconsistent with the buyer’s free power to return them
o Thus he meant to treat himself as purchaser and acquired property in the jewellery,
putting him in the position to pass good title to D
 Weiner:
o Rule 4 excluded by the words in the agreement ‘goods had on sale or return remain
the property of the seller until such goods are settled for’
Rule 4(1)(b)
 1) When goods are delivered to the buyer on approval or ‘on sale or return’ or similar terms
the property therein passes to the buyer:
o B) if the buyer does not signify the buyer’s approaval or acceptance but retains the
goods without giving notice of rejection, then, if a time has been fixed for the return
of the goods, on the expiration of such time, and, if no time has been fixed, on the
expiration of a reasonable time
 2) what is a reasonable time is a question of fact
 Poole
Facts
o Motor dealer left his car with D, another motor dealer, to sell on a ‘sale or return’
basis
o Car still not sold after 3 months
o P wrote to D demanding that D return the vehicle within 3 days or pay as a deemed
sale
o D did not answer the letter or return the car for another 3 weeks, when they did it
had been badly damaged in an accident
Findings
o D had to pay the purchase price for the car, by the time P demanded the vehicle’s
return, a reasonable time for return had passed
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o Court took into account the seasonal nature of the market in second hand cars, the
rapid depreciation in value in autumn, and D’s failure to respond to P’s continued
requests for return
o Property in the car had passed under rule 4(1)(b)
Rule 5(1)
 1) When there is a contract for the sale of unascertained or future goods by description, and
goods of that description and in a deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer, or by the buyer with the assent of
the seller, the property in the goods thereupon passes to the buyer
o 1A) such assent may be express or implied, and may be given either before or after
the appropriation is made
 2) when, in pursuance of the contract, the seller delivers the goods to the buyer or to a
carrier or other bailee for the purpose of transmission to the buyer, and does not reserve
the right of disposal, the seller is deemed to have unconditionally appropriated the goods to
the contract
 5(1) – Pignataro: By advising P that the goods were ready for collection, the seller had
unconditionally appropriated them to the contract with the implied assent of P (P having
made no objection to D’s correspondene)
o Hence, property and risk had passed to P, the buyer, even though it remained for the
seller to allow the buyer to enter the premises and to cooperate in the removal of
the rice
 5(2) – Wardar’s: property in the goods passed to the buyer when they were acknowledged
by the storage official to be the buyer’s property, which occurred when the carrier handed
over the delivery note to the store owner and was permitted to commence loading
o Since the thawing of the goods occurred after that time, the goods were at P’s risk at
the relevant time, and so its action failed
The Passing of risk (s 23)
 ‘risk’ refers to the risk of accidental loss, deterioration or damage to the goods
 S 23: risk prima facie passes with property
o 1) Unless otherwise agreed, the goods remain at the seller’s risk until the property is
transferred to the buyer. But when the property is transferred to the buyer, the
goods are at the buyer’s risk whether or not delivery has been made
o 2) When delivery has been delayed through fault of either buyer or seller, the goods
are at the risk of the party at fault in regard to any loss which might not have
occurred but for such fault
o 3) this section does not affect the duties or liabilities of either seller or buyer as a
bailee of the goods of the other party
 Bevington: the parties had, by their implied by their contrary intention (long-established
custom that goods delivered in the fur trade ‘on approval’ were at the buyer’s risk),
overridden the general rule
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 Allied Mills: owing to the seller’s wrongful delay, the goods were at the seller’s risk and so
the seller, who as bailee was unable to show that the loss occurred without its fault, was
liable to compensate the buyer for the loss
 If the parties agree that as from a certain time the goods are to be at the buyer’s risk, an
inference follows that property in the goods is also to pass to the buyer at that time (Dench
Bros)
The transfer of title by a non-owner of the goods
 Part 3 Div 1 governs the relations between buyer and seller with respect to the transfer of
property in the goods – it does not deal with the rights of third parties who may contract to
buy the goods from the buyer or the seller
 Title disputes typically demonstrate a clash between two fundamental legal policies: 1)
protection of private property (favouring the owner), and 2) promotion of security in
contractual dealings (favouring bona fide purchasers without notice) (Dennin LJ in
Bishopgate)
o A pragmatic
balance is needed
 Third parties’ rights are
governed by Div 2 Pt 3
ss24-28
Nemo Dat Rule
 S 24(1): when goods are sold by a person who is not the owner and who does not sell them
under the authority or with the consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods is by the owner’s conduct
precluded from denying the seller’s authority to sell
 ‘feeding of title’ – a defective title is cured ex post facto
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o The party purporting to sell doesn’t actually have title but subsequently acquires
good title
o The seller’s newly acquired title then automatically and instantly feeds through
down the purchasing chaing to the current owner, perfecting the current owner’s
title and curing any defects in the title of any previous buyers whose title derived
from that of the original seller/non-owner of the vehicle (Patten)
Exceptions to the Nemo Dat Rule
 Most of the exceptions aim to protect innocent purchasers who are misled by a seller’s
apparent physical possession of the property (or documents of title) that is the subject of
the sale
o A number of the ct’s exceptions are now affected by the operation of the PPSA and
they will not apply if and to the extent that they are inconsistent with the later act (s
254(1) PPSA)
o SOGA has not been amended to narrow the scope of the nemo dat exceptions so as
to avoid conflict with the PPSA
Exceptions: Estoppel
 S 24(1): ‘unless the owner of the goods is by the owner’s conduct precluded from denying
the seller’s authority to sell’
 S 24 aims primarily at those cases where the true owner has represented in words or by
conduct that the seller is the owner (‘ostensible ownership’) or has authority to sell
(‘ostensible agency’)
o The owner will be estopped from denying the validity of the title of a third party
where they have allowed an unauthorised individual, who may be exceeding a
limited authority or purporting to exercise a non-existent authority, to appear to be
acting with authority, or indeed to appear as the owner, in relation to disposal of the
subject matter of the sale
 The appearance of authority must be created by the owner and not by the supposed agent
themselves (Dascorp)
 The third party carries the onus of showing the ostensible authority so as to make out the
exception (Dascorp)
 The third-party buyer must acquire the goods in good faith and without notice of the seller’s
actual lack of ownership or authority (Goldring)
 Where an estoppel is found, the buyer acquires a title to the goods against the whole world,
and not merely a right to plead an estoppel against those who happen to be privy to the
representation or appearance-creating conduct of the owner
 The critical requirement is culpable action or inaction by the true owner that leads the
buyer to believe that the seller has a right to sell the goods (Leonard)
 Simply ‘parting with possession’ of the goods (and/or documents of title to them) so as to
afford the possessor of them a ‘practical opportunity’ to deceive others does not normally
suffice to raise an estoppel against the true owner, there must be either (Goldring):
o Estoppel by representation
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
An unequivocal representation by the true owner of the ownership or
authority in the seller, upon which representation to the third-party buyer
acted to their detriment (by buying the goods) (Esanda Finance)
o Estoppel by negligence
 A breach of a duty of care owed by the true owner to the third party, the
effect of which breach is to allow the seller to hold themselves out as the
owner, or as being authorised by the owner to sell, on which holding out the
third-party buyer has acted to their detriment (Dascorp)
Disposal by Mercantile Agents
 A mercantile agent is a commercial intermediary that in the customary course of business
has authority either to sell goods, or to consign goods for the purpose of sale, or to buy
goods, or to raise money on the security of goods (Factors Act, s 2)
o E.g. selling agents like brokers and auctioneers, retail sellers and car dealers, antique
dealers
 S 3 Factors Act is a nineteenthcentury exception to nemo dat, the
practical consequence of which is to
provide a statutory extension to the
common law estoppel exception
 By leaving the goods (or title
documents) consensually in the
agent’s possession, the owner is
effectively saying to the world that
the agent has authority to sell, at
least in the ordinary course of the
agent’s business
 The ‘mercantile agents’ exception
will not apply where the agent has
received possession of the goods
from a thief (or a person deriving
title from a thief), as the agent is not
in such circumstances in possession
of the goods ‘with the consent of the
owner’
 Fraud on the part of the owner will not destroy the necessary consent
 Folkes:
Facts
o F delivered his care to a mercantile agent and authorised him to sell it for not less
than $575 without his permission
o The agent secretly intended from the outset to sell the car for whatever he could get
it for
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o Ended up selling for $340 to Alvarez, who purchased in good faith and without
notice of the agent’s fraud/lack of authority
o Alvarez sold the car to Simons, who sold it to Harris, who sold it to King
Findings
o Good title passed to Alvarez by virtue of s 3 – Alvarez could thus pass good title
down the purchasing chain to king
o F’s claim against King failed
o F had consensually given the agent possession of his car for sale, and the sale to
Alvarez occurred in the ordinary course of the agent’s business
Persons having special power or acting under a court order (s 24(2)(b))
 Sales via such officials possessing special powers of sale wither under the common law or
under statute pass good title to a buyer despite the absence of the owner’s express
authority
 ‘agents of necessity’ = at common law, carriers in possession of perishable goods can sell
the goods if the owner cannot be contacted (China Pacific SA)
 Sales under s 5 Disposal of Uncollected Goods Act, s 63 of the Second-hand Dealers Act, s 6
of the Storage Liens Act
 Where goods are stolen and the seller manages to pass good title to an innocent purchaser
by virtue of one of the exceptions, the original owner is deprived of ownership unless the
thief happens to be convicted, in which case property is revested in the original owner by
virtue of s 26 SOGA, notwithstanding any intermediate dealings in the goods
Sale under a voidable title
 S 25: when the seller has a voidable title to the goods, bu the seller’s title has not been
avoided at the time of the sale, the buyer acquires a goods title to the goods, if the buyer
buys them in good faith and without notice of the seller’s defect of title
 Where contract with the other party to the voidable contract is not practicable, any
outward act by the seller revealing an intention to disavow the contract with the rogue will
suffice to rescind the contract (e.g. recovering the goods (Re Eastgate) or seeking help of
the police in locating the goods (Caldwell)
 Lewis:
o Lewis soldhis car to a rogue pretending to be Greene, a well-known actor, he
accepted a cheque as payment
o Lewis asked the rogue for identification and was shown a studio pass containing
Greene’s name and the rogue’s photograph
o Cheque was subsequently dishonoured, but in the meantime the rogue, pretending
to be Lewis, sold to Averay (who purchased for consideration in good faith without
notice of the fraud)
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o Rogue disappeared
o Lewis failed, as good title passed to Averay. By virtue of his fraud, the rogue acquired
a ‘good but voidable’ title to the car from Lewis
o Because Lewis hadn’t rescinded the contract before sale to Averay, Averay acquired
good title
Seller or buyer in possession after sale
 S 27(1) – seller in possession
o Buyer 1 leaves goods (or documents of title) in the physical possession of the seller,
and, before buyer 1 takes delivery, the seller resells the goods to buyer 2. Buyer 1
could have averted the second sale simply by taking delivery/possession of the
goods when they bought them, and thus they bear any resulting loss
o Buyer 2 is protected so long as they buy the goods in good faith and without notice
of the previous sale to buyer 1, and has also taken delivery of them, actually or
constructively (Wilkinson)
o Buyer 1’s only remedy is to sue the seller in conversion (fruitless if S is insolvent)
 S 27(2) – buyer in possession
o Where the seller gives B actual physical possession of the goods before the sale is
finalised, they are in the same position as a buyer who leaves the goods with the
seller after sale, so that they shoulder the risk if the buyer resells them to an
innocent third party (who can get good title)
 The major difference between s 27(2) and s 27(1) is that a buyer in possession can only give
as good a title as a mercantile agent could give
 s 27(1) and (2) both presuppose that the seller or buyer ‘in possession’ is not the owner of
the goods at the time of the sale to the third party (otherwise such a seller or buyer could
pass good title to the third party simply by virtue of their own title)
 for the purposes of s 27, the seller’s or buyer’s ‘possession’ at the time of sale to the third
party buyer must be actual physical possession, but the required ‘delivery’ to the third party
buyer may be actual or constructive
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