Torrens and Old Systems Title

REAL PROPERTY

GEOFF MOORE – SEMESTER 1 2000

Torrens and Old Systems Title

The 2 Systems

Old System Title
The English brought their system (Old System title) to Australia – tracing ownership back through previous owners until it reached the original Crown grant.
The emphasis was placed on the idea that my title was no better than the person from which I purchased the item/land from. i.e if you purchase from a thief, your title is no better than the thief’s – that is, no title.
Torrens Title
The system developed in South Australia in C19th by Sir Torrens Title.
Adapted in NSW by the Real Property Act 1900, which overrode previous legislation of 1862. The system has been embraced across Australia, NZ, Israel, Malaysia and Russia. 99% of land in Australia is governed by the TT system.
TT is based on the idea that there is a register maintained in the Land Titles Office (which administers it, run by the Registrar General). Registration is the all-important factor.
Under TT, if you pay for TT land and register it, you are able retain title, even if it subsequently transpires the person you purchased from didn’t have real ownership.
The fundamental difference between the 2 systems is the principal of registration v real ownership.

Processing A Torrens Title Purchase

Exchange of Contracts (C/S)
An interest in land has to be created in writing. Verbal/handshake agreements don’t count.
The process involved 2 identical contracts (1 signed by the vendor, the other by the purchaser) being exchanged. At that point BOTH parties are considered contractually bound.
At exchange of contracts, a deposit is usually paid to the vendor.
Specific performance is an equitable remedy to both the purchaser/vendor to compel either party to complete the sale/purchase.
Completion (C) / Settlement (S)
Usually takes 6-8 weeks to complete but can vary.
Completion is where a transfer (tfr) is handed over by the vendor.It is the delivery of the signed transfer of land from the vendor to the purchaser – this constitutes the settlement.
At this time the balance of the money owed should also be paid (not a strict rule, but usually part of good conveyancing practice.)
Lodgement
After settlement, transfer should be registered (usually ASAP).
Registration
Should occur 24 hours after the lodgment (unless complications arise)
Complications may include – discrepancies with names or the spelling of names. In such as case, a requisition is needed to satisfy the registrar that the misspelt names belong to the persons named in the contracts.
If the complications involved a registered lease or other technicalities (i.e. prior incumberances) then they need to be overcome before registration will take place.
Every block of land governed by the Real Property Act in NSW has its own separate certificate of title (computer generated). Within it will be 2 schedules.
The 1st Schedule contains the name of the purchaser (which replaces the name of the vendor).
The 2nd Schedule contains all other interests of land (e.g. mortgages, leases, easements and restrictive covenants).

Whoever is registered in the 1st schedule is subject to everyone registered in the 2nd.
The notion of indefeasibility however states that the person in Sch 1 should not be liable to anyone outside of Sch 2.
The order of subjectivity/priority in Sch 2 is established according to the order of registration (s 36(9) RPA).
S 36(6) – if you want to register anything it has to be according to the certificate of title.

Ss 41, 42, 43 of the Real Property Act

S41 – Title By Registration
Cth v NSW (1918) - HC established that a purchaser only gets title of land by registering it, not simply because the vendor has been paid. Title is granted by way of registration.
Reaffirmed in Frazer v Walker (1967).
S42 – Title by Registration Has the Quality of Indefeasibility
Indefeasible title s granted only by registration.
Mayer v Coe (1968)
M left land title with solicitor; C also client of solicitor. Solicitor told C that M wanted to borrow money. C handed money over to solicitor in return for M’s mortgage and land title (forged by the solicitor).
C therefore listed in Sch 2 – getting also title of registration (s 41) and indefeasible title (s 42). M is now subject to C.
WHAT IS THE JUDGEMENT??!
When dealing with 2 equally innocent parties, the Court will find for the party that is registered over the unregistered party.
Followed by PC in Frazer v Walker and in obiter in Breskvar v Wall.
S43 – Registration Grants Title of Land
I can deal with the registered party withou troubling myself as to whether they are entitled to be registered. (key of the TT system).
State Bank v Berowra Waters (1986)
BW registered in 1st Schedule;SB in the 2nd.
BW pays off mortgage and bank hands over ‘discharge of mortgage’ which is then registered at LT office.
SB realises weren’t paid enough and that they discharged the mortgage wrongfully.
Court held that by having the mortgage discharged and registered, the bank effectively ended the mortgage and no longer had any claim under Sch 2.
Kokeff v Bogdanovic (1988)
K owned a property ansd registered under Sch 1. Told B if she looked after him, he would leave his house to her for the duration of her life and it would then revert back to his family. K died before the agreement was registered.
The son (executor and sole beneficiary) became registered under Sc1.
Ct held that B had no claim because the son had an indefeasible title – he was registered, she was not. Only those registered in Sch 2 can claim against those in Sch1.
***Bursill Enterprises v Beyer Bros (1971)
2 adjoining properties; an easement had gone through P1. P1 had rights over it, but 3.6m above the easement, P2 had the right to build and demolish (ie the airspace).
P1 argued it should own the airspace over the easement.
P2 argued when they were registered for the easement in Sch 2 they acquired indefeasibility and their rights therefore could not be overturned.
HC agreed – on registration, that which could not be achieved was achievable. Registration is the key.
Fels v Knowles (1906) – NZ Case
Owner held property on trust for beneficiary. Trust said trustee had right to lease the house but no power to sell the property. Trustee leases the house and registers it (T in Sch1 and lesee in Sch 2).
Fineprint of the lease though said that L had the option of purchasing it.
Ct found that even though the trustee was not enpowered to sell the property, the registration of the lease made Sch2 powers override those of Sc1 – therefore the option of purchasing the land stood, despite other laws forbidding it.
Registration overrides other laws.

Exceptions to Indefeasibility

Determining Priorities in Torrens Title Disputes

Registered v Registered
Registered v Unregistered – exceptions to indefeasiblity
Unregistered v Registered – exceptions to indefeasibility
Unregistered v Unregistered

When dealing with scenario 1 – ask who is in the 1st/2nd schedules – it will affect priority. 1st Sch is subject to everyone registered in the 2nd. If there are 2 people registered under Sch 2, s36(9) RPA says it goes down to who was registered first.
When dealing with scenarios 2 + 3 – the registeres person generally shall have priority unless there is an exception to indefeasiblity.

Exceptions

(A)Fraud

SS 42/43 both recognise fraud as an exception to indefeasiblity.
“Fraud” can be committed by the person who is registered or by someone who acted for the benefit of the person who is registered.
Where the dishonest party is registered, fraud will apply – if the dishonest person registers another on grounds of a gift, fraud will apply.
Definition doesn’t cover situations like that of Mayer v Coe though because Coe was never aware of the fraudulence and was just as much a victim as Mayer. If Coe had been dishonest though then it would have amounted to fraud.
Wicks v Bennett (1921)
HC held that notice of itself is not fraud. ie – Just because there is notice of someone’s interest in land (and you knowing this continue to act as if it is irrelevant), it doesn’t amount to fraud.
If the notice is dishonest enough, it might make the notifier fraudulent and therefore amount to fraud – eg knowing of a forged signature and taking advantage of it.
Stuart v Kingston ( 1923)
Fraud is a “personal dishonesty” or “moral turpitude”.
Assets Co v Mere Koiki (1905) - NZ
MR was bringing a class action on behalf of all Maoris. Land in dispute had been transferred to A under Torrens Title. A claimed indefeasibilty.
MR argued A had been fraudulent because they’d acquired registration in contravention to land title legislation. Never proven A knew the transaction was in breach of land title law.
PC – without showing a mental element, there can be no fraud. Constructive notice is not fraud.
Loke Yew v Port Sweltenham (1913)
Modern Malaysia.
A significant piece of land in Salangor owned by Usopi who sold part of it to LY who farmed the land but didn’t register the title. Usopi sold the rest of the land to PS, including the land already owned by LY. PS evicted LY as soon as they registered their title.
PC – it is fraud to take a transfer and register it in the LTO pretending all affairs are in order when 1 party knows at all times that the affairs are otherwise.
Breskvar v Wall (1972)
B was registered in 1st Sch, borrowed money from Petrie. Petrie persuaded B not to sign a mortgage ut a transfer stating the property had been sold. P’s grandson (Wall) became the registered owner.
B however still had an equitable unregistered right to challenge it because B had never intended to sell, but conned into the transaction thinking it was something else.
HC – if the dispute were between B and W – B would win because fraud on P’s behalf is imputed to W. (P acting for benefit of W).
Because W had alter transferred the property to Alban though, B had no action.
Note – under QLD not NSW legislation – QLD legislation doesn’t have an equivalent to s 43A RPA.
Schultz v Corwill Properties (1969)
Facts similar to Mayer v Coe
CP owned a number of properties, solicitor was Galea. G had other client called Schultz (money lender). S sent money to G thinking a loan for CP; G pocketed the money, forged the mortgage and S got listed under Sch 2 of title.
Cp unknowingly asks for title back, so G decides to dishcarge the mortgage fraudulently.
Street J – was CP still under the mortgage?
S argued when G fraudulently caused the discharge he was acting for the benefit od CP therefore CP should be imputed for dishonesty.
If that were to be the case though, then the earlier transaction granting the actual mortgage would fall under the same category.
Ct held G was acting for himself only; state of register determined the outcome – ie S not listed under Sch2. CP therefore won and was held to be liable to noone.
NAB v Hedley (1984) – NSW Supreme Court
Mr/Mrs H owned land, Mr H got loan from NAB for himself and wife, but Mrs H not aware of it.
Mr H forged wife’s signature and did his signature at the bank – bank officer stating he had witnessed both signatures. Officer didn’t know Mrs H’s signature was forged, but by purporting to witness both signatures, he allowed registration to go ahead and the bank was enlisted in Sch 2.
Sch 2 status challenged, the bank argued ground of Mayer v Coe.
Ct said bank was ‘fraudulent’ in that they had passed off a document at registration as having been properly witnessed when the bank officer knew it wasn’t properly witnessed. The fact he didn’t know it was forged was irrelevant.
Bahr v Nicolay (1988) - WA
B is registered, transfers it to N. 2 other contracts are signed at the same time. N leased property back to B for 3 years with option to repurchase in favour of B.
N now registered, but subseqently transfers title to Thompson (T). Even though N and T contracted, clause said T acknowledged the agreements between N and B ( no contract between T and B). B wants to repurchase as market fluctuated in his favour, T said no.
B transfers title to N
N agrees to 3 year lease with option to repurchase with B
N transfers title to T
HC faced with dispute between B’s equitable right to repurchase and T’s interest in the land.
Ct determined T’s “I acknowledge” mean T agreed to be subject to previous arrangements between B and N. Is it fraud to renege on that?
Ct held 5-0 in favour of Bahr on 2 different grounds though.

- Mason/Dawson held there was fraud on T’s behalf – if you promise something and

intend it at the time of promise, when you renege on it within the scope of this law,

it amounts to equitable fraud. It is against conscience to allow T to renege on B.
– Intention to renege after registration s fraudulent and acts as exception to RPA

indefeasiblity.

2. - Wilson/Brennan/Toohey – defence not in fraud but in personal equity.
– once T had effectively agreed to be subject to B a trust was established – T holding

the property on trust for B. T was therefore bound in equity and subject to B.

Snowlong v Choe (1991)
Landlord subject to unregistered lease where LL sells to purchaser who agrees to be bound by the lease. P tries to evict tenant on grounds of indefeasiblity.
Wood J – purchaser was bound by the lease. The decision to renege was pre-registration, so all 5 judgements in Bahr v Nicolay applied.
Disrepancy in BvN in judgements was because decision to renege came after registration.
Ceros v Tendra (1992)
LL subject to a 6 year lease, almost expired, with an option to re-lease for another 7 years. Lease isn’t registered.
Purchaser from LL is asked to be subject to the lease; P says no. Tenants lawyers say P is subject to the lease, P says no.
P gets registered making it clear he does not intend to be subject to the lease.
Tenant argues fraud (B v N). Ct distinguished it on facts because in this case the purchaser never agreed to be subject to the lease.

(B)Personal Equities

This exception is wholly and solely recognised in case law – there is no legislative authority dealing with it.
Barry v Heider (1914)
Affirmed by PC in Frazer v Walker.
B registered and borrowed money from Schmidt, unknowingly signing a transfer instead of mortgage – making S the new owner. S then enters into a mortgage with H.
H lends money on security of land; B discovers what happened and challenges it. B (registered) taking action against H (unregistered).
Ct – who had priority? – B registered so technically winner, BUT ct took into account B’s stupidity in the entire transaction (ie – letting someone transfer the title in the first place).
B’s actions armed S with the power to appear to others that he was the true owner. So even though B hadn’t sold his land and H had lent the money unknowingly, the blame fell in B’s conduct and gave rise to undermining indefeasiblity.
Ct held in equity, B should be subject to H.
Reasoning of Court:

It’s wrong to say B must win because he was registered – equity must be able to side step it somehow.
Not only should B be subject to H where B has created H, but also where B’s actions have contributed to the situation.

MMI v Gosper (1991)
Ct propounded that it is always possible for courts to be able to identify new fact scenarios giving rise to personal equities.
Mrs G owned a property and owed $265 000 to MMI as well as them being registered under Sch 2.
Mr G approached MMI (allegedly on behalf of his wife) asking for another $285 000, but wanted it under his business name. Said wife agreed to it. Mr G forged wife’s signature etc; MMI had no appreciation of the dishonesty.
MR G dies, Mrs G finds out.
Mahrney J (Kirby concurred) – development of new personal equity.
Because MMI were the pre-exisitng first mortgagee they owed Mrs G a fiduciary obligation not to use her title deeds without her authority. MMI thereofre owed a duty of care and, in breaching it, was subject to liability.
Gives rise to a 4th scenario where personal equity can exist – where there is a pre existing relationship, there is a duty owed to the mortgagee by the mortgagor and a breach of that amounts to a defeat of indefeasibility.
Grgic v ANZ (1994)
Mr G Snr owned a property; Mrs G and son negotiated with ANZ for loan on behalf of MR G Snr. Bank agreed but wants to meet Mr G Snr first; wife brings in an imposter.
Mr G discovers this and argues on Gosper authority.
Ct distinguished Gosper from this case because in this case the bank had no pre-exisitng relationship.

Summary – Situations giving rise to Personal Equity

A person can use the personal equity as a defense to indefeasiblity where:
The registered person created the unregistered person (Barry v Heider)
The registered person so misconducts themselves that their misconduct gives rise to personal equity in favour of an unregistered person. (Barry v Heider)
A registered party agrees with a 2nd party to be subject to a 3rd unregistered person. (Bahr v Nicolay)

where there is a pre existing relationship, there is a duty owed to the mortgagee by the mortgagor and a breach of that amounts to a defeat of indefeasibility. (MMI v Gosper)

(C)Other Exceptions – The Real Property Act

S 41(1)(a)
Where the land titles office issues 2 certificates of title – the 1st certificate issued is the one that counts. The 2nd one is treated as having been issued wrongly and therefore the claim of indefeasiblity is defeated.
S 42(1)(a)(i)
Where an easement is omitted or misdescribed in the register, the person who benefits from it can still enforce it. It is a defence to indefeasibility.
The easement must have been created in writing (under TT). Under OS though, non-written easements are still acceptable – Beck n Auberach (1986) and Pobbie v Davidson (1991).
James v Stevenson – if an easement under OS is created, the fact that it isn’t registered doesn’t detract from its indefeasibility.
James v Registrar General – agreed with above case.
S 42(1)(b)
Omitted profit a prendre (harvests etc)
If a profit a prendre is omitted from the register it remains enforceable.
S 42(1)(c)
Where the boundaries have been misdescribed by something like a conveyancing error, this section allows the register to redefine the boundaries so that they reflect the boundaries appropriately.
S 42(1)(d) – Short Term Leases
Applies to short term leases.
A short term lease is where the actual lease and any option to extend it is equal to 3 years or less (De Alcover Holdings).
Must show – the lease was short term and the person now registered took interest with notice.
Notice can either be actual or constructive (I would know if I had made all the enquiries of a prudent person – Marsden v Campbell 1897)
Also imputed notice – where your agent has actual/constructive notice, it is imputed to you (Miller v Kenwick).
Clyne v Lowe (1968)
C bought from vendor with protective tenancy (to keep prices low) policy. Court held that even though C didn’t know who exactly who the tenant was, C was stuck with him/her due to having constructive knowledge of the policy – ie the building was run down – suggesting it was policy protected.

(D)Further Defences