• July 29th, 2016

Property Law

Paper , Order, or Assignment Requirements

2 QUESTION

 

Fred owns land in NSW. His solicitor Joe, takes the certificate of title and stated he was acting as agent for Fred and sells to Henry at a large discount. Henry did NOT know of the fraud of Joe but was suspicious but did not make any further enquiries.

At settlement Henry received the certificate of title for the land and a transfer, which had Fred’s forged signature.

Henry then sold the land to Carol. Carol did a search of the title and found that there were no caveats on the land.

At settlement, Carol received the certificate of title and the forged transfer. from Wendy to Jackie. Mary had the dealing stamped and then drove to the office of Land and Property Information (LPI) in order to lodge the documents

Discuss the applicable law relating to Torrens Title – Indefeasibility of Title, Caveats, Fraud, Registration and Priorities with regard to the Real Property Act 1900 (NSW)

Referencing style must comply with: Australian Guide to Legal Citation.

 

3 BACKGROUND INFORMATION – please do not just copy into the paper

Torrens title is that a member of the general community, acting in good faith, can rely on the information on the land register as to the rights and interests of parties recorded there, and act on the basis of that information. A prospective purchaser, for example, is not required to look beyond that record. The legislation governing Torrens Title in New South Wales is the Real Property Act 1900

The main object of the system is to make the register conclusive (in most cases) without a transferee or purchaser having to look behind the register as was the case in the “old system title” system inherited from age-old English legal practice and procedure. Once your name is registered or recorded on the title register under Torrens title you become the owner of the property to the exclusion of all others, by the very fact of registration. You therefore obtain “title by registration”, which is the pivotal concept of Torrens Title.

The registered proprietor of Torrens land is said to have an indefeasible title. That means that only in very limited circumstances can his or her title be challenged. Normally, the person who is recorded as the owner of a parcel of land cannot have his title challenged or overturned. This concept is known as “indefeasibility” of title. There are, however, exceptions to this general rule. The main ones being:

  • if a dealing is registered fraudulently

 

In New South Wales is that a purchaser who acquires land through a forged or fraudulent instrument, but is not a party to the fraud, will receive an indefeasible title on registration of the forged or fraudulent instrument, and the former owner will not be entitled to have the title restored or to monetary compensation from the new owner/purchaser.

 

Indefeasibility of title applies to the registered proprietor or joint proprietors of land.

  • s 42 (known as the ‘key indefeasibility provision’) – the proprietor listed on the register holds the land free of any interests which are not listed on the register (there are exceptions).

o Doesn’t apply in the case of fraud.

  • s 43 (known as the ‘notice provision’) – once a person completes a transfer from the real proprietor, he is free from any trust or unregistered interests, even if he had notice of that interest (there are exceptions).

o Doesn’t apply in the case of fraud.

o Note: this is essentially the overruling of the usual priority doctrine for earlier equitable interests vs. later legal interests.

There is also a less important s 43A, which deals with situation where there is a competition between a person holding an earlier equitable interest, and a person who has obtained a later equitable interest through a dealing with the registered proprietor (ie, whose interest is registrable, but has not yet been registered). For the purposes of such a scenario, the equitable interest of the person dealing with the registered proprietor is treated as a legal interest

These doctrines are concerned with a situation where a person (the ‘forger’) forges the signature of the real proprietor on a transfer and sells the property to an innocent purchaser. Both the real proprietor and the purchaser are innocent, and both want the property. There are two (opposing) approaches to such a situation:

  • Immediate indefeasibility – the purchaser obtains indefeasible title once he registers the transfer regardless of the fact that the document was invalid. He becomes immediately indefeasible.
  • Deferred indefeasibility – the purchaser’s title is defeasible and can be ‘set aside’ if the real proprietor makes a claim. However, if the purchaser transfers his title to a new purchaser (bona fide and for valuable consideration) before any such claim is made, that new purchaser’s title does become indefeasible. Thus, the indefeasibility is deferred until a new bona fide purchaser arrives

In Frazer v Walker (from NZ), the court held that the doctrine of immediate indefeasibility prevails. This was then confirmed by NSW legislation in s 45 of the Real Property Act 1900 (NSW).

  • This means that a purchaser registered through fraud, error, or by means of a void instrument nevertheless grants the purchaser indefeasible title immediately (as long as the purchaser didn’t cause the fraud).

These issues, and what happens in the case where the first purchaser uses fraud, are discussed in Breskvar v Wall:

  • Registration creates title even if the situation is within the exceptions listed in the act (such as fraud). The difference is that the title is subject to the rights on the defrauded vendor (ie, the title is defeasible).
  • The fraud creates an equitable interest on the part of the defrauded vendor, which is not barred by the legislation because there is an exception made for fraud. The vendor can thus cancel the registration of the purchaser.
  • However, once the purchaser transfers his title to a third party (bona fide and good consideration), it becomes a question of priorities.

o If the third party completes registration entirely, than he obtains indefeasible title.

o If the third party doesn’t complete registration before the original vendor bring a claim, the vendor’s earlier equitable interest would prevail over the third party’s later equitable interest unless the vendor’s conduct helped encourage the third party’s false assumption (that the title vested with the fraudulent purchaser).

Note that Breskvar was decided before the introduction of s 43A, which would now settle the dispute.

The leading judicial statement as to what constitutes fraud within the Torrens title legislation,

is the following extract from Assets Company Ltd v Mere Roihi (1905) AC 176, at p210:

Fraud” requires actual fraud, and actual personal dishonesty or moral turpitude by the

registered proprietor, for example National Commercial Banking Corporation of Australia

Limited v Hedley (1984) NSW ConvR 55-211

For there to be fraud, there must be knowledge either that someone would be deprived of an

interest, or that the Registrar General would be misled (for example Australian Guarantee

Corporation v De Jager [1984] VR 483

In Wiamiha Sawmilling Co Ltd v Waiore Timber Co Ltd (1923) NZLR1,137, at page 1,173

and 1,175, the Court said:

 

“The true test of fraud is not whether the purchaser actually knew for a certainty of

the existence of the adverse right, but whether he knew enough to make it his duty as

an honest man to hold his hand…”

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