PART VII THE TORRENS SYSTEM

Transcription

1 PART VII THE TORRENS SYSTEM I Land Management A Intrductin Apprximately 26 cuntries have systems f land administratin. Sme, like the African system f cmmunity titles, embdy nn-tenure based principles f land management. By cntrast, cmmn law cuntries reflect principles f private land wnership. In Australia, the Trrens system is the dminant land management structure. In additin t administering private land tenures, it is als a legal prduct exprted t ther legal envirnments arund the wrld. Land administratin may be thught f in several cntexts. Bradly, these are cnceptual, administrative, and gegraphical: Cnceptual (a mental understanding f and relatinship with land) Administrative (in gvernment administratin, law, ecnmics, and public plicy) Gegraphical (surveying, GPS, GIS, mapping, satellite images, remte sensing, aerial phts, rthphts, Ggle Earth) Land administratin is a prduct f bth envirnmental and plitical factrs. It frmalises values abut land ccupatin, use and develpment, and interacts with the legal system t create a framewrk fr recgnising and enfrcing recgnised interests. Land administratin invlves the prcess f determining, recrding and disseminating infrmatin abut the tenure, value and use f land when implementing land management plicies. 1 Prper land administratin accelerates wealth: it enables land t be used t develp markets, investment, private hldings and sustainable develpment: What creates capital in the West is an implicit prcess buried in the intricacies f its frmal prperty systems. Legal prperty thus gave the West the tls t prduce surplus value ver and abve its physical assets. 2 One example f land administratin is the cadastre, a type f map which identifies lgical parcels f land rather than physical land hldings. It has its rigins in Naplenic France, where it was used t recrd land bundaries and tax land wners. It is nw used thrughut the wrld, even in prer cuntries (thugh nt England r the United States). As cncepts f land wnership changed, and frmal methds f administratin develped, the cadastre has becme a primarily technical instrument. It is nw mstly used by surveyrs. This develpment highlights the relatinship between mechanisms f land administratin and technlgical and plitical factrs. Mst cuntries lack even basic land administratin systems. Frm the perspective f the internatinal agencies, there exist fur majr land administratin and land plicy issues: 1 Urban land tenures 2 Native and ther cmmunity titles 3 Methds f imprving centralised land administratin 1 United Natins, Eurpean Cmmissin fr Eurpe (1996). 2 Hernand de St, The Mystery f Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (2000) Page 1 f 41

2 4 Methds f catalguing and enfrcing restrictins ver land The Trrens System ffers ne particularly efficient way f reslving these issues. B Trrens Land Management The phrase Trrens system describes the registratin cmpnent f Australia s land administratin system. It may be cntrasted with general law land, which is subject nly t deeds registratin. The basic principle f Trrens land registratin is that an interest must be registered t be cgnisable in law. Fr a registratin-based system f land management, Trrens has ne f the strngest registratin requirements: mst land hldings, with several ntable exceptins, will be f n legal effect until frmally registered. The Trrens system has several cmpnents: 1 Certificates f title (describing the interests f wner and any ther restrictins) 2 Maps and surveyrs plans (nting bundaries and alltments) 3 Electrnic land title systems (catalguing titles and plans) Key principle: Trrens registratin creates title. Any Trrens system will visibly interact with three different types f titles: Registrable (titles capable f being recrded n the register) Equitable (infrmal interests recgnised by curts f equity) Pssessry (ad hc interests; eg, f adverse pssessrs) In any given prperty, there may be bth registered, equitable and pssessry claims n ft simultaneusly. Fr example, a prperty, wned by a registered prprietr X, wh is trustee fr a beneficiary Y, may subsequently lease t Z, wh ccupies as tenant. Such interactin may be further cntrasted with civil cde systems f land management. These systems envisage nly ne abslute wner, rather than many cntempraneus nes. C Trrens Wrldwide Australia has cntributed tw internatinally acknwledged innvatins t glbal prperty law: The Trrens system; and Strata titles. Strata titles are nw almst universally used t vertically divide urban land hldings. They were first intrduced in New Suth Wales arund The Trrens system was first intrduced t the Clny f Suth Australia in 1858, fllwed shrtly after by Victria (1862). Its adptin was catalysed by widespread dissatisfactin with lawyers and infrmal cnveyancing practices. The respnse f lawyers was predictable: in 1893, ne lawyer had the fllwing cmments t make abut the ntin f land registratin: Page 2 f 41

3 Barely plausible and utterly impractical idea, the utcme f a bureaucratic and free hunting administratin wrking n the fanciful enthusiasm f well-meaning but mistaken and visinary faddists. 3 Mst prbably, lawyers were just reacting t the prspect f reduced fees as cnveyancing became mre efficient. Tday, the Trrens system has been adpted by the fllwing cuntries: Australia; New Zealand; Canada (nly certain prvinces); Africa (in certain regins); and United States (nly certain states) Similar systems have been intrduced t: England; Israel; Philippines; Malaysia; and Thailand. Land registratin systems based n civil law perate in: Eurpe; and Japan. Deed registratin systems perate in: United States (using the English mdel); France; and French clnies. D Prcedural and Idelgical Tensins Tw cmpeting views abut land management are at wrk in present frmulatins and interpretatins f Trrens legislatin: practical bjectives (simplicity, efficiency and certainty), and established traditins (English prperty law and cnveyancing practices). This tensin is exhibited by early case law, which largely reflects the traditinal view that deeds f title are mre imprtant than acts f registratin. Even tday, many curts intrduce equitable and persnal ntins int their cnstructin f Trrens legislatin, ften t cmbat its ccasinally harsh peratin. Practitiners, t, exhibit bias twards traditinal deeds cnveyancing systems. Cnveyancing practices cntinue t be influenced by ld ways: search f title, exchange f cntract, requisitins n title, and the like. At varius times, ne r ther f these views has been dminant. The present trend is twards registratin, as reflected by recent English legislatin. 3 R T J Stein and M A Stne, Trrens Title (1991) 15. Page 3 f 41

4 E Frms f Land Organisatin Mst systems f land registratin may be classified int ne f fur different theries f land tenure: Private wnership Cmmnly justified n ecnmic grunds: preventin f a tragedy f the cmmns (Hardin) by making individuals ecnmically respnsible fr sustainable land use Land rights typically entail Freehld Leasehld Sharecrp Mrtgage Public wnership Eg, cmmunist scieties Cmmn wnership Eg, indigenus r agrarian scieties Open access Eg, medieval (pre-enclsure) England F Land in Australia There exist apprximately 10.2m parcels f land. Mst are private (alienated) hldings, thugh there are als unalienated Crwn reserves, and varius tracts subject t native title. Hwever, the vast majrity f alienable land is privately wned freehld and leasehld frm the Crwn. Crwn leases and licences are mstly administered utside Trrens system in Victria. The Victrian Land Registry recrds abut 3.2m titles (thugh this figure smewhat exceeds the number f saleable prperties). It is imprtant t understand the distinctin between parcels f land and prperties. The term prperties, cllquially, describes the visible bject f prprietary rights: a building r area in which peple perate in relatin t land. Hwever, in law, a given physical structure may be classified as any number f individual parcels f land, each the subject f prprietary rights. In ther wrds, land management thinks in terms f cadastres (parcels), nt addresses. Cnsequently, there are rughly 20 per cent mre parcels than there are prperties. Page 4 f 41

5 II Histry A Pre-Registratin Prir t the intrductin f Trrens legislatin in Australia, title t land was very insecure. Early attempts by clnial Gvernrs t regulate the sale f land prved unsuccessful. Transactins invlving land were perfrmed with casualness and infrmality. The clnies were hst t several views cncerning cnveyancing: Traditinal English view (high degree f frmality using a written system) Gvernrs view (a different kind f frmality) Civil curts views (allwed infrmal sales despite Gvernrs Orders and cmmn law) By the time the ill effects f infrmal cnveyancing practices began t be felt, the custm was already entrenched and culd nt [easily] be verturned. And s it cntinued: New Suth Welshman dealt with land rally and n scraps ff paper, and curts cntinued t accept their claims. In this way, ppular views f legitimacy were impsed n the civil curt. Principally respnsible fr the infrmal apprach t land dealings was the culture f the yeman, an independent wner/ccupier class f farmers: Yeman is an antiquated British term fr a farmer f middling scial status wh wned his wn land, and ften farmed it himself. The yemanry shared attributes with bth the upper and wrking classes, thugh had little in cmmn with the urban middle class. A yeman culd be equally cmfrtable shvelling manure n his farm, educating himself frm bks, r enjying cuntry sprts such as shting and hunting. By cntrast, members f the landed gentry and the aristcracy did nt farm their land themselves, but let it t tenant farmers. Yemen and tenant farmers were the tw main divisins f the rural middle class in traditinal British sciety. Isaac Newtn was a famus member f the yeman class, inheriting a small farm which paid the bills fr his academic wrk. (Wikipedia) The strength f such views abut law and land was enhanced by varius histrical factrs: Rughly half f the ppulace was illiterate Chains f title were difficult t trace, especially given the casual recrd-keeping Whenever a title was cancelled r frfeited, it was pssible fr the same land t be granted twice; this led t clashes between the successrs in each chain f title, turning n the validity f the cancellatin f the first grant Curts gave effect t this infrmal system f cnveyancing, aviding injustice in the shrt term but cmpunding the prblems caused by cmmn practices Judges did nt acknwledge the legal basis n which the transactins were given effect t (n mentin f equity r part perfrmance, etc) Several cnsequences stemmed frm these practices: Ntice f interests had t be given in the Sydney Gazette Land interests were uncertain and thus had very little value: hrses and crps were ften wrth far mre than land Land was seen initially as having nly a use value: cultivatin, grazing and, ccasinally, ccupatin. Hwever, as the value f land increased s did the number f ntices in the Sydney Gazette telling prspective buyers f a prir interest in it and warning ff trespassers. Land Page 5 f 41

6 gradually became an integrated part f capital and nt merely a place n which t build a huse r grw crps. Additinally, Suth Australia was a clny f free settlers (as cmpared with New Suth Wales, which was cmprised by penal clnists), and the emerging Australian middle class f free settlers develped estates and ther interests in land. The situatin in the clnies was still radically different t that in England. Lad had little f the value and few f the scial and plitical implicatins which it had in England: Where traditin and aristcratic interests cmbined t create a labyrinthine land law in England, the bscurity f titles in New Suth Wales was based n an egalitarian apprach t land law. Land which had nly a lw value was dealt with casually, and bught and sld as easily as a hrse, smetimes much mre cheaply. This, cmbined with high levels f illiteracy, the lack f a large-scale legal prfessin, and a willingness t disregard fficial Orders, let t lcal ways f ding things. (at 130) As early as 1814, the law gverning clnial land transactins had despite its English rigins develped int smething quite different. B Intrductin f Trrens Legislatin The clnial administratin wanted t frmalise land transactins fr several reasns: T prmte settlement T prmte ecnmic develpment thrugh yemanry T reduce enfrcement csts T reduce the citizenry s dependence upn lawyers in matters f cnveyancing The need fr refrm was clear: by 1857 there were ver t land in the clnies, f which deeds three quarters had been lst and at least impssible t trace r else defective. Purchasers, and particularly mrtgagrs, lived in fear that their titles wuld be challenged by sme unexpected deed, the effect f which wuld be t render them liable fr fraud and frfeiture f their livelihd. The early titles were basically receipts issued by the Cmmissiner f Public Lands. Hwever, even when descriptins f the parcels were appended t them, they were ften meaningless. Fr example, they ften referred t land in highly apprximate terms ( abut seventy paces frm the nrthwest crner ) by reference t lng since demlished landmarks, r departed r deceased persns. The chas is best illustrated by sme buyers mistaken purchases f land already belnging t them. 4 Dr Ulrich Hübbe, a Hamburg-brn lawyer, effectively invented the Trrens system. Hwever, it was simply unfeasible t pass legislatin in terms set frth by a German. Frm its inceptin, then, the Trrens system was a German system masked as Australian fr lcal ppularity. A Mr RR Trrens ppularised refrm, which is t say, he is alleged t have stlen the idea f title by registratin frm Hübbe. Initially, lawyers were ppsed t the intrductin f the system, thinking their mnply n cnveyancing wuld be remved. The drafting and legislative prcess was carefully rchestrated t prevent prfessinal tyranny frm being exercised. 4 Real Prperty Law Cmmissin, Reprt (1861) 17. Page 6 f 41

7 On 2 July 1858, the system came int peratin with RR Trrens as Registrar. The legal prfessin generally accepted the system, thugh ne was heard t remark that the newlypassed Real Prperty Act 1858 (SA) was flish, unwrkable and a mst pernicius measure. Despite the new system, its first test in curt was unsuccessful: a registrant lst pssessin with their certificate f title, despite being the registered prprietr (Hutchinsn v Leewrthy). This was quickly rectified by legislative amendment. Hwever, the Act s next applicatin was hardly mre successful, with the plaintiff s appeal being struck ut befre it culd reach the Supreme Curt n the grunds that Payne had becme a lunatic (Payne v Dench). Predictably, the Act faced further ppsitin frm Bthby J, leading t what sme termed as a judge hunt. Judge Bthby tk great delight in finding lcal institutins and acts f Parliament vid r repugnant. This was put a stp t with the passing f the Clnial Laws Validity Act 1865 (Imp). Frm this pint frwards, the newly-established Land Titles Office grew in stature and acceptance, and cnfidence steadily grew in the new Trrens system f registratin. C Real Prperty Law and Wmen The develpment f land registratin thrughut the 1800s saw the what Glder and Kirkby describe as the demcratisatin f land wnership amng the nn-indigenus inhabitants. Hwever, they als nte tensin within the clnial liberalist mvement between bjectives f settlement (essentially cnservative) and ecnmic grwth (essentially prgressive). The latter imperative sught t cmmditise land and establish a free market. This develpment was marked by several limitatins upn a married wman s capacity t buy and sell prperty. The dctrine f cverture meant that, upn marriage, a wife s prperties were subsumed within the estate f her husband, limiting her ability t alienate prperty withut her husband s cnsent. Reciprcally, the cmmn law right f dwer entitled a wman t the lands f her husband upn his death, including lands alienated prir t the husband s death. This was understandably prblematic fr third parties, wh may be unknwingly subject t a dwer claim. In shrt, Trrens refrm inadvertently catalysed refrms beneficial t wmen. Trrens refrms sught t make land mre marketable, with the unintended side effect that married wmen and their land were brught within its bundaries and made it simpler and mre feasible t transact with a married wman s prperty. Trrens refrms have been described by Kercher as Australia s legal gift t burgeis land wning, perfecting as they did the cmmditisatin f land and increasing the egalitarian and individualistic prperties f private land wnership. Thus, encumbrances such as dwer were required t be inscribed upn the certificate. The Real Prperty Act als granted express recgnitin, in sme circumstances, t the right f a wife t be issued with a certificate f title. Hwever, the husband was still primarily respnsible fr dealings with land: wmen were passive recipient[s] (at 215). Hwever, the result f these refrms was t reduce certainty assciated with dwer and cverture, reducing hesitance t deal with married wmen. Wives were able t dispse f land in the same manner as any ther prprietr. Wmen culd be included n the register as cwner. Sme wmen were even listed as sle wners n the register. Hwever, mst f these changes were the result f minr husekeeping f the Trrens system (at 217). Page 7 f 41

8 D Evaluating the Success f Trrens Issue: des the Trrens system meet its bjectives? The Trrens legislatin and its interpretatin by curts represents ne way f balancing the cmpeting imperatives f certainty, security and efficiency n the ne hand, and fairness t hlders f unregistered interests and defrauded parties n the ther. Certainty? Security and simplicity f dealings with land was the primary bjective Mirrr/Cmpleteness? The state f the register was t accurately and precisely reflect the interests held in each parcel land Hwever, it gives n indicatin whatsever as t the existence f many interests, including easements and equitable rights Many f thse rights are caveated, but nt all; incentive nt prvided since nt nn-ldgement is nt fatal in a pririty dispute Knwledge f thse interests irrelevant unless fraudulent, because f indefeasibility; s the fact that they are recgnised des little t undermine cmpleteness f claims f wnership Curtain? The idea that nthing behind the Register (cutain) can affect the registered prprietr s title Indefeasibility is immediate which prevents the purchaser frm needing t enquire abut the prceeding transactin Hwever, in persnam exceptin means that a new registered prprietr will be subject t the persnal duties f the ld But Trrens was never abut exempting a party frm their persnal bligatins upn registratin; recgnitin f these bligatins des nt substantially undermine the register s cmpleteness because the bligatins are wed nly t ne party: the registered prprietr Further, in persnam is cnfined t recgnised legal and equitable causes f actin and nt a brad and amrphus cncept like uncnscinability This makes it reasnably straightfrward fr the party mst likely t be affected by an in persnam claim (the registered prprietr) t ascertain and fulfil their bligatins Cst? Prprtinate t the value f a transactin, the cst f establishing a mrtgage and transferring land has reduced Number f cntested transfers? Number f extinguished unregistered interests? Dminance f lawyers? Cnveyancing clerks can perfrm basic tasks, but haven t whlly remved the mnply f lawyers ver land transactins Page 8 f 41

9 Fairness? Several cmmentatrs are cncerned that the Trrens system des nt deliver just utcmes t victims f fraudulent transfers, where such transfers are subsequently registered Sme degree f flexibility and discretin is needed t accmmdate all circumstances A purely statutry system regardless f the precise balance it strikes cannt, strictly applied, hpe t achieve fairness in all cases Instead, recgnitin and judicial accmmdatin f equitable interests, subject t the prper recgnitin f rdered legislative prcesses, represents the best cmprmise between certainty and fairness In the absence f a better legislative system having been implemented in any jurisdictin, and the minimal (if any) practical detriment that can be shwn t result frm such a cmprmise, it shuld rightfully be regarded as bth warranted and viable E Trrens in an Electrnic Age Imprved speed and efficiency Impersnal, abstract, nn-physical Online fraud r cmputer errr See belw Part IX Page 9 f 41

10 III General Law Registratin A Basic Features Deed registratin attempted t refrm the general law land system by making it mre efficient t shw gd title. It differs t the Trrens system in that the ld general law system, which was based n chains f title deeds, was still retained. Tday, the Trrens system frms the primary methd f land management. Indeed, since 1 January 1998, instruments affecting land in Victria may n lnger be registered under the deed registratin system. Hwever, the general law registratin system is still imprtant: Large tracts f Australian land cntinue t be regulated by the deed registratin system; Althugh autmatic cnversatin f general law land t Trrens title is prvided fr by statute, this will still take decades t cmplete; Pririties between cnflicting general law interests are still reslved accrding t the general law rules; Sectin 6 f the Prperty Law Act 1958 (Vic) still determines sme pririty disputes accrding t general law rules Deed registratin sught t reduce the risk that a purchaser might acquire an interesting land withut knwledge f an earlier incnsistent interest. It did s by allwing all instruments affecting land t be registered, except leases fr less than three year duratins. Instruments that were s registered, and executed in gd faith fr value were affrded pririty ver interests which culd have been registered, but weren t, r which were registered later. Hwever, failure t register an interest did nt avid it. B Pririties under the General Law Order f pririty: 1 Registered deeds, first in time Instruments registered first in time, executed in gd faith and fr value 2 Registered deeds, secnd in time Instruments registered secnd in time, executed in gd faith and fr value 3 Registrable deeds Registrable but unregistered instruments 4 Nn-registrable deeds Unregistrable instruments If the grantee f an instrument prcured their interests by fraud r with actual r cnstructive knwledge f a prir unregistered interest, they are said nt t be acting bna fides. Page 10 f 41

11 IV Characteristics f the Trrens System A Overview The Registrar f Titles ( the Registrar ) maintains a written register f land hldings. Each fli details the peple hlding interests in that parcel. Certificates f title are essentially just cpies f a fli. Nt all interests are recrded in flis: Registered interests Mrtgages Leases ver three years Title Transfers Easements Unregistrable interests Interests incapable f registratin but have pririty Tenant in pssessin (less than three years) Adverse pssessin Equitable titles These are nrmally prtected by means f caveats The Registered Prprietr ( RP ) is the party named as hlder f an interest in land described by a given fli f the register. The RP is able t deal with land as wner, and may transact t sell, lease, sublease, and mrtgage their interest in ways prvided fr by the statutes. The Registrar has varius discretinary pwers, including an ability t request dcuments and require parties t give evidence. Registered interests arise upn registratin. In this sense, registratin cnfers legal title. Hwever, sme unregistrable interests may till be legal (and nt equitable) in nature, despite nt being registered (eg, a shrt term lessee s legal lease). Mst unregistered but registrable interests are equitable, hwever. Because unregistered and unregistrable interests can (and, indeed, d) exist ff the register, it can never be an entirely cmplete recrd. Indeed, the Trrens legislatin appears t acknwledge this inevitability quite explicitly in its prvisins fr the ldgement f caveats. Caveats are designed t prtect unregistered interests. In general, hwever, the Trrens system partakes f the fllwing characteristics: Vluntary Interests need nt be registered; registratin is vluntary (Largely) Cnclusive Only valid interests are placed n the register; all registered interests are s recrded Certain Registered titles are certain and valid, s there is n need t lk beynd the register t determine gd rt f title; unregistered interests always cede pririty, except in case f fraud, etc Page 11 f 41

12 Indefeasible Bna fide registratin cnfers unimpeachable title Cmpensable Fr thse suffering lss as a result f the register, an assurance fund ffers cmpensatin (thugh nt specific perfrmance) Guiding questins: what is the scpe f unregistered equitable interests within the Trrens system? Can it deal with them adequately? What is the psitin f mere equities? B Cntents f the Register The Trrens Register manages principally private interests in land. Each fli cntains tw kinds f data: Legal text Alphanumeric infrmatin abut the parcel, interests in it, and the identity f parties hlding same Spatial infrmatin Maps, plans, ther gegraphical and surveying infrmatin In rder fr the system t be certain and cnclusive, bth pieces f data must be accurate and reliable. In mst jurisdictins, certainty is prvided by effectively guaranteeing accuracy f legal text n the register. Hwever, spatial infrmatin is nt legally guaranteed. Victria, fr example, adjusts plans t suit ccupatin, s adversely pssessed bundaries are held as ccupied and title is updated t reflect the changed dimensins. By cntrast, New Suth Wales adjusts bundaries t suit plans; this means that a surveyr must check the bundaries after an auctin. The Trrens register updates its cntents n the basis f textual recrds prvided by banks, lawyers, cnveyancers, and individuals. It receives spatial infrmatin primarily thrugh surveyrs. The register des nt recrd several imprtant aspects f a parcel f land: Buildings (type, ftprint, value, use) except as bundaries in strata r subdivisin titles; Land values, zning, rates, heritage classificatin, business apprvals; r Rads (cuncils typically recrd these n a separate register). Thery suggests that a land administratin system shuld manage all rights, restrictins and respnsibilities relating t a parcel f land. Hwever, current tenure-based systems, including Trrens, fcus nly n rganising rights. The register is able t successfully and efficiently recrd land transactins and changes in land wnership (whether by peratin f law, as by prbate, administratin f intestate estates, bankruptcies, and curt rders, r by vluntary dealing). It can d s because f the simple fact that, withut registratin there is n change in actual legal wnership. Registratin brings the change t the attentin f the registry, allwing it t be recrded. Page 12 f 41

13 Hwever, the Registrar typically des nt actively seek ut changes t land wnership. Parties must generally bring such changes t the Registrar s attentin. Because an interest registered first in time wins, this can smetimes lead t what is knwn as a race t the Register. Due t the efficiency and certainty prvided by Trrens land registratin, there exists high public cnfidence in the land registry and its Registrar. C Basic Trrens Principles 5 Mirrr The register reflects accurately and cmpletely the current interests held in a parcel f land A title is free f adverse claims r burdens unless they are mentined n the title N claims are pssible utside the register This is presently the dminant interpretative principle Hwever, there are several imprtant exceptins Curtain The current certificate f title cntains all the infrmatin abut the title A histrical search t verify the rt f title is unnecessary The registry is cnclusive s there is n need t lk beynd it, in general, even if the purchaser is aware f the facts giving rise t an unregistered interest In general, dn t ask This principle is nt always applied cnsistently Insurance Cmpensatin fr lss f rights is available frm the assurance fund established by the legislatin in each jurisdictin The register is guaranteed t reflect the crrect status f land If, thrugh human errr, a flaw appears, the lss suffered is crrected by cmpensating the party Hwever, this is ften criticised as inadequate, bth in terms f quantum (cmpensatin is ften minimal) and significance (land is arguably irreplaceable) There is als ften substantial incnvenience and delay In many circumstances, parties suffering lss chse instead t sue their lawyer The register ffers bth psitive warranties (as t wnership, bundaries, and interests held) and negative warranties (that there are n ther interests that culd have pririty). Nte: significant tensin exists between the bjective f cmpleteness (ie, nthing exists beynd the register) and fairness (ie, unregistered equitable interests shuld be recgnised where it wuld be against cnscience nt t d s. It has been accepted that unregistered interests in land can be created since Barry v Heider. Cmpleteness is thus by degree nly. 5 See generally The Ruff, An Englishman Lks at the Trrens System (1957). Page 13 f 41

14 D Central Legislative Prvisins Land is defined bradly and recursively. Sectin 4 Definitins: Crwn grant electrnic instrument the grant by Her Majesty f land whether in fee r fr years; means an instrument that is an electrnic cmmunicatin within the meaning f the Electrnic Transactins (Victria) Act 2000; electrnic ldgement netwrk means the electrnic ldgement netwrk referred t in sectin 44B; encumbrance in respect f any land includes any estate interest mrtgage charge right claim r demand which is r may be had made r set up in t upn r in respect f the land; fli f the Register means a fli f the Register under sectin 27; instrument land registered prprietr includes every dcument registered r capable f registratin under this Act r in respect f which any recrding is, by this Act r any ther Act, directed, required r permitted t be made in the Register; includes any estate r interest in land but des nt include interest in land arising under the Mineral Resurces Develpment Act 1990; means any persn appearing by the Register (ther than an identified fli) r by any registered instrument t be the prprietr f any estate r interest in land; Registratin creates title. Sectin 40 Instruments nt effectual until registered: (1) N instrument until registered.. shall be effectual t create vary extinguish r pass any estate r interest r encumbrance but upn registratin.. The estate r interest r encumbrance shall be created varied extinguished r pass. (2) Every instrument when registered shall be f the same efficacy as if under seal.. The legal text f flis is guaranteed t be accurate. Page 14 f 41

15 Sectin 41 Certificate t be cnclusive evidence f title: N fli shall be defeasible by reasn f any irregularity in an instrument; every fli shall be received in all curts as evidence f the particulars recrded in it and be cnclusive evidence that the persn named as prprietr r having an estate r interest, r pwer t appint t dispse is seised r pssessed f that estate r interest r has that pwer. In this way, the fli is cnclusive. Registered titles mirrr (at least in thery) interests actually held, thus bviating the need t search behind the register in rder t determine whether incnsistent interests exist (curtain principle). E Trrens in Practice 1 A standard cnveyance A typical sale transactin invlving Trrens land cnsists f the fllwing: Prir t purchase, search the register t lcate the relevant title and verify the identity f wner and purchaser Visually inspect the land, identifying any rights f way, tenants, r relevant third parties As sn as the auctin is cmplete, use caveats t prtect the purchaser s equitable interest in cmpletin Obtain a duplicate certificate f title befre handing ver the funds (never hand ver mney befre that) Register the certificate f transfer as sn as humanly pssible Perfrming these steps with speed and accuracy makes it very likely that the purchaser will prevail in a Trrens pririty dispute. 2 Cmparisn with deeds cnveyancing In a deeds system, judges established strict cnveyancing standards, frcing peple t search all the title histry, even behind the frmal dcuments. Trrens is a public register prtecting last registered interest. Simple search. Cnveyancing standards are different, and they remain vital t the integrity f the register. Nte effect f legal educatin in deeds given t HCA judges sitting in the late 20th century; influenced their treatment f the Trrens statutes 3 Internatinal standards Trrens is cnsidered internatinal best practice fr land registratin in a land administratin system. It prvides: Jurisdictin-wide cverage (a register); Currency (infrmatin that is up t date and cmplete); Guarantee (psitive and negative warranties, pririty guarantees); and Indemnificatin (cmpensatin in the event f system failure). Page 15 f 41

16 In additin, Trrens is simple t administer, cheap and efficient t run. Hwever, it can be expensive t establish (thugh nt in Australia, where there was little in the way f existing recgnised tenures). Fr these reasns, the Trrens system is much better than a deeds system. It is arguably the best land registratin system in the wrld. Althugh its interactin with equitable and adverse pssessry interests is nt entirely satisfactry (see belw), the system prduces a just utcme in the vast majrity f cases (certainly a greater prprtin than under a deeds system). Page 16 f 41

17 IV Indefeasibility A Definitin Indefeasibility f title is a cnvenient descriptin f the immunity frm attack by adverse claim t the land r interest in respect f which he is registered, which a registered prprietr enjys (their Lrdships in Frazer v Walker). Indefeasibility is cnferred by registratin. It is, in essence, a statutry guarantee against retrspective invalidatin f title, subject t several exceptins (see belw Part VII). As Windeyer J nted in Breskvar v Wall, indefeasibility is the very essence f the Trrens system. 1 Interests rendered indefeasible Sme dcuments are a simple ne page transfer f land and result in an immediate change in the wner f the interest when registered. Others are mre cmplicated; fr example, many mrtgages cntain persnal and prprietary cvenants. Other dcuments may refer t a memrandum r standard frm prvisins. Issue: are all these secndary prvisins and interests created thereby als registered and, hence, indefeasible when the primary instrument is registered? Mercantile Credits Ltd v Shell C f Australia Ltd (1976) HCA: Facts A lease is registered (nw an unusual practice in Victria) It included a cvenant allwing tenant t renew The land wner had a mrtgage t MC and defaulted n repayments MC wanted t sell the land with vacant pssessin Issue Can Shell renew the lease? Reasning The renewal cvenant is prprietary and runs with the land Decisin The High Curt allwed the prtectin f registratin t encmpass prprietary cvenants cntained within the lease Mercantile Credits suggests that mrtgages and leases that create cvenants will be binding upn new wners f land t the extent that the rights created are prprietary (and nt persnal). 2 Registrable instruments Issues ccasinally arise as t whether a given instrument is registrable (capable f registratin). Fr example, are plans f sub-divisin instruments capable f registratin? In a sub-divisin, prprietary rights are ften created by changes t the plan, nt individual transfers. Page 17 f 41

18 3 Statutry prvisins guaranteeing indefeasibility If the instrument is registrable, bna fide registratin cnfers prima facie indefeasibility, subject f curse t certain exceptins (see belw Part VII): Sectin 42 Estate f registered prprietr paramunt: (1) the registered prprietr shall, except in case f fraud, hld land.. subject t encumbrances recrded, but abslutely free frm all ther encumbrances except. included in prir flis wrng descriptin. (2) But land remains subject t (verriding r paramunt interests) Even if the registrant has actual r cnstructive ntice f a prir unregistered interest, subsequent registratin will nt be fraud, even thugh it has the effect f denying thse earlier rights. Sectin 43 Persns dealing with registered prprietr nt affected by ntice: Except in case f fraud n persn cntracting r dealing with r taking r prpsing t take a transfer frm the registered prprietr shall be required t ascertain the circumstances.. under which such prprietr r any previus prprietr was registered.. r shall be affected by ntice actual r cnstructive f any trust r unregistered interest, any rule f law r equity t the cntrary ntwithstanding; and knwledge f such trust r unregistered interest shall nt f itself be imputed as fraud. Hwever, all this is subject t the exceptin that certificates fraudulently registered will be invalid. This exceptin des nt extend t subsequent bna fide purchasers dealing n faith f the register, such that a further transactin t a third party will escape invalidatin. Sectin 44 Certificate vid fr fraud: (1) Any fli prcured by..fraud shall be vid as against any persn defrauded r sught t be defrauded and n party t the fraud shall take any benefit.. (2) But nthing shall be interpreted s as t leave subject t ejectment r damages r deprivatin f the estate r interest in respect f which he is registered prprietr any bna fide purchaser fr valuable cnsideratin f the land n the grund that the persn thrugh whm he claims was registered thrugh fraud Page 18 f 41

19 Nte: sme interests (eg, trusts) cannt be registered (recrded n the register). These can be prtected using caveats. Hwever, mst interests can be placed n the register. B Scpe f Indefeasibility 1 Current psitin: immediate indefeasibility Accrding t the thery f immediate indefeasibility, upn registering a transfer r ther instrument, a persn btains an immediate title t the estate r interest transferred r created by that transfer r ther instrument, even if it is vid. The prprietr n becming registered pursuant t a vid transfer is prtected against actin by the previus registered prprietr s lng as the newly registered prprietr has acted withut fraud and has given valuable cnsideratin fr the transfer. 6 2 Cmpeting theries Issue: at what pint is an indefeasible title cnveyed? Wh shuld be given prtectin? All peple wh register withut fraud, nly sme registrants? At first, deferred indefeasibility was favured n the basis f an interpretatin f TLA s 44. Accrding t this view, nly secnd and subsequent registratins are prtected by indefeasibility, and nly if they are themselves bna fides. Prtectin is deferred t the secnd dealing. By cntrast, immediate Indefeasibility is nw favured n the basis f TLA s 42. Registratins btained withut fraud are prtected immediately. The bject f indefeasibility is t save purchasers frm the truble and expensive f ging behind the register. This is achieved by prtecting any bna fide purchaser fr value frm adverse claim where they purchase n faith f the register. Such a purchaser acquires an indefeasible right f wnership ntwithstanding any infirmity in the title. 7 3 Histrical develpment The initial psitin favured deferred indefeasibility, reflecting a deeds system interpretatin f Trrens legislatin: the justificatin fr destrying a legal estate is nly t prtect smene wh deals n the faith f the register Dixn J in Clements v Ellis (1934) Accrding t Sir Anthny Masn, what Dixn J in Clements v Ellis did was t invest the Trrens statute with many f the characteristics f the existing law f real prperty and equity. It is bvius that Trrens is nt whlly self-cntained. 6 Sir Anthny Masn, Indefeasibility Lgic r Legend in David Grinlintn (ed), Trrens in the Twenty-first Century (2003) 3, 5. 7 CN and NA Davies Ltd v Laughtn [1997] 3 NZLR 705, (Thmas J). Page 19 f 41

20 This cntrversy has centred n the cncept f indefeasibility, what it means r was intended t mean and whether it shuld nw be mdified s as t permit just utcmes in a wide variety f circumstances. The Privy Cuncil settled this cnflict in Frazer v Walker in favur f immediate indefeasibility. Frazer v Walker devided that, n registratin f an instrument that is merely vid by a purchaser fr value withut fraud, the purchaser has an indefeasible title. Frazer v Walker distinguished Gibbs v Messer and did nt verrule it. S it still stands as authrity fr the prpsitin that registratin f a frged instrument in favur f a fictitius r nn-existent persn des nt cnfer an indefeasible title. Frazer v Walker (1967) Privy Cuncil (appeal frm NZ): Facts Mrs Frazer frged Mr Frazer s signature f a mrtgage f the farm t Radmski She is paid the 300 punds, and she discharges an earlier mrtgage, but she des nt make payments and defaults under the mrtgage Radmski exercises pwers f sale as mrtgagee and sld the farm t Walker Walker then sught t eject Frazer Issue Is the transfer valid? Des Radmnski have gd title as derived title frm frged instrument? Can Mr Walker btain a declaratin that his interest in the land was nt affected by the mrtgage r subsequent transfer? Reasning Radmski, the first mrtgagee Frged instrument vid at cmmn law Culd nt pass the title at cmmn law Curt applies Byd t hld indefeasible title may be derived frm registratin f vid instrument Sectin 63 (ur s 42) prtects the registered prprietr (Radmnski) except where he (nt Mrs Fraser) is guilty f fraud This is immediate rather than deferred indefeasibility Curt distinguished Gibbs v Messer as fictitius persn : cnfined t factual circumstances Even thugh there is a frgery, it is pssible t derive gd title frm the mrtgagee; the title is indefeasible at that pint and there is n need t engage in a secnd, subsequent transactin N fraud n the part f Radmski Mr Frazer relied in Gibbs v Messer: rejected by the Privy Cuncil Cnfined t its facts abut dealing with a fictitius persn Nte s 183 f NZ Act: nthing shall render subject t deprivatin f the estate f which he is registered any bna fide purchaser fr value n grund that the previus persn was registered thrugh fraud r vid r vidable instrument [Indefeasibility] is a cnvenient descriptin f the immunity frm attack by adverse claim t the land r interest in respect f which he is registered, which a registered prprietr enjys. Decisin The sale is valid and Radmski s title indefeasible Page 20 f 41

21 Mre recently, the High Curt f Australia has cnfirmed that immediate indefeasibility is the crrect apprach: Trrens is nt a system f registratin f title but a system f title by registratin. Barwick CJ in Breskvar v Wall (1971) 4 Future appraches The mdern trend suggests that the mst recent act f registratin is, and will cntinue t be, determinative. Previus cnduct is generally ignred. Nte, hwever, that each Australian jurisdictin has differing prvisins in relatin t indefeasibility, and different bdies f case law have grwn ut f each. C Old View: Deferred Indefeasibility Accrding t the deferred indefeasibility thery, the persn registering a vid instrument des nt necessarily secure prtectin frm challenge by a secnd persn seeking t set aside the registratin even if the first persn has acted withut fraud. Indefeasibility ensures nly in favur f a party wh purchases in gd faith frm the registered prprietr, acts n the faith f the register, and registers a valid instrument executed by him. 8 Deferred indefeasibility may be viewed as an attempt t alleviate the ccasinally harsh peratin f the (at this pint) new Trrens system. Gibbs v Messer (1891) Privy Cuncil: Facts Mrs Messer verseas, leaving pwer f attrney with her husband Husband leaves certificate f title with her slicitr The slicitr inserts a fictitius persn n the transfer, which is registered The slicitr executes a mrtgage frm the fictitius persn t the MacIntyres, and is registered Messer discvers the frgery and nw seeks t be entered n the register again, free f the mrtgage MacIntyres argue that their interest is indefeasible Issue Can Messer be restred as registered-prprietr? Must the MacIntyres' mrtgage interest be recgnised and the land wned subject t that interest? Reasning Privy Cuncil prtectin by statute is limited t thse wh actually derive title frm, and deal with, a registered prprietr MacIntyres dealt with a fictitius persn culd nt derive gd title frm the 8 Sir Anthny Masn, abve n 6, 5. Page 21 f 41

22 frged instrument The mrtgage, thugh registered, was invalid because f fraud The prtectin is limited t thse wh deal with and derive title frm the registered prprietr They culdn't derive gd title frm a fictitius prprietr This reflects a deeds-based apprach t title (Ie, title dependant upn predecessr's validity) Cf Trrens: title, nce registered, is effective regardless f previus chain f title If there had been a secnd transactin frm MacIntyres t a third party, the transfer wuld have been valid Ie, must be ne step away frm the fraud: indefeasibility 'deferred' t the secnd transactin If yu're n the register and deal with land, the purchaser is entitled t treat yu as wner Decisin Curt held Messer restred as RP w/ mrtgage The view f Dixn J in Clement v Ellis invest the statute with many f the existing characteristics f the existing law f real prperty and equity. Just hw much f that law and equity shuld be imprted int Trrens Title jurisprudence has always been a matter f debate. It was, f curse bvius that the system was nt whlly self cntained. Nte week ne article by Justice Gummw prbing hw far equity shuld be imprted int the peratin f the Trrens system. Nte view that Recgnitin f equitable estates and interests lying beynd the state f the register has prved an uncntrversial matter (Masn at 6) D Current View: Immediate Indefeasibility Acceptance f Immediate Indefeasibility in Australia: unregistered interests [equitable] interests are vulnerable t registered interests, ie the registered interest is paramunt ; the title is - in the absence f exceptins indefeasible. Breskvar v Wall required the High Curt t cnsider the range f authrities. Endrses the ntin f immediate indefeasibility; ie registratin vests title in the prprietr. Breskvar v Wall (1971) HCA: Facts Breskvars were registered prprietrs in fee simple f a vacant tw acre parcel f Trrens land at Acacia Ridge, Queensland They brrw mney frm Petrie fr 12 mnths T secure the lan the Breskvars gave Petrie their duplicate certificate f title plus a transfer with the name f the purchaser left blank Page 22 f 41

23 Executin f a blank transfer was a breach f s 53(1) f the Stamps Act 1984 (Qld) Breskvar signed the transfer in lieu f a mrtgage Petrie inserts his grandsn's name (Wall) and had the transfer registered Wall knew f and is fund t cllude in the fraud Wall becmes the registered prprietr (thugh his title is defeasible fr fraud) Wall registers in grandsn's name, registers and sells t Alban Petrie then sells the land t Alban Alban s slicitr searched the register befre signing the cntract and finds n evidence f earlier interests Alban cmpletes the sale Befre Alban registers, the Breskvars discvered the fraud and ldged a caveat which prevented Alban getting registered Alban wants t be prtected n the basis f reliance n the register Issue Is defeasibility deferred r immediate? Either way, the Breskvars will lse Althugh the Breskvars culd have recvered their land fr fraud at the time f Wall s registratin, nce Alban purchased n the basis f Wall s purprted wner, the third party is prtected Reasning Barwick CJ except in and fr the purpse f such excepted prceedings, the cnclusiveness f the certificate f title is definitive f the title f the registered prprietr. That is t say, in the jargn which has had currency, there is immediate indefeasibility f title by the registratin f the prprietr named in the register. It is really n impairment f the cnclusiveness f the register that the prprietr remains liable t ne f the excepted actins any mre than his liability fr persnal equities dergates frm that cnclusiveness. S lng as the certificate is unamended it is cnclusive and f curse when amended it is cnclusive f the new particulars it cntains. The Trrens system f registered title is nt a system f registratin f title but a system f title by registratin. Cnsequently, a registratin which results frm a vid instrument is effective accrding t the terms f the registratin. It matters nt what the cause r reasn fr which the instrument is vid. The situatin therefre immediately after the registratin f the [memrandum], by the endrsement f a memrial n the certificate f title was that the fee simple in the land was vested in [Wall] Hwever, that transfer was prcured by the fraud f the transferee; Cnsequently, althugh the registered prprietr in whm the fee simple was vested, [Wall] did hld his estate subject t the rights f the [Breskvars]. He did nt hld it n trust fr the [Breskvars] but as between themselves and [Wall] they had a right t sue t recver the land and t have the register rectified such a claim is an equitable claim enfrceable by reasn f the principles f the Curt f Chancery (it is nt clear whether his Hnur means t describe it as a mere equity r therwise) If there had been n transactin by [Wall] with [Alban], the [Breskvars] wuld have been entitled t succeed against [Wall] But the purchase by [Alban] bna fide fr value and withut ntice intervened, befre that equitable right f the appellants was fulfilled. The third respndent thus acquired an equitable interest in the land. The ability t create and the Page 23 f 41

24 validity f an equitable estate in land the title t which is under the Trrens system were fully established in Barry v Heider McTiernan J Wall s registratin cnfers gd against the whle wrld except the Breskvars Therefre they had gd title in relatin t third parties dealing with him n faith f the register The decisin in Frazer requires this cnclusin In this case, the register (which reprted Wall as the registered prprietr) was relied upn by Alban Therefre Wall passed an interest in land t Alban by memrandum f transfer (equitable interest) Cnduct f parties must be taken int cnsideratin in rder t determine the better equity and the Breskvars were estpped frm relying n their prir equity because f their behaviur Menzies J: Upn registratin, Wall became registered wner and the Breskvars ceased t be registered wners The Breskvars interest became a right t impeach the defeasible title f Wall The signed transfer that the Breskvars gave Petrie was nt valid, and therefre culd nt be regarded as a gd surce f equitable rights But the transfer held by Alban was frm the registered prprietr and as such a transferee; his rights fall t be determined by s 48 which gave it an equitable interest as unregistered purchaser f land Alban shuld have pririty, nt because the Breskvars armed Wall r because that transfer was nt capable f creating any interest, but because such a transfer is in breach f the Stamps Act and it was this breach f law that enabled Wall t becme registered Frazer v Walker is imprtant here in establishing that, if and t the extent that earlier decisins were t the effect that an indefeasible title cannt be acquired by the registratin f a vid instrument, they have lst their authrity. It must nw be recgnised that, in the absence f fraud n the part f the transferee, r sme ther statutry grund f exceptin, an indefeasible title can be acquired by virtue f a vid transfer... [but] where there is fraud... a transferee des, by registratin f a vid transfer, btain a defeasible title Walsh J: Prir t Frazer the result may have been different Hwever, while this case differs, the principles laid dwn in Frazer are very imprtant N lnger pen t Breskvars t argue that the registratin f wall as prprietr was abslutely vid and inperative Effect f immediate indefeasibility is t pass title t Wall upn registratin Effect f fraud was t give the Breskvars rights against Wall and as against Wall, the Breskvars were entitled t be restred as registered prprietrs Right is equitable right which enables curt t prvide a remedy as against Wall Hwever, as against A, the questin was whether that interest was ne that shuld take pririty ver A s interest which arse ut f the cntract f sale and the cmpletin f the cntract including their hlding a transfer Nt necessary t determine whether the Breskvars interest was a mere equity r an equitable interest because Alban had n ntice and the Bs had armed Petrie and Wall with the transfer and certificate f title (pstpning cnduct) Page 24 f 41