Torrens Title and Indefeasibility 1. Torrens system title by registration The Torrens system is one of title by registration (not registration of title) No need to prove a chain of title. Three core principles: Mirror principle: register accurately and completely reflects all facts material to the owner s title Curtain principle: the register is the sole source of information - no reason for prospective purchasers to concern themselves with interests behind the curtain Insurance principle: a person deprived of an interest by the Torrens system is entitled to compensation 1.1. Interests capable of registration Interests capable of registration (LTA) - fee simple alienated by State: s 47 - transfer of a lot or interest in a lot: s 60(1) - a lease: s 64 - a mortgage: s 72 - building management statement: ss 54A-54J - a life interest: s 55 - caveat to protect equitable interests - an easement: s 82 - title of an adverse possessor: s 99 - a profit a a prendre: s 97E - a trustee s interest: ss 109, 110 - a writ of execution: s 116 - a plan of subdivision: s 49A Unregisterable interests: beneficial interest under a trust: ss 109, 110 LTA remainder interest (vested or contingent): s 55 LTA, s 30(2) PLA restrictive covenant that isn t specifically allowed by s 97A LTA: s 4 PLA 1.2. Registration of instruments Instrument registered when particulars are entered on the freehold land register s 174 LTA o The registrar must keep a register of freehold land in the general land registry: ss 8/27 LTA Registered in the order in which they are lodged s 177 LTA o But see Caveats and SN Registered instruments have priority according to when lodged (not when signed) s 178 LTA Registrar must record the following particulars - s 28(1) LTA, o every lot under the LTA; o every interest registered in the register; o the name of everyone who holds a registered interest; o the date of birth of every minor who holds a registered interest; o all instruments registered in the register including their lodgement and registration dates. LWB241 Trusts Natasha G 1
1.3. Effect of registration Instrument does not transfer or create an interest in a lot at law until it is registered s 181 LTA On registration, the interest s 182 LTA (a) is transferred or created in accordance with instrument; and (b) is registered; and (c) vests in the person identified in the instrument Unregisterable / Unregistered interests Unregistered interests may be: o Capable of registration (e.g. unregistered transfer in correct form); or o Not capable of registration (e.g. beneficial interest under a trust) Unregistered interests do not create legal rights - s 181 LTA; however equitable rights evidenced by the instrument may still be enforceable: Barry v Heider o Can support a mortgage o Right to have interest registered Barry v Heider (B signed transfer to S unregistered = equitable representation by B that S entitled to be registered owner obtained loan from H unregistered - B sought to set aside transfer argued S and H had no right: HELD: unregistered interest could support mortgage of H equitable interest w/ right to registration) Unregistered interests = vulnerable to being defeated by a subsequent legal title. May seek to protect interest via: o Registration o Caveat or SN see Caveats/Settlement Notices o Possession of title deed where issued. Exception: unregistered short lease = legal interest. LWB241 Trusts Natasha G 2
2. Indefeasibility A registered proprietor (person entitled to interest in lot incl owner, mortgagee) of an interest in a lot holds the interest subject to registered interests only s 184(1) LTA o Not affected by actual or constructive notice of an unregistered instrument s 184(2)(a) o No need for consideration s 180 LTA E.g. unregistered mortgage new owner no right to land, but contractual rights against mortgagor. Indefeasibility protects the interests in the land created or transferred; o Includes terms of instrument that define the interest of the owner/mgee/lessee o Does NOT include personal covenants mortgages and leases not protected unless registered separately. Deferred or immediate indefeasibility HCA has held that upon registration, immediate indefeasibility of title is obtained, even where the interest was obtained under a void or voidable instrument; Frazer v Walker; Breskavar v Wall o However, indefeasibility subject to usual exceptions (e.g. fraud, careless mortgagee) Examples: o Mortgagee who obtains interest via fraudulent signature registered indefeasible: Frazer v Walker (Mrs F forges husbands signature mortgage to R, registered (immediate indefeasibility power to sale, sold to W valid) o Transfer under a voidable document registered indefeasible: Breskavar v Wall (B blank transfer doc to P fraudulent transfer to W registered (immediate indefeasibility, but defeasible for fraud of P) sold to A A s equity better than B s wins) Fictitious transferee exception: if transfer executed in favour of a fictitious person, authority suggests indefeasibility deferred until the next registered interest- Gibbs v Messer (rouge forged signature, transfer to fictitious person registered (no indefeasibility) mortgage for McI defeasible) o Gibbs v Messer has been heavily criticized though never expressly overruled and arguably doesn t apply in Queensland - Khan ATF Khan Family Trust v Hadid Certificate of Title: Conclusive evidence of indefeasible title for a lot: s 46 LTA No longer automatically issued and must be requested in writing: s 42 LTA Mortgagee s permission is required for a certificate of title to be issued: s 42(2) LTA When no certificate is issued, a title search is proof of indefeasible title: ss 35 and 36 LTA LWB241 Trusts Natasha G 3
3. Exceptions to Indefeasibility Indefeasibility conferred by s 184(1) is subject to exceptions s 184(3) (a) listed in s 185; or (b) where there has been fraud by the registered proprietor 3.1. Fraud Common fraud = regd owner s signature forged to transfer or obtain mortgage (void); reg d owner s signature genuine but obtained on fraudulent misrep (Loke Yew) = voidable. [Registered proprietor] will not obtain the benefit of indefeasibility where there has been fraud on their behalf s 184(3). Fraud must involve actual dishonesty; and must be brought home to either the registered proprietor or their agent: Assets Co v Mere Roihi. Mere notice of an unregistered instrument is insufficient: s 184(2)(a); Friedman v Barrett o However fraudulent if promised to honour the unregistered interest, and there was an intention to defraud from the outset: Loke Yew (E contracted to sell land to cpny, refused to sign until cpny s agent promised to purchase LY s equitable interest on the land; once registered cpny sought to remove LY fraud) o Fraudulent intention must have existed at time of registration: Bahr v Nicolay (N sold land to T who acknowledged agreement to resell to B at end of lease; registered; T later refused to resell 2 judges held T had indefeasibility, not defeated by fraud as no intention at time of registration) Can be difficult to prove this intention in personam exception Fraud must be operative in causing acquisition of the registered interest: Bank of SA v Ferguson (Bank officer forged F s signature on internal doc bank registered mortgage F defaulted, argued fraud; HELD valid forgery didn t affect decision to give loan as based on correct info from F) o e.g. forged signature on document with no bearing = insufficient. Fraud against Registrar of Titles - where registered proprietor knows of an irregularity/falsity in the execution of the instrument and seeks to register it- including falsely signing an attestation clause: AGC v De Jager. o Lender personally and falsely signing attestation clause, then sending for registration when suspicious = fraud: AGC v De Jager o False attestation by employee of solicitor of mortgagee insufficient where employee acted without understanding dishonesty of the act: Russo v Bendio Bank (solicitor had instructed only to witness when signed in front of her, incorrectly witnessed signature not signed in front of her; solicitor unaware of actions too far removed to be fraud of mortgagee) Knowledge required Insufficient if might have found out fraud if more vigilant; must have actually known or been wilfully blind Assets Co v Mere Roihi Wilful blindness (or reckless indifference) may be sufficient where the registered proprietor is suspicious but abstained from making inquiries for fear of learning truth in a dishonest manner. Carelessness insufficient for wilful blindness: o Bank in failing to check adequate ID when issuing mortgage = not fraud: Grgic v ANZ (son and friend impersonated father at bank to forge signature to obtain mortgage for son s debts bank failed to check ID when witnessing signature no fraud, unwitting particiapation) LWB241 Trusts Natasha G 4
o o Mortgagee s solicitors failed to adequately verify signatures and ID = not fraud: Young v Hoger (mother and daughter forged father s signature to obtain refinancing of current mortgage; solicitor sent letter setting of requirements to ensure genuine signatures; required certified documents but accepted uncertified family context, no suspicion mortgage valid) Failure to follow anti-fraud procedures e.g. requiring independent certificate = no fraud (Hilton v Gray); or sending mortgage documents by email and failing to ensure certified copies (Royalene v Registrar) careless mortgagee exception. Fraud by agent Registered proprietor will be liable where: o Fraud was committed by an agent (eg Loke Yew) o Agent has actual knowledge that fraud was committed against regd proprietor Fraud committed by agent: registered proprietor bound by agent s fraud if act was within the actual or apparent (held them out to have) authority of the agent o No actual authority unless regd proprietor actually authorised to fraudulently register: Schultz v Corwill ( G solicitor fraudulently registered mortgage by C for S; S believed it was genuine; G took loan money for self (no authorisation S not affected by fraud = valid mortgage); G then fraudulently affected release of mortgage (C unaware, didn t authorise = valid release)) Agents knowledge of fraud: registered proprietor bound by agent s knowledge of another s fraud as there it is presumed the agent communicated all relevant information to its principal o Presumption doesn t apply to fraud committed by agent. o Presumption is rebuttable with actual evidence no communication. LWB241 Trusts Natasha G 5
3.2. In personam exception E.g where registered proprietor enters into contract for sale- bound by it. [Registered proprietor] will not obtain the benefit of indefeasibility where an equity arises from an act they have committed s 184(3)(a); 185(1)(a). (1) Recognised equitable or legal cause of action Recognised proprietors conduct must give rise to a recognised cause of action legal or equitable - Grgic v ANZ Bank o Mere notice insufficient: s 184(2)(a) LTA; Loke Yew o action may arise before or after registration Contract: Recognised legal cause of action where [registered proprietor] acts contrary to express agreement of terms in a contract equitable fraud defeating indefeasibility: Valbirn v Powprop Sale of land subject to existing unregistered leases and options: Valbirn v Powprop (V contracted to purpose land from lessor, expressly subject to and conditional upon recognition of existing tenancies and V s written acceptance of existing lease terms/condtions (incl option to renew) V signed bound to these unregistered leases and options) Sale contract included right to re-sell = amounts to undertaking to be bound by that right: Bahr v Nicolay (B sold to N sold to T, contract included right to resell to B B had equitable right to repurchase defeated T s indefeasibility) Breach of duty: There is a legal cause of action where the registered proprietor has obtained their interest through a breach of a duty. Breach of duty where mortgagee (bank) hands over the certificate of title without the mortgagor s consent : Mercantile Mutual v Gosper (Mrs G had mortgage bank held CT as security Mr G forged signature to variation of mortgage increasing debt bank handed over CT to enable registration without Mrs G s consent breach of duty to safeguard the CT in personam exception applied against mortgage) Carelessness insufficient: Grgic v ANZ (bank granted mortgage on son s forgery and impersonation of father no inpersonam exception merely carelessness) Breach of trust or fiduciary relationship sufficient: Majestic Homes v Wise Court Order Where registration is obtained by court order, indefeasibility is subject to the equity that arises via submitting your title to the jurisdiction of the court therefore title may be defeasible to an appeal order by the court: White v Tomasel (T s obtained court order for W to transfer land to them registered; order overturned on appeal T s argued indefeasibility; HELD equity arose by submitting to court s jurisdiction bound to re-transfer) Unconscionable conduct: Cause of action arises where registered proprietor engages in unconscionable conduct e.g o Knowingly taking advantage of a mistake in lot boundary (actual knowledge): Tutt v Doyle (Contract for sale of land P asked surveyor to shift boundary so received larger area than in contract unconscionable to knowingly take advantage of mistake could only keep area contracted for) o Taking advantage of mistake when ought to have known: Minister for Education v Canham (contract for sale of land attached diagram of excluded areas purchaser = real estate agent solicitor submitted transfer doc with all land included new solicitor didn t notice mistake purchaser ought to have known disputed site not included in personam applied) LWB241 Trusts Natasha G 6
(2) The cause of action must not be inconsistent with the LTA A cause of action based on knowing receipt of trust property is not sufficient to prove the in personam exception; as this is inconsistent with section 184(2)(a) LTA which states that indefeasibility is not affected by notice of an unregistered interest Tara Shire Council v Garner (G agreed to sell part of land to council (Subdivision CT held on trust) then sold rest of land to A and told them of the council s interest transfer registered for whole property = knowing receipt of trust property in personam unavailable in reality mere notice) Farah v Say-Dee o In personam requires the primary wrongdoer to be the registered proprietor in trying to deny an equitable right. However, knowing assistance will give rise to a claim in personam as knowledge of a dishonest and fraudulent conduct is an essential element: Bli Bli #1 v Kimlin Investments 3.3. Careless Mortgagee Exception A mortgagee will not obtain the benefit of indefeasibility of their interest if - s 185(1A) (a) they have failed to confirm the identity of the mortgagor by: (i) failing to comply with s 11A(2) [lodging or amendment of mortgage]; or (ii) failed to comply with s 11B(2) [transfer of mortgage]; and (b) the person registered as mortgagor was not the correct registered proprietor - s 184(3)(a). Confirmation of Identity: s 11A(1): (a) registering or (b) amending a mortgage. S 11B(1): transfer of an interest constituted by the mortgage Before registration, mortgagee (bank) must take reasonable steps to ensure the person who is mortgagor under the instrument is the same person who is (or is about to become) the registered proprietor of the lot s 11A(2) / 11B(2) Reasonable steps taken if completed a 100 points identification check s 11A(3)/ 11B(3); Land Title Practice Manual. o Birth/citizenship certificate, current passport 70 points o Drivers license 40 o Confirmation from current employer 35 o Electoral roll, record of public utility, credit cards 25 points. o Need not complete 100 point check where existing customer within reasonable period. Where mortgagor is a company must adopt prudent lending practices e.g. current company search, registration number, registration status, address of registered office etc. Must record steps taken and keep records for 7 years after interest registered s 11A(4)/ 11B(4) Failure to comply Mortgagee s interest defeasible: s 185(1A) Mortgagee denied compensation from the state for any loss or damage suffered: s 189(1)(ab) Mortgage can be removed from register: s 187 LWB241 Trusts Natasha G 7
3.4. Short Lease Exception [Registered proprietor] will not obtain the benefit of indefeasibility over an interest of a lessee under a short lease s 184(3)(a); 185(1)(b). A short lease is one Sch 2 definition: (a) for a term of 3 years or less; or (b) from year to year or a shorter period The interest of a lessee under s 185(1)(b) does not include s 185(2): (a) rights to acquire fee simple or reversionary interests after ending the short lease: s 185(2)(a) (b) options to renew beyond 3 years from the beginning of the original term: s 185(2)(b) e.g. lease for 3 years with option for 3 years only initial term protected: Friedman v Barrett A lease not exceeding 3 years can be made without the requirement of writing s 12(2) PLA 3.5. Omitted easement Servient = easement exercised on this land Dominant = land which benefits [Registered proprietor] will not obtain the benefit of indefeasibility over a person entitled to the benefit from an omitted or misdescribed easement s 184(3)(a); 185(1)(c). An omitted easement can be enforced against subsequently registered proprietor s185(4) Was there an easement? Essential characteristics per Re Ellenborough Park There must be dominant and servient land o Dominant land must exist before easement can be created o Owners of dominant / servient land must be different people Easement must accommodate (benefit) the dominant land o Benefit must be real and practical o Benefit must be connected with enjoyment of land personal advantage insufficient o Dominant and servient land must be sufficiently proximate (not necessarily adjacent, but close) Right must be capable of forming the subject matter of a grant o Incapable of forming grant where too wide and vague (e.g. right to wander at will) o Must be consistent with ownership and possessory rights of servient owner o Must be right of utility and benefit mere recreation and amusement insufficient Increased value in the property may be sufficient Re Ellenborough Park o Can include right to: Air flow (e.g. to assist dying process) Water Light (e.g. workshop required light through windows to function) Right must not amount to exclusive use of servient land LWB241 Trusts Natasha G 8
Re Ellenborough Park(right to use common garden was an easement houses quite proximate, garden benefitted land enhanced their value, right to walk in garden not too wide or vague) Omitted or Misdescribed in the Register To create an easement, must register the instrument of easement s 82(1) LTA o Failure to register = equitable interest only. Easement particulars are omitted from the freehold land register only if s 185(3) (a) easement was in existence when the servient land was first registered, but the easement particulars have never been recorded in the register; or (b) easement particulars previously recorded, but current particulars were incorrectly omitted; or e.g. previously recorded under Torrens method, new CT issued but easement incorrectly omitted-- James v Registrar General (subsequent purchaser bound even though not aware of easement) (c) easement instrument was lodged for registration but, because of an error of the registrar, has never been registered. e.g. registrar fails to record easement Papadoupoulos v Goodwin An easement that was never properly recorded cannot be omitted Stuy v BC Ronalds. 3.6. Adverse Possession [Registered proprietor] will not obtain the benefit of indefeasibility over a person who would be entitled to registration due to adverse possession s 184(3)(a); 185(1)(d). Registration as owner by adverse possession requires: 1. Proof of adverse possession at common law (possessory title) 2. Property held in adverse possession for more than 12 years - s 13 LAA 12 years will reset upon any transfer of the title e.g. sold or owner dies only entitled if have accrued the full 12 years without interruption. 3. Application for registration under LTA (s98 108) Adverse possessor may apply to be registered as owner of the lot if satisfied CL requirements and LAA s 99(1) LTA If no caveat is lodged, applicant may be registered: s 108(1)(a) LTA (1) Adverse possession established at common law? Must establish factual possession and an intention to possess: Buckinghamshire v Moran (1) Factual possession Factual possession is an appropriate degree of physical control amounting to single and exclusive possession : Powell v McFarlane Must show that the possessor has dealt with the land like an occupying owner and that no one else has dealt with the land in that way (depends on the nature and usual use of the land): Powell v McFarlane Examples of factual possession: - Formal entry on the land is not sufficient: s 21 Limitation of Actions Act - Paying rates is indicative, but not conclusive: Bank of Victoria v Forbes o Paying rates is not necessary: Monash CC v Melville - Erecting and maintaining fences is indicative, but not conclusive: Buckinghamshire CC LWB241 Trusts Natasha G 9