REAL PROPERTY TABLE OF CONTENTS Lecture 1A: Introduction & Old System Title... 11 Introduction... 11 Deeds... 11 General overview of priority rules:... 11 o Prior equitable, later legal... 11 o Prior legal, later equitable... 11 Northern Counties of England Fire Insurance v Whipp (1884)... 11 Walker v Linom (1907)... 12 Prior equitable v Subsequent Equitable... 12 Abigail v Lapin [1934]... 13 Heid v Reliance Finance Corp (1983)... 13 Priorities between competing Legal/Equitable or Legal and Equitable interests... 13 Types of Equitable interest include:... 14 Notice... 14 Mere Equity... 15 Postponing Conduct... 15 Registration... 16 Competing between Legal and Equitable Interests... 16 Prior Equitable Estate, Subsequent Legal Estate Example:... 16 Wilkes v Spooner [1911]... 17 Prior Legal Estate, Subsequent Equitable Estate:... 18 Doctrine of Part Performance... 19 The Rule in Lysaght v Edwards (1876)... 19 Lecture 1B... 20 Old system registration - Conveyancing Act - 184G: Instruments affecting land to take effect according to priority of registration... 20 Elements for the application of s 184G... 20 Purpose of Registration:... 20 Operation of s184g... 20 Effect of Priority based on the ORDER of registration... 20 Example... 21 Elements... 21 Contracts for sale of Land (CSL)... 21 Moonking Gee v Tahos [1963] SR (NSW)... 22 Lecture 2A: Torrens Title... 23 Historical Introduction... 23 Elements of Torrens System... 23 Title by Registration... 24 Equitable INterest... 25 Indefeasibility of title... 27 42 Estate of registered proprietor paramount... 27 43 Purchaser from registered proprietor not to be affected by notice (Notice Provision)... 28 118 Registered proprietor protected except in certain cases (In General, this section Prohibits actions to recover land in Torrens Title subject to exceptions)... 28 Gibbs v Messer [1891] AC 248 (Deferred Indefeasibility)... 29 Immediate indefeasibility... 29 Frazer v Walker [1967] 1 ALL ER 649... 30 1
Breskvar v Wall (1971) HCA CASE... 31 What does indefeasibility protect?... 33 PT Ltd v Maradona (1992)... 33 Leases... 33 Which Do... 33 Which don t... 33 Mortgages... 33 Limitations of indefeasibility All monies mortgages... 33 Single Borrower: Provident Capital Ltd v Printy (2008)... 34 Several borrowers: Perpetual trustees Victoria Ltd v English (2010)... 35 Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015]... 37 Unregistered Interests under the Torrens System (these do not attract indefeasibility of title)... 37 Barry v Heider (1914) (recognised existence of unregistered interests that arise out of transactions). 38 Chan v Cresdon Pty Ltd (1989)... 39 The Nature of Caveats; Unregistered Interests... 40 Real Property Act 1900 (NSW)... 41 Section 74F(1) & (2) Formal Requirements... 41 Section 74F(5) Specificity... 41 Section 74Q... 41 Section 74H(1) Effect of A Caveat... 41 Exceptions to what the RG can do... 42 Removing Caveats... 42 1. Section 74I Lapsing Notice Lodged with Dealing... 42 2. Section 74J Lapsing Notice without Dealing... 42 3. Section 74MA Withdrawal by Court order... 42 Section 74K Extending the Caveat... 42 Section 74O Have to take Questions of Lapsing Seriously... 43 Things to Note:... 43 Section 74P LODGMENT WITHOUT REASONABLE CAUSE (wrongful lodgment of a caveat)... 43 Section 74R Injunctions (IMPORTANT REMEDY FOR DEALINGS REGISTERED ALREADY)... 43 Effect of Caveats on Equitable Priorities (generally Relevant for Unregistered Interests)... 44 3 Situations where this can arise:... 45 Butler v Fairclough (1917)... 45 jacobs V platt nominees [1990] (exception- Should be very limited in application)... 45 Exam Prep... 46 Mimi v Millenium Developemtns [2003] (LIMITS JACOBS CASE)... 46 J&H Just (Holdings) v Bank of NSW (1971)... 47 Avco Financial Services v Fishman [1993]... 47 person to Person Financial Services v Sharari [1984]... 48 Barry v Heider... 49 Abigail v Lapin [1934]... 49 Heid v Reliance Finance (1983)... 50 Barlin Investment v Westpac Banking (2012)... 51 Black v Garnock (2007) HCA... 51 Real Property Act (NSW) Section 43A... 52 43 Purchaser from registered proprietor not to be affected by notice... 52 43A Protection as to notice of person contracting or dealing in respect of land under this Act before registration but AFTER transaction.... 52 Black v Garnock (2007)... 55 When is a Dealing Registrable?... 55 Weller v Williams [2010]... 56 Notice... 56 2
Finlay v R&I Bank of WA... 56 Notice... 57 Jonrary v Partridge bros... 57 Barlin... 57 Requirement for immediately registrable (If not, Cannot use s 43A)... 58 Successive Effect... 60 Barlin Investments v Westpac Banking Corporation (2012)... 62 Finlay v R & I Bank of WA (1993)... 63 Statutory Exceptions to Indefeasibility... 65 Fraud... 65 Two basic areas where fraud is relevant:... 66 Real Property Act 1900 (NSW) Section 42(1)... 66 Summary of cases... 67 Husband and Wife Scenarios:... 67 Mortgage scenarios:... 67 Lease Scenarios:... 67 Defrauded Registered Holder Cases... 67 Australian Guarantee Corporation (AGC) v De Jager [1984]... 67 Principle found in common law... 68 Davis v Williams (2003) nswca (No Fraud made out)... 68 Section 56C Confirmation of Identity of Mortgagor... 69 Section 117 Certificate of correctness... 70 Cassegrain v Gerard Cassegrain (2015) HCA... 70 Defruaded Unregistered Holder (Fraud = Notice + Other factor)... 70 Timing of Fraud... 71 Loke Yew v Port Swettenham Rubber [1913]... 71 Notice + Misrepresentation = Fraud... 71 Loke Yew v Port Swettenham Rubber [1913]... 71 Bank of South Australia v Ferguson (1998)... 72 Mock v Thomson and Mel Studios (1982)... 72 Heggies Bulkhaul v Global Minerals Australia (2003) (Post Rego fraud)... 73 Section 42(1): Estates, interests and entries recorded in the folio of Register... 73 Bursill Enterprises v Berger Bros Trading (1971)... 73 RG (NSW) v Cihan (2012)... 74 Section 42(1)(a) Estate or interest of a proprietor claiming the same land under a prior folio of the register... 75 Section 42(1)(a1) Omitted or misdescribed easements... 75 Two situations contemplated by the legislation:... 75 Section 42(1)(b) Omitted or misdescribed profits a prendre... 76 Section 42(1)(c) - Wrong description of Parcels... 76 Hamilton v Iredale (1903)... 77 Section 42(1)(d) Tenancies not exceeding three years... 77 Relationship between s 42(1)(d) and s 43A... 78 United Starr-Bowkett Cooperative Building Society v Clyne (1967)... 78 Option to Renew... 78 Alcova Holdings v Pandarlo (1988)... 78 Other exception to indefeasibility to which RP are subject:... 80 Personal Equities/Rights in Personam... 80 Bahr v Nicolay (No. 2) (1988)... 81 Third Parties... 81 Timing... 81 Snowlong v Choe (1991)... 81 3
mercantile Mutual Life Insurance v Gosper (1991)... 82 Grgic v Australian and New zealand Banking Group (1994)... 83 Barnes v Addy... 83 Farah Constructions v Say-Dee (2007)... 83 Extra Points:... 84 RG s Power of correction... 85 James v RG (1967)... 85 Castle Constructions v Sahab Holdings (2013)... 85 Real Property Act section 12... 85 Real Property Act section 136... 85 Real Property Act section 138... 85 Real Property Act section 121... 85 Real Property Act section 122... 85 Overriding Statutes... 85 Hillpalm v Heaven s Door [2002]... 85 Real Property Act section 42(3)... 86 Volunteers... 86 Bogdanovic v Koteff (1988) (NSW)... 86 Rasmussen v Rasmussen [1995] (VIC)... 86 Topic 3: Co-Ownership (COO)... 87 Joint Tenancy... 87 Requirements for Creation... 87 Requirements for Creation Tenancy in Common (TIC)... 88 Presumption regarding intention General Law (Pre-statute)... 88 Presumption regarding intention Conveyancing Act s 26... 89 (FIRST LOOK AT THIS THEN GO BACK TO CL) (Applies to OS/Torrens)... 89 What is the situation when a party takes a beneficial interest without an instrument coming into operation?... 89 Delehunt v Carmody (1986) 161 CLR 464... 90 What does instrument expressly provides mean?... 90 Hircock v Windsor Homes (Development No 3)... 90 Does s 26 displace equity presumption for transfer of property?... 90 Minter v Minter 2000)... 91 Section 100 RPA for Joint proprietors in Torrens (Presumes JT, not TIC)... 91 Potential Areas of Dispute between Co-owners... 91 Three areas of financial disputes... 91 Occupation Rent... 92 Ouster and Constructive Ouster Exceptions... 92 Biviano v Natoli (1998) 43 NSWLR 695... 92 The new principle exception... 93 Callow v Rupchev [2009] nswca 148... 93 Calculating Occupation Fee... 93 Squire v Rogers (1979)... 94 Contribution Claims for improvements... 94 Position at common law:... 94 Leigh v Dickeson (1884) (TIC Case)... 94 How then can a Co-owner (who repairs or improves the property) claim their costs, or, benefit from the increased value? (Defensive equity)... 95 What can be claimed?... 95 Brickwood v Young (1905)... 95 Note: Priorities... 95 How much can be claimed?... 96 4
Squire v Rogers (1979)... 96 Does The capacity in which improvements are made matter?... 96 Other allowances for improvements... 96 Mortgage Repayments: Forgeard v Shanahan (1994)... 96 Repairs... 96 Ryan v Dries (2002) nswca 3... 96 Account for rents and profits received: position in law and equity.... 97 In Law... 97 In Equity... 98 Interaction between the obligation to account for rents and profits and the claim for improvements.. 98 Squire v Rogers... 98 Termination of JT (conversion into a TIC)... 99 Three ways a jt is terminated:... 99 Formal requirements of Severance s 30 CA, s 97 RPA... 99 Ways to sever a JT... 99 Public trustee v Hall [2003]... 100 Cross-transfers between Jt... 100 Wright v Gibbons (1948)... 100 By operation of law... 100 Transfer of a partial interest... 100 Gutherie v ANZ Banking Group (1991) 22 nswlr 672... 101 Granting a Lease... 101 Granting a charge or encumbrance... 101 Williams v Hensman (Foundational case)... 101 Ways to sever a JT... 102 Unilateral Act (Destruction of unity of title and time)... 102 Examples when JT does/does not get severed.... 102 Mischel Holdings v Mischel [2013] VSCA 375 [56] [72]... 104 Termination of COO by partition or sale: Section 66G Conveyancing Act... 104 Harb v Harb [2010]... 104 Segal v Barel (2013)... 105 Topic 4: Easements and Profit a Prendre (pap)... 106 Clos Farming Estates v Easton (PAP case)... 106 Easements... 106 Positive and negative easements... 106 How are easements created?... 107 Substantive/Essential Requirements for Easements... 107 1. Must have dominant and servient land... 108 2. The easement must accommodate the dominant land (Difficulty in court)... 108 Re Ellenborough Park [1956]... 108 Area of dispute is where easement benefits a business conducted on the dominant land... 109 Moody v Steggles (1897)... 109 Contrast this to: Hill v Tupper (1863)... 109 What happens when dominant land is subdivided? Does easement survive? Does the easement accommodate each of the parts which the land was subdivided or is it extinguished?... 110 Gallagher v Rainbow (1994) HCA... 110 Compare with Westfield Management Ltd v Perpetual Trustee... 110 3. Same persons must not own and occupy the dominant and servient tenements (Now covered in statute)... 110 Statutory exceptions to the rule... 111 Applies to OS and TT... 111 Under Torrens only... 111 5
4. The right must be capable of forming the subject matter of a grant... 111 Examples of rights: Is it too vague or not?... 111 Clos Farming Estates v Easton:... 111 Moncrieff v Jamieson: (HoL)... 112 Registrar General (NSW) v Jea Holdings (2015) 17 BPR 33 (NSWCA)... 112 Formalities in creating easements... 113 Express easements... 113 Registration of Plan: section 88B CA (Both OS and Torrens)... 113 UNENFORCEABLE UNLESS CLEARLY INDICATES MATTERS: SECTION 88(1) CA... 114 Creation by general words in conveyance or transfer?... 114 Creation through statute: s 88K Easement... 114 117 York Street v Proprietors Strata Plan (1988)... 115 ING Bank v O Shea [2010] NSWCA... 116 Moorebank Recyclers v Talane... 116 Things to consider also for reasonably necessary... 117 Implied Easements... 117 1. General words Conveyancing Act s 67 (OS only) & RPA s 51... 117 2. Common intention (Grant v Reservation)... 117 3. Easements by necessity... 118 Example where intention was lacking:... 118 North Sydney Printing v Sabemo Investment Corporation... 118 4. Continuous and apparent easements (The rule in Wheeldon v Burrows)... 119 Requirements: (4 elements)... 119 Wheeldon v Burrows (1879)... 119 5. Easement by Prescription... 120 Dobbie v Davidson... 120 Williams v State Transit Authority... 121 Mills v Silver [1991] Ch 271 CA (English case)... 121 Statute... 121 Easements in Torrens Title... 122 Exceptions to INdefeasibility for easements:... 123 Section 42(1) (a1)... 123 First limb (Dobbie v Davidson)... 123 Second Limb: If easement has been validly created while land held under TT... 123 What is Validly created?... 123 Accidental and intentionally removing easement from register.... 123 James v R-G (Deals with provisions in the former sense not current sense)... 124 Contrast this with Castle Constructions v Sahab Holdings [2013] HCA 11... 124 Exceptional Principle (Dabbs v Seaman)... 124 Other exceptions to indefeasibility: In personam exception... 124 In personam Cases dealing with implied/prescriptive easements... 124 Australian Hi-Fi Publication v Gehl (implied)... 124 McGrath v Campbell [2006] nswca 180 (Implied)... 125 IP and Prescriptive easements... 126 Williams v State Transit Authority of NSW... 126 Section 42 (1)(b) (PAP exception)... 128 Extent of permissible user of easement... 128 Express grant or reservation... 128 Construction of Easements terms... 128 Permissible Use Cases... 128 Westfield Management v Perpetual Trustee Company [2007]... 128 6
Contrast this to:... 129 Sertari v Nirimba Developments NSWCA [2008]... 129 Ancillary Rights along with easement... 130 National Trust v White... 130 Other examples... 131 Butler v Muddle (No ancillary right)... 131 Implied and Prescriptive Easements... 131 More recently,... 132 McAdams Homes v Robinson (2005)... 132 Remedies... 132 Extinguishment of Easement... 133 ING Bank v O Shea... 133 Abandonment (Common law way to extinguish easement)... 133 Treweeke v Wolseley Road (1973)... 133 When parcels move into common ownership... 134 S 49 of RPA: RG can extinguish easement (cheaper than going to court)... 134 Court order under Conveyancing Act s 89(1) (Torrens and OS)... 134 3 grounds... 134 Pieper v Edwards [1982]... 134 Suspension under Environment Planning and Assessment Act s 28... 135 Profits a prendre... 135 Clos Farming Estates v Easton (2002) bpr 20... 135 Can also arise through prescription... 136 Can also be extinguished... 136 Topic 5: Restrictive covenants... 137 Covenantee (dominant land) v Covenantor (servient land)... 137 Burden of covenants at common law... 138 Covenator can remain contractually liable for successors in title of the covenantee: Section 70A(1) Conveyancing Act... 138 3 Exceptions to get around the austerberry decision... 139 1. Chain of personal covenants... 139 2. Enlarging a long-term Lease... 139 1. Benefit and burden principle... 139 Halsall v Brizell [1957] 1 ch 169... 139 Contrast with Rhone v Stephens [1994] Hol... 140 2. Essential fabric of easement (Where burden can run)... 140 Covenant requiring Easement for repair... 140 Frater v Finlay (1968) wn NSW... 140 What is essential fabric?: Clifford v Dove [2003]... 141 3. Statute for covenant for repair/maintenance can burden: s 88BA Conveyancing Act (OS and TT). 141 Benefit of covenants at common law:... 142 Element 1: Covenant must touch and concern land owned by the covenantee at the time the covenant was entered into... 142 (Re Ballard s Conveyance; Kerridge v Foley)... 142 Re ballard s Conveyance [1937]... 142 Marquess of Zetland v Driver [1939]... 143 Ellison v O neill (1968) NSW... 143 Element 2: Convenantor and covenantee must have intended that the benefit of the covenant would run with the dominant land so as to be enforceable by successors in title.... 143 Element 3: The successor in title to the dominant land must receive a legal estate in the land... 144 Summary in law... 144 7
Summary in equity... 144 In Equity... 145 Tulk v Moxhay (1848)... 145 For burden of covenant to run in equity:... 145 1. The covenant must be negative in substance (Rhone v Stephens)... 145 Rhone v Stephens... 146 2. The covenant must have benefited land owned by covenantee at the time the covenant was entered into... 146 3. THe covenantor and covenantee must have intended that the burden of the covenant run with the land so as to be enforceable against the successors in title to the servient land... 146 4. Under the general law, a successor in title to the servient land will not be bound by the covenant if she/he is a bona fide purchaser of the legal estate for value without notice... 146 5. section 88(1) details must be clearly indicated in order for the covenant to be enforced against a successor in title to the covenantor... 147 Kerridge v Foley... 147 Remedy... 147 Benefit of covenant in equity... 148 Annexation... 148 1. As with the case of running of the burden in equity, the covenant must have benefited land owned by the covenantee at the time the covenant was entered into... 148 2. The covenator and the covenantee must have intended that the benefit of the covenant run with the dominant land... 148 Forestview Nominees v Perpetual Trustees WA... 148 The position of the original covenantor and covenantee... 149 The position of the original covenantee: vis-à-vis Successor of original covenantor... 149 The position of the successor in title of the covenantee: The successor in title of the covenant is in no better position than the original covenantee.... 149 Formal requirement of covenants... 149 Old System... 149 Torrens Title... 149 Interaction with indefeasibility of title... 150 S 88(3) of Conveyancing Act... 150 Extinguishment of covenant... 151 Type 1: General Law Principles... 151 Exceptions:... 151 Post Investment v Wilson... 151 In OS:... 151 Type 2: Release as a means of extinguishment... 152 In Statute:... 152 1. s 89 of Conveyancing Act Application to Supreme Court... 152 2. Environmental Planning & Assessment Act s 28(2)... 152 Coshott v Ludwig... 152 Lennard v Jessica Estates example of extent to which covenants are overridden... 153 3. RG Power under s 81I... 153 4. RG power to extinguish: s 81J... 154 Topic 6: Leases and Licences... 155 Classification of leases by duration... 155 1. Fixed Term lease... 155 2. Periodic tenancy (year to year tenancy)... 155 3. Tenancy at will (Consent is granted)... 157 4. Tenancy at sufferance (Tenant stays longer than their lease) (no consent)... 157 Essential requirements for a lease:... 157 8
Distinguish lease and licence... 157 1. Exclusive possession... 157 Radaich v Smith (1959) 101 clr 209 (HCA)... 157 Street v Mountford [1985]... 158 Bruton v London Quadrant Housing Estate: (UK Case)... 158 KJRR v Commissioner of State Revenue (Vic) [1999]... 159 Sham Provision... 160 Antoniades v Villiers [1990]... 161 Snook Case... 161 Distinguished from cases above: Kjjr v Commissioner of State Revenue [1999]... 161 2. Term must be certain (Certainty of term)... 161 Prudential Assurance v London Residuary Body [1992]... 162 Lace v Chantler [1944]... 162 Formal Requirements for a lease:... 163 In OS:... 163 In Torrens... 163 EXAMPLE OS LEASE PROBLEM... 163 formalities for Equitable Leases... 164 In OS... 164 In Torrens... 164 Chan v Cresdon (1989)... 164 Marshall v Council of the Shire of the Snowy River (1994)... 165 binding unregistered leases against successors in title s 42(1)(d) RPA... 165 S 42(1)(d):... 166 Alcova Holdings v Pandarlo (1988)... 166 Summary for characterizing leases:... 167 Topic 7: Mortgages... 168 Security INterests - Types... 168 General law mortgage... 168 In Torrens Title:... 168 Equitable Mortgages... 169 1. Agreement to grant a mortgage:... 169 2. By deposit of title deeds:... 170 3. Mortgage of equity of redemption (2nd and subsequent mortgages):... 170 POSSESSION AND OLD SYSTEM... 170 POSSESSION AND TORRENS... 171 Remedies for mortgagees... 172 Power of Sale... 173 Source of power of sale... 174 Prerequisites: DEfault + Notice... 174 Mortgagee s power of Sale... 174 Must be a sale... 174 ANz Banking Group v Bangadilly Pastoral co... 175 Standard of Care owed by mortgagee to mortgagor when exercising a power of sale... 175 Cuckmere Brick v Mutual Finance [1971] 1 CH 949... 175 Pendlebury v Colonial Mutual (Australian)... 175 statutory OBLIGATION ON MORTGAGEE WHEN EXERCISING POWER OF SALE.... 176 Conveyancing Act s 111A (applies IN os AND tt)... 176 There are a number of factors where mortgagor seeks to claim damages from mortgagee because mortgagee has breached the standard of care.... 177 FORSYTH V BLUNDELL (1973) CLR... 177 9
IF THE MORTGAGOR WANTS TO RESTRAIN POWER OF SALE OBLIGATION OF MORTGAGOR TO PAY INTO COURT... 179 what happens when contracts are made/not made?... 179 what happens if power of sale has been exercised improperly but contracts have been exchanged?.. 179 Compare this general law position with Section 111A (4)... 179 when settlement has occured... 179 Purchaser is on register... 179 Latec Investments v Hotel Terrigal (1965) 113 CLR 265... 180 Priorities with emphasis on tacking and marshalling... 182 Further advances... 182 Old System... 182 Torrens Title... 183 Exception to Hopkinson Case: Matzner v Clyde Securities... 183 Compare concept with Southwell v Roberts... 183 10
LECTURE 1A: INTRODUCTION & OLD SYSTEM TITLE INTRODUCTION Conveyancing Act s 47 - Overturns the old common law where you had to specify to A and his heirs to create a fee simple. Now you can just say to A it will make a fee simple. DEEDS A document on paper that is (1) signed, (2) sealed and (3) delivered b/w parties whereby interests/rights/property passes or (4) obligations binding is clear. (Section 38 Conveyancing Act) Deeds of trust Deeds of settlement Deeds of litigation GENERAL OVERVIEW OF PRIORITY RULES: Legal interests: Recognised by statute and first in time prevails (exceptions) o When there are two legal interests they are not necessarily inconsistent owner v lease a later purchaser in fee simple can take title subject to the earlier legal lease. i.e. will have a reversion in fee simple. Equitable interests: Equity follows the law, the general rule being that where equitable interests are equal, the first in time prevails. Between equitable and legal interests: o PRIOR EQUITABLE, LATER LEGAL bona fide purchaser for value without notice (BFPFVWN) (Wilkes v Spooner) Think O enters into a contract to sell P who pays a deposit, then executes a deeed of conveyance to P2 which is signed sealed and delivered to P2 (s 23B). If P2 is a BFPFVWN then they will take free of the equitable interest. o PRIOR LEGAL, LATER EQUITABLE the legal takes priority (assuming BFPFVWN) unless there is postponing conduct. o Postponing conduct include: The legal owner is fraudulent in the creation of the equitable interest (Whipp s Case) The legal owner fails to get his documents in (Walker v Linom) The legal owner gives authority to an agent to deal with the property as a security and the agent exceeds that authority (Whipp s Case) Principle Facts NORTHERN COUNTIES OF ENGLAND FIRE INSURANCE V WHIPP (1884) 1. If the prior legal estate assists in the fraud that led to the creation of the subsequent equitable estate, its interest will be considered serious postponing conduct. 2. Also considered the situation where an agent who overreaches authority may also constitute postponing conduct. CR borrowed money from the company (C) he managed and granted it an OS mortgage to secure repayments (so that the C held legal title and CR held an equity of redemption). The C kept the deeds for the mortgaged property in a safe to which CR had the key. Without the C s knowledge, CR took the deeds except the deed for his mortgage to the company from the safe and then used them to grant a mortgage to W (which was equitable although granted by deed). W had no notice of the earlier mortgage interest. 11
Issue C has prior legal interest. W has subsequent equitable interest. Did C have priority over W or did its negligence regarding the custody of the deeds postpone its interest? Reasoning The Court held that yes, C retained its priority because it was not fraudulent. The Court said that they will postpone the prior legal interest in two situations: 1. If the prior legal interest holder had assisted in or connived in the fraud which led to the creation of the subsequent equitable estate. Here, C was careless but not fraudulent since C did not get any benefits from this. 2. If C had made CR their agent with authority to raise more money and the agent exceeded his authority. Here CR was not the agent of the company and approached W as the unencumbered owner of the property. There was no representation by C that CR was acting as their agent. WALKER V LINOM (1907) Principle 1. The prior legal estate s failure to gain control of the documents is postponing conduct because it would be inequitable for him not to be postponed. He has allowed misrepresentations to be made by the previous legal estate to the world. 2. The negligence leading to the prior legal estate s failure must be gross in order to make it inequitable. Facts W created a family trust and conveyed the land to his solicitors as trustees. He had a life interest under the settlement, which was to determine on alienation. His wife s family was not happy with W s assets and so they changed it to be non alienable (cannot be assigned, otherwise the interest would disappear) and that his wife would have a deferred life interest. The same solicitor acted for W, his wife and were also the trustees. The solicitors got in all the deeds except the deed by which the land was previously conveyed to W. W retained the deed and later used it to equitably mrotgage the land. The mortgagee subsequently exercised his power of sale to sell the land to L. Issue T has prior legal interest. L has subsequent equitable interest. Did L s equitable interest have priority over the Trustee s legal interest? Reasoning The court held that yes, L s equitable interest had priority over the Trustee s legal interest because the Trustees had not gained control of the deeds. This allowed the previous owner to represent himself as such to the subsequent owner of the equitable interest that any prior legal interest did not exist. Note: W technically lost his interest when he attempted to alienate his interest and thus under nemo dat, L should have no interest at all. However, this case shows that the legal owner s postponing conduct in failing to get the deeds not only postponed their interest to the subsequent one but also created the later interest itself. L took nothing under the mortgage from W because he had nothing to give, but L acquired an equitable interest against the trustees arising from their negligence. PRIOR EQUITABLE V SUBSEQUENT EQUITABLE If they are equal then generally earlier will prevail (Abigail v Lapin). However, the subsequent will prevail if it has the more meritorious equity (earlier interest holder engaged in postponing conduct Heid v Reliance Finance Corporation). - Postponing conduct in this sense is less serious than in prior legal v later equitable. - It is insufficient that the subsequent interest holder is a BFPFVWN, although it is a necessary element. The BFPFVWN doctrine does not apply. - Postponing conduct includes: o The earlier interest s act or neglect contributed to the subsequent interest being created without notice of the earlier interest (Abigail v Lapin) o It is reasonably foreseeable that, as the consequence of the acts or omissions of the earlier interest, a subsequent equitable interest might be created and that the owner of that subsequent interest would assume the non-existence of the earlier (Heid v Reliance Fiannce Corporation) 12
ABIGAIL V LAPIN [1934] Principle 1. Affirmed the equitable maxim where equities are equal, the first in time prevails. 2. The claimant who is first in time will lose priority by postponing conduct. This is defined as any act or omission, which had or might have had the effect of inducting a subsequent claimant to act to his prejudice. Facts L executed a transfer of their Torrens land for H, who became the registered proprietor. Although the transaction was absolute in form, in substance, it was intended to be a mortgage. Thus, L retained an equity of redemption in the land. H granted a mortgage over the land to A, which was unregistered. Issue Did L s earlier equitable interest (equity of redemption) or A s later equitable mortgage have priority? Reasoning The court (Privy Council) held that A s equitable mortgage had priority because L s conduct in allowing H to be the legal owner of the fee simple rather than as a mortgagee ultimately allowed her to present herself as such to the world and to A. L had allowed the misrepresentation to occur. Privy Council: In the case of a contest between two equitable claims, the first in time, all other things being equal, is entitled to priority. But all other things must be equal and the claimant who is first time may lose the priority by any act or omission which had or might have had the effect of inducting a claimant later in time to act to his prejudice. The court recognised that these misrepresentations often operated through the intermediary (H). This fact in this case is irrelevant because L s conduct still allowed H to make this misrepresentation to A. L had other options such as lodging a caveat on the register or granting her a mortgage rather than legal title. HEID V RELIANCE FINANCE CORP (1983) Principle 1. Note that this is a Torrens title case but still applicable to OS title 2. Postponing conduct is whether there have been any acts that make it inequitable for the earlier equitable interest to retain priority. Facts H owned land and sold it to C. H handed C the CT and a transfer in favour of C, which contained an acknowledgement that the purchaser price had been fully paid. However, it had not so the statement was incorrect. Therefore, H held a vendor s lien (an equitable interest to secure payment of price). C grants an unregistered equitable mortgage to R. Issue Did H s vendor s lien or R s unregistered equitable mortgage have priority? Reasoning Court held that R s unregistered equitable mortgage had priority over H s vendor s lien as H s act of giving the CT and the incorrect statement had constituted postponing conduct Whether it is based on estoppel or negligence or a combination, the conclusion is the same. The concept is about whether they contributed to the creation of the subsequent equitable interest in a way they should not have. Gibbs CJ: The concept of postponing conduct that undermines the merit of the equity comes from estoppel. While the representation is made by an intermediary and does not technically satisfy estoppel, the fact that H allows C to have the CT with an incorrect statement allows them with the power of going into the world under false colours that would amount to the same as making the misrepresentation themselves. Mason and Deane JJ: The theoretical basis is more similar to negligence. Has H acted in a way that they could ve foreseen the creation of an equitable interest without notice of any earlier equitable interest? Concluded that H was negligent in the docs given to C that allowed the misrepresentation to be made to R. PRIORITIES BETWEEN COMPETING LEGAL/EQUITABLE OR LEGAL AND EQUITABLE INTERESTS 13
An equitable interest in property is one that will be enforced by a court exercising equitable jurisdiction. The practical effect is that all major courts in our legal system recognize, characterize and enforce equitable interests. Dispute between legal and equitable and dispute between registrations. TYPES OF EQUITABLE INTEREST INCLUDE: 1. Beneficiary s right under a trust 2. Right of purchaser under a valid agreement for sale of land a. Exchanged contracts to purchase property, deposit paid, given time to get finances together once contracts exchanged you have acquired an interest, only when settled have you acquired the legal estate 3. Right of mortgagee/lessee under a valid agreement (not a deed) to grant mortgage/lease 4. Right of a mortgagor in the mortgaged land which is Old System title (equity of redemption) a. Sign a deed of mortgage, and then get the loan in return (the land is the security), but under Old System the land was conveyed to mortgagee, effectively the new owner 5. Right of a second or subsequent mortgagee a. If you have given a mortgage (legal) and then need more money thus create another any subsequent mortgages will necessarily be equitable (no more legal title to give!) 6. Right of mortgagee under mortgage by deposit of deeds (principle of part performance) an equitable mortgage is created even though the documents are not completed 7. Grantee of an option (general approach) 8. Unpaid vendor (vendor lien) 9. Purchase price resulting trust (s 23C (2)) a. Two or more people (M and B) have contributed to the purchase price (Arises at the time when the property is acquired. It will not arise if M contributed after B purchases.) but only one person (B) is the owner of the land. So on the face of it, one person (B) is the sole owner. In this case equity does not intervene. B will be holding a resulting trust on himself and M. A percentage of the purchase price that was contributed by M is also the percentage of the land given to M. 10. A profit a prendre that is in writing but not in the form of a deed. b. Profit a prendre is a right in the land to enter and take away the natural soil, timber and animals (specific purpose). c. Legal profit a prendre is done by complying with s 23B, but if it is not in the form of a deed then it will be equitable in nature. NOTICE Existence of notice is decisive: Abigail v Lapin NOTICE BEFORE CONSIDERATION? Defeated at the threshold, as the person is the author of his or her own predicament: Courtenay v Austin (1961) A distinct and fundamental ground for disqualification, nor merely a factor in the search for the better equity: Platzer v Cth Bank [1997] NOTICE AFTER CONSIDERATION? Can carry on as long as the equitable interest isn t a trust. You will still get a legal title then but the beneficiary will still have the prior equitable interest: Bishopsgate Investment Trust Limited Exceptions Earlier holder has by agreement or conduct waived the right to prevail: Cth Bank v Platzer 14
Earlier holder engaged in some act or omission which caused the later holder to believe, at the time of acquiring their interest, that the earlier interest ceased to exist: Lapin v Abigail Single transaction: see Composite Buyers v State Bank of NSW (1990) [CB 712] o Contract as to future property (mortgage), but later purchased property is subject to a mortgage later considered single transaction so first mortgage = over equity of redemption of second mortgage QUESTION OF FACT Constructive Notice S 164: There are two requirements for purchasers (or anyone taking an interest in the land) to meet, the failure of which would result in constructive notice of any prior interests: o S 53 Search of title documents: Purchasers are on constructive notice of interests that are discoverable for a period of 30 years. A purchaser is not fixed with notice of interests earlier than this good root of title, unless the purchaser actually extends the inquiry beyond this period. Note, such a search will protect you from earlier equitable interests and to ensure that you have no such notice of it. However, it will not protect you from earlier legal interests because you are bound by nemo dat whether or not you have notice. o Inspection of the land: the inspection should check whether there are any persons in possession and in what capacity they are using the land. A purchaser is on constructive notice of any interests that would be discovered by this inspection and is bound by such interests (Hunt v Luck). MERE EQUITY A right which ranks at the bottom of the hierarchy of proprietary interests, behind equitable interests, which in turn rank behind legal interests. Examples Right to have rectified a document conferring an interest in land: Smith v Jones [1954] (equity to rectify a lease); Shawyer v Amberday (2001) (equity to rectify and complete blanks in mortgage) Right of a person deprived through a fraudulent transaction to have the transaction set aside and their own interest re-established: Latec POSTPONING CONDUCT If earlier holder s acts contributed to the creation of the subsequent equitable interest, earlier holder is bound by their acts and the subsequent equitable interest prevails (Abigail v Lapin) Arming the person (holder of equitable mortgage not taking title deeds = arming); or Apparent authority. Note also Heid v Reliance Finance o Estoppel: Gibbs CJ o Negligence: Mason and Deane JJ AG (CQ) v A&T o Which is the better equity? Look for deficiencies in prior interest holder s conduct. Or Conduct (subjectively unequal): more general and flexible principle per Mason and Deane JJ in Heid v Reliance Finance: o It will always be necessary to characterize the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the later interest. o The overriding question is whose is the better equity, bearing in mind: 15
the conduct of both parties, the question of any negligence on the part of the prior claimant, the effect of any representation [by the prior] as possibly raising an estoppel [in favour of the latter] and whether it can be said that the conduct of the prior has enabled such a representation to be made (at 341) As a general rule, an earlier equitable interest will be postponed to a later one where the conduct of the earlier interest holder has led or allowed the later interest holder to acquire that interest in the mistaken belief that the earlier interest did not exist: Barry v Heider. S 184G Old System S 41-43 Torrens Title REGISTRATION COMPETING BETWEEN LEGAL AND EQUITABLE INTERESTS Prior legal v later legal Prior equitable and subsequent legal Prior legal and subsequent equitable (very serious postponing conduct) Prior equitable v later equitable (Postponing conduct (not as serious)) not enough that BFPFVWN) Prior mere equity v later equitable (or legal) (Later will defeat mere equity if BFPFVWN) Notice: actual (s164(a)), constructive (s164(b)), imputed (s164(b)) PRIOR EQUITABLE ESTATE, SUBSEQUENT LEGAL ESTATE EXAMPLE: 1. Bona fide 2. Value 3. Without notice o Types of inquiries: a duty to inspect the land (Hunt v Luck) and to inspect the title deeds. For OS, it is required that the search needs to be back to a good root of title at least 30 years (s 53) anything within 30 years is considered to be constructive notice. o Time when the notice is relevant: at the time consideration is paid. o Note s 164 Conveyancing Act constructive notice encapsulate searches/inquiries OBJECTIVE TEST a purchaser thought ought reasonable to have made o The rule in Hunt v Luck [1902] 1 Ch 428: A purchaser who knows that any person is occupying or using the property whether or not as a tenant is on notice (constructive) of the occupant s or user s proprietary rights however qualified constructive notice assumes an interest whose existence would be discovered by proper search: where there is no interest to find, there can be no constructive notice by failure to search properly Kemmis v Kemmis further qualifications [CB 720] BUT NOTE important criteria to apply The rule in Wilkes v Spooner: bona fide purchaser of legal estate for value without notice can give a good title to purchaser from him or her (even with notice) i.e. free of the prior equitable interest. o Consider the situation where A has a prior equitable interest; B is a bona fide purchaser for value without notice of the legal estate; C is a purchaser with notice (does not need value) of A s interest but is purchasing through B. C can hide behind B s protection i.e. B s lack of notice. 16
o There is an exception: when the trustee has sold property in breach of trust or a person who acquires property by fraud cannot rely on the being a bona fide purchaser of the legal estate without notice. WILKES V SPOONER [1911] Principle Any subsequent interest after the BFPFVWN will receive the same protection and priority over the prior equitable interest even if they are volunteers or even if they have had notice. Facts S owned the business of two butcheries (one was general, the other was pork) and leased the premises on which they operated. W bought the general butchery and lease from S, but since the S family name was so famous for butchering, W bought the business and lease on the condition that S agree not to change the other pork butchery into a general one (creating a restrictive covenant equitable interest over the pork butchery and lease). S s son had notice of this prior equitable interest over the pork butchery. S decided to retire and sold the lease back to the landlord who had no notice of the equitable interest over it. The son bought a new lease from the landlord and transformed the previous pork butchery into a general one in S s name. Issue Was S s son bound by S s restrictive covenant (W s equitable interest) burdening his lease of the pork butchery? Reasoning The Court held that S s son was not bound by S s restrictive covenant because when S surrendered the lease of the pork butchery to the landlord who was BFPFVWN (effective transferring the legal lease to the landlord), W s equitable interest was extinguished at that point. Landlord was free of W s equitable interest. o Thus, when S s son took out a new lease, he could shelter behind the protection of the landlord even though the son did have notice of W s interest. o If S had merely sold his lease to his son (who had notice of W s interest), then S would be bound by the covenant as well. Vaughn Williams LJ: This extension of protection cannot be claimed by a trustee repurchasing property sold in breach of a trust or a fraudulent party repurchasing property acquired by fraud and then sold to a BFPFVWN. (ie. By the same person). Analogous rule also exists for TT in s 43 RPA. Tabula in naufragio (plank in a shipwreck): Consider the case where O holds the legal fee simple. O grants a legal mortgage to M. O grants an equitable mortgage to S. O contracts to sell the land to P. The rule is that the holder of a later equitable interest (P) without notice of an earlier equitable interest (S) can squeeze out the earlier interest by acquiring the legal interest (from M), even though at the time of acquiring the legal interest P knew of S s earlier equitable interest if they can prove that they had no notice of S s interest when acquiring their equitable interest. o So, technically the NOW legal interest holder HAD NOTICE when they acquired the legal interest, but DID NOT have notice when they acquired their equitable interest = OKAY. 17
Basically, A would always get priority if it was WITHOUT fraud. B would be second since it is before C. What C can do however is become BFPFVWN of A s legal mortgage (get A s legal mortgage) AFTER realising that B is also in the picture. By doing this the law allows C to tack onto A s legal mortgage and take priority over B s equitable mortgage. B can also do this once realising about C s equitable mortgage. ONE THING TO NOTE: If C knew about B s equitable mortgage when it got its equitable mortgage then this plank in the shipwreck won t work anymore. Where there is a breach of trust, tacking WILL NOT WORK. (Mumford v Stohwasser (1874)) B would not be able to tack its original equitable interest onto the legal interest as it would be a breach of trust. This is because when O granted an equitable interest to A, O was holding the land on trust for A and so transferring the legal estate to B would be a breach of trust. As party of the breach of trust, B cannot tack the two interests together. PRIOR LEGAL ESTATE, SUBSEQUENT EQUITABLE ESTATE: The general rule is that the holder of the legal interest takes priority, UNLESS; 1. The legal owner has expressly created the equitable interest 18
2. The legal owner has been party to some fraud that has led to the creation of the equitable interest 3. The legal owner s act of gross negligence (usually in relation to the title deeds) has allowed he equitable interest to be created Whipp NB c.f. mere negligence in re competing equitiesz 4. Where a legal owner entrusts an agent with the title deeds with limited authority to raise money on them and the agent exceeds the authority by creating a security for a larger sum in favour of a person who has no notice of the limitation. The legal interest in bound by the interest so created, not merely to the extent authorized. 5. Where the title deeds themselves are not handed over to the agent or someone else, but rather some document which on its face appears to entitle the holder to a beneficial interest in the land or to get the legal estate vested in him or her. 6. Based on estoppel : the legal owner is estopped from asserting his or her legal title against the holder of the equitable interest. DOCTRINE OF PART PERFORMANCE An equitable doctrine that enables oral contract (or unregistered interest) to be enforced in circumstances where an act or acts have been done in actual performance of a contract which in fact existed between the parties: Walsh v Lonsdale (first case) Requirements: 1. Was there an agreement (informal or unregistered)? 2. Did a party act under that agreement and performed an act to their detriment which relates solely to the agreement? 3. Is the agreement one which a court of equity would order specific performance? TORRENS: The doctrine of part performance can give rise to an unregistered equitable interest, allowing a right to seek specific performance; Barry v Heider Will NOT: Create a contract where none exists Cure impediments to SP other than a lack of writing Examples An enforceable agreement to grant a lease creates a lease in equity: Walsh v Lonsdale Equitable mortgage created by deposit of title deeds with intent that they shall act as security for the repayment of a debt: Cooney v Burns; Chan v Cresdon o But there must also be agreement: see Theodore v Mistford, where mother purposefully didn t sign documents because she did not agree to specific terms. THE RULE IN LYSAGHT V EDWARDS (1876) A person who enters into a contract to purchase land from the owner of the fee simple acquires (prior to settlement): an equitable interest in the land based on the specific enforceability of the contract (or other equitable relief). i.e. exchanging deeds creates an equitable interest and creates a constructive trust (if the agreement is one that can be specifically performed) DIFFERENCE WITH PP Executory agreement (as here, not yet finished but can force it to be passed) vs. Executed Agreement (part performance, completed agreement that hasn t been passed properly) 19
LECTURE 1B OLD SYSTEM REGISTRATION - CONVEYANCING ACT - 184G: INSTRUMENTS AFFECTING LAND TO TAKE EFFECT ACCORDING TO PRIORITY OF REGISTRATION (1) All instruments (wills excepted) affecting, or intended to affect, any lands in New South Wales which are executed or made bona fide, and for valuable consideration, and are duly registered under the provisions of this Division, the Registration of Deeds Act 1897, or any Act repealed by the Registration of Deeds Act 1897, shall have and take priority not according to their respective dates but according to the priority of the registration thereof only. (2) No instrument registered under the provisions of this Division or the Registration of Deeds Act 1897 shall lose any priority to which it would be entitled by virtue of registration thereunder by reason only of bad faith in the conveying party, if the party beneficially taking under the instrument acted bona fide, and there was valuable consideration given therefor. (3) In the case of an instrument that affects, or intends to affect, both land and an access licence under the Water Management Act 2000 : (a) this section has effect in relation to the instrument to the extent to which the instrument affects, or intends to affect, the land, and (b) section 83A of the Water Management Act 2000 has effect to the extent to which the instrument affects, or intends to affect, the access licence. ELEMENTS FOR THE APPLICATION OF S 184G 1. Both competing interests are created by instrument and thereby registrable. a. S 184G will apply even though only one of those interests are actually registered. 2. The interest seeking s 184G application is bona fide 3. The interest seeks s 184G application is taken for value. PURPOSE OF REGISTRATION: 1. Publicity (to a degree) 2. Secondary evidence 3. Priority over earlier unregistered legal interest or later legal interest. OPERATION OF S184G 1. The conflicting interests must each have been created by instruments. (Examples of interest created without an instrument are: mortgage by deposit deeds EFFECT OF PRIORITY BASED ON THE ORDER OF REGISTRATION Rights created by the first registered document prevail over the rights created by the other document, if they conflict. Simple way to determine priority is to: 1. Treat the first registered document as if it was executed first; and 2. Treat the other document as if it was executed with notice of the first registered document; and then 3. Apply the common law and equitable priority rules No longer any significance of law/equity distinction once there is registration. (Moonking Gee) Also requires that there needs to be no notice/no fraud (Moonking Gee) 20
EXAMPLE If I grant a legal mortgage to Deb (D) then grant an equitable mortgage to Hadia (H). If H registered her mortgage first, it would have priority over D s mortgage. The outcome would be the same if the equitable mortgage to H was executed first, D acquired her mortgage with notice of H s mortgage, and neither mortgage was registered. In that case, the equitable priority rules would give H s mortgage priority, because D would not be a bona fide purchaser without notice. ELEMENTS 1. Both competing interests must be created by instrument a. For example: Mortgage by deposit of deeds, oral contracts to sell or mortgage land, vendor s liens are all non-instrument created interests that s 184G will not apply. 2. Bona Fide a. There must be an absence of fraud and notice of the earlier unregistered interest i. The notice is assessed at the time the interest is acquired ii. Notice after the interest is acquired but prior to registration does not affect the bona fide statuts of the interest holder (marsden v Campbell) 3. For Value a. Valuable consideration must underpin the instruments for s 184G to apply. Consideration need not be adequate, merely sufficient and not nominal. i. For s 184G, the value needs to already be executed. A promise to pay constitutes valuable consideration for the purposes of s 184G (Moonking v Tahos) b. Volunteers do not get the priority advantages of s 184G, they should still register as it gives notice to others that your interest exists, such that a person claiming an interest will have constructive notice of your registered interest and cannot be benefited by s 184G. CONTRACTS FOR SALE OF LAND (CSL) Special consideration applies to contracts for the sale of land. In considering priority between competing equitable interests and between competing legal interests, there is also conflict between legal and equitable interest. This may arise in contracts for sale of land where a piece of land is sold to two parties both paying a deposit and obtaining an equitable interest however one party registers their interest creating a conflict between a legal and equitable interest. If O enters into CSL with P and then before registration O CSL with Q. P and Q both pay deposit to O. o If P registers his contract before Q then P s equitable interest would prevail over Q s interest. Also P could pay the balance and demand conveyance of the legal fee simple from O, and if O had already conveyed the fee simple to Q, then P (by virtue of registration of his contract) could demand conveyance from Q. (Moonking Gee v Tahos [1963]) o If Q enters into her contract without notice of P s contract, but then, after acquiring notice of P s contract, paid the balance of the purchase price to O and received the conveyance. Registration of Q s conveyance would not give Q priority over P s equitable interest. But had Q registered her contract (without notice of P s unregistered equitable interest), that would secure priority for her equitable interest under that contract over P s (unregistered) equitable interest, and that priority would carry with it the right for Q to demand the legal fee simple on paying the balance of the purchase price; this ould be so even where O had conveyed the legal fee simple to P. P would then hold the legal estate on trust for Q. (Subsequent equitable can have priority if notice was after obtaining equitable interest.) ALL ABOUT WHEN THE PARTIES RECEIVED NOTICE AND REGISTER. 21