(c) cameron stewart 2005 real property 5 associate professor cameron stewart

(c) Cameron Stewart 2005

Real Property 5Real Property 5

Associate Professor Associate Professor Cameron StewartCameron Stewart


Exceptions to indefeasibilityExceptions to indefeasibility- Rights in personam- Rights in personam

While registration of an interest may While registration of an interest may extinguish other unregistered interests extinguish other unregistered interests personal rights of action can still survive – personal rights of action can still survive – sometimes called “personal equities”sometimes called “personal equities”

Examples:Examples: Right of specific performance in a sale of Right of specific performance in a sale of

land contract;land contract; Right of beneficiary to call on performance Right of beneficiary to call on performance

of trust;of trust; Right to rectify a mistake in a contract Right to rectify a mistake in a contract

which has bestowed title on the wrong which has bestowed title on the wrong party.party.

The personal equity must rest on a legal or The personal equity must rest on a legal or equitable cause of actionequitable cause of action



Bahr v Nicolay (No 2)Bahr v Nicolay (No 2) 1988) 62 ALJR 1988) 62 ALJR 268.268.

The registered proprietor (R) was The registered proprietor (R) was bound by a personal equity where R bound by a personal equity where R knew of an unregistered interest and knew of an unregistered interest and had purchased the property on the had purchased the property on the basis that R would recognise and be basis that R would recognise and be bound by that unregistered interest.bound by that unregistered interest.



Mercantile Mutual v GosperMercantile Mutual v Gosper (1991) (1991) 25 NSWLR 3225 NSWLR 32: : Mrs Gosper and the Mrs Gosper and the registered proprietor of land registered proprietor of land subject to a mortgage to Mercantile subject to a mortgage to Mercantile Mutual. Mr Gosper borrowed money Mutual. Mr Gosper borrowed money from Mercantile Mutual and it was from Mercantile Mutual and it was agreed that the loan would be agreed that the loan would be secured by a variation of the secured by a variation of the existing mortgage over Mrs existing mortgage over Mrs Gosper’s property. Mr Gosper Gosper’s property. Mr Gosper forged his wife’s signature to the forged his wife’s signature to the variation and it was registered. variation and it was registered.



After her husband’s death Mrs After her husband’s death Mrs Gosper discovered what had Gosper discovered what had happened. She sought orders happened. She sought orders removing the variation of the removing the variation of the mortgage from her title. The issue mortgage from her title. The issue before the court was whether before the court was whether Mercantile Mutual had an Mercantile Mutual had an indefeasible title insofar as the indefeasible title insofar as the variation was concerned or whether variation was concerned or whether it was defeated on the basis of an it was defeated on the basis of an in in personampersonam claim by Mrs Gosper. By claim by Mrs Gosper. By a majority the Court of Appeal held a majority the Court of Appeal held in favour of Mrs Gosper.in favour of Mrs Gosper.



In In Story v Advance BankStory v Advance Bank the Court of Appeal had to the Court of Appeal had to consider consider in personamin personam exceptions in the context of a exceptions in the context of a mortgage granted by a corporation to a bank, where mortgage granted by a corporation to a bank, where the corporation was a ‘family’ company operated by the corporation was a ‘family’ company operated by Mr & Mrs Story. The loan was to Mr Story only with Mr & Mrs Story. The loan was to Mr Story only with the mortgage being over land owned by the the mortgage being over land owned by the corporation. Mr Story forged his wife’s signature on corporation. Mr Story forged his wife’s signature on the mortgage documents. Mrs Story claimed an the mortgage documents. Mrs Story claimed an in in personampersonam exception against the bank on the basis exception against the bank on the basis that the bank failed to make appropriate inquiries that the bank failed to make appropriate inquiries to determine that Mrs Story had indeed executed to determine that Mrs Story had indeed executed the mortgage. The Court of Appeal ruled against the mortgage. The Court of Appeal ruled against Mrs Story. Gleeson CJ (Cripps J agreeing) held that Mrs Story. Gleeson CJ (Cripps J agreeing) held that even if the bank had not made adequate inquiries of even if the bank had not made adequate inquiries of what going on in the corporation ‘that does not what going on in the corporation ‘that does not produce the result that it is against conscience for produce the result that it is against conscience for the bank to rely upon its statutory rights’ to an the bank to rely upon its statutory rights’ to an indefeasible title as to the mortgage.indefeasible title as to the mortgage.



Vassos v State Bank of South AustraliaVassos v State Bank of South Australia, the bank , the bank obtained a mortgage over land owned by three tenants-obtained a mortgage over land owned by three tenants-in-common. One of the tenants-in-common in-common. One of the tenants-in-common subsequently obtained a substitute mortgage for a subsequently obtained a substitute mortgage for a greater sum by forging the signatures of the other two greater sum by forging the signatures of the other two tenants-in-common. In this case the bank’s mortgage tenants-in-common. In this case the bank’s mortgage was not obtained as the result of fraud, nor was there was not obtained as the result of fraud, nor was there an exception under the an exception under the in personamin personam exception. On the exception. On the in personamin personam exception, Hayne J said this case was exception, Hayne J said this case was distinguishable from distinguishable from Mercantile Mutual v GosperMercantile Mutual v Gosper. He . He reaffirmed that more than a mere forgery was reaffirmed that more than a mere forgery was required. Even though the bank was negligent in the required. Even though the bank was negligent in the manner in which it took the forged mortgage, there manner in which it took the forged mortgage, there was, at 333, ‘no misrepresentation by it, no misuse of was, at 333, ‘no misrepresentation by it, no misuse of power, no improper attempt to rely on its legal rights, power, no improper attempt to rely on its legal rights, no knowledge of wrongdoing by any other party. … no knowledge of wrongdoing by any other party. … Even if by making reasonable enquiries the bank could Even if by making reasonable enquiries the bank could have discovered the fact of the forgery I do not have discovered the fact of the forgery I do not consider that that fact alone renders its conduct consider that that fact alone renders its conduct unconscionable’.unconscionable’.


Registrar’s power of Registrar’s power of correctioncorrection

RG can fix up administrative errors in the RG can fix up administrative errors in the records but no resolve disputes – s 12 not records but no resolve disputes – s 12 not to prejudice the rights of interest holdersto prejudice the rights of interest holders

State Bank of NSW v Berowra Waters State Bank of NSW v Berowra Waters Holdings Pty LtdHoldings Pty Ltd (1984) 4 NSWLR 398 (1984) 4 NSWLR 398

James v Attorney-GeneralJames v Attorney-General (1967) 69 SR (1967) 69 SR (NSW) 361, it was held that the corrections (NSW) 361, it was held that the corrections should be made prior to a bona fide should be made prior to a bona fide purchaser or mortgagee obtains an interest purchaser or mortgagee obtains an interest on the faith of the uncorrected register. on the faith of the uncorrected register.


Overriding statutesOverriding statutes Other statutes can override the provisions of the RPAOther statutes can override the provisions of the RPA EG – rates, taxes and charges on land bind the land EG – rates, taxes and charges on land bind the land

regardless of the indefeasibility provisionsregardless of the indefeasibility provisions Pratten v Warringah Shire CouncilPratten v Warringah Shire Council, part of Pratten’s , part of Pratten’s

land was resumed by the Council before he land was resumed by the Council before he purchased the land. Before purchasing the land purchased the land. Before purchasing the land Pratten made inquiries to the Council to ascertain if Pratten made inquiries to the Council to ascertain if it had any interest in the land. The Council replied it had any interest in the land. The Council replied that it had no interest in the land. Pratten also that it had no interest in the land. Pratten also thoroughly searched the register. After Pratten thoroughly searched the register. After Pratten became registered proprietor of the land the Council became registered proprietor of the land the Council asserted its rights over the land that had been asserted its rights over the land that had been resumed. The Court ruled in favour of the Council on resumed. The Court ruled in favour of the Council on the basis that Pratten's registered interest was the basis that Pratten's registered interest was subject to overriding legislation, in this case s. 398 of subject to overriding legislation, in this case s. 398 of the the Local Government ActLocal Government Act of that time. of that time.


Overriding statutesOverriding statutes Hillpalm Pty Ltd v Heaven\'s Door Pty Ltd Hillpalm Pty Ltd v Heaven\'s Door Pty Ltd

[2004] HCA 59 – right claimed to have [2004] HCA 59 – right claimed to have easement created pursuant to subdivision easement created pursuant to subdivision plan –Majority found that it was not an plan –Majority found that it was not an exception because there was no evidence exception because there was no evidence that the creation of the easement was a that the creation of the easement was a condition (McHugh ACJ, Hayne and condition (McHugh ACJ, Hayne and Heydon JJ)If there was a right it was a Heydon JJ)If there was a right it was a right to create an easement which was in right to create an easement which was in personam, but given that the EPPA Act did personam, but given that the EPPA Act did not seem to create such a right and given not seem to create such a right and given the easement did not appear to be a the easement did not appear to be a condition there was no in personam right condition there was no in personam right created.created.


Overriding statutesOverriding statutes The Court held that the resumption by the Council The Court held that the resumption by the Council

was one that created a charge that took effect by was one that created a charge that took effect by force of the statute creating it. It did not depend force of the statute creating it. It did not depend upon registration. Street J observed that the upon registration. Street J observed that the indefeasibility provisions of the indefeasibility provisions of the Real Property ActReal Property Act were of no effect in the face of overriding legislation were of no effect in the face of overriding legislation that removed the land from the registration system of that removed the land from the registration system of the Act as had occurred in this case. The fact that the the Act as had occurred in this case. The fact that the Council didn’t apply to have its interest notified upon Council didn’t apply to have its interest notified upon the register when it became possible to do so after an the register when it became possible to do so after an amendment to the amendment to the Real Property ActReal Property Act did not amount did not amount to an estoppel against the Council. Not did an to an estoppel against the Council. Not did an estoppel arise when in response to Pratten’s inquiry, estoppel arise when in response to Pratten’s inquiry, the Council wrote a letter back saying that it had no the Council wrote a letter back saying that it had no interest in the land. This was so because the Council interest in the land. This was so because the Council had no right to dispose of the land without the had no right to dispose of the land without the consent of the Governor-in-Council.consent of the Governor-in-Council.


VolunteersVolunteersKing v Smail King v Smail [1958] VR 273 a husband and wife [1958] VR 273 a husband and wife were registered as the proprietors of land as joint were registered as the proprietors of land as joint tenants. The husband executed a transfer of his tenants. The husband executed a transfer of his interest in the land to the wife by way of gift. Before interest in the land to the wife by way of gift. Before the transfer was registered the husband executed a the transfer was registered the husband executed a deed of arrangement under the bankruptcy deed of arrangement under the bankruptcy legislation. The trustee lodged a caveat claiming an legislation. The trustee lodged a caveat claiming an equitable interest in the land under the terms of the equitable interest in the land under the terms of the deed of arrangement. In proceedings by the wife to deed of arrangement. In proceedings by the wife to remove the caveat the question was whether the remove the caveat the question was whether the trustee had an interest which had priority over the trustee had an interest which had priority over the registered title of the wife. Adam J held that s 42 of registered title of the wife. Adam J held that s 42 of the Victorian Act (which is equivalent to s 68) did the Victorian Act (which is equivalent to s 68) did not give the wife priority because she was a not give the wife priority because she was a volunteer and the doctrine of indefeasibility only volunteer and the doctrine of indefeasibility only protected bona fide purchasers for value. protected bona fide purchasers for value.


VolunteersVolunteers Adam J said, at 276:Adam J said, at 276: "Although s 42 of the Transfer of Land Act "Although s 42 of the Transfer of Land Act

1954 in itself affords no ground for 1954 in itself affords no ground for distinguishing between thevolunteer and the distinguishing between thevolunteer and the purchaser for value and would appear to purchaser for value and would appear to give paramount effect to registered title in give paramount effect to registered title in either case, other sections in the Act draw a either case, other sections in the Act draw a distinction between the volunteer and the distinction between the volunteer and the purchaser for value and appear tojustify the purchaser for value and appear tojustify the conclusion that upon the registration of conclusion that upon the registration of dealings subsequent to initial registration dealings subsequent to initial registration under the Act, it is purchasers for value under the Act, it is purchasers for value only who were intended to have the benefit only who were intended to have the benefit of s 42.”of s 42.”


VolunteersVolunteers Kitto J in IAC (Finance) Pty Ltd v Courtenay Kitto J in IAC (Finance) Pty Ltd v Courtenay

(1963) 110 CLR 550 at 572:(1963) 110 CLR 550 at 572: "A provision that a person is not to be affected by notice of prior "A provision that a person is not to be affected by notice of prior

interests has no application to him so long as he remains interests has no application to him so long as he remains unregistered. For the same reason, it has no application even to unregistered. For the same reason, it has no application even to one who has become registered, if he acquired his estate or one who has become registered, if he acquired his estate or interest as a volunteer. It is only a person having a legal estate interest as a volunteer. It is only a person having a legal estate or legal interest acquired for value whose position is prejudiced or legal interest acquired for value whose position is prejudiced by his having received, before paying his money, direct or by his having received, before paying his money, direct or constructive notice of an outstanding equitable interest. This is constructive notice of an outstanding equitable interest. This is so even under the Real Property Act (NSW) for a registered so even under the Real Property Act (NSW) for a registered interest is not (as was suggested in the course of the appellant's interest is not (as was suggested in the course of the appellant's argument) some special kind of statutory interest - it is a legal argument) some special kind of statutory interest - it is a legal interest, acquired by a statutory conveyancing procedure and interest, acquired by a statutory conveyancing procedure and protected from competition to the extent provided for by the protected from competition to the extent provided for by the Act, but having, subject to the Act, the nature and incidents Act, but having, subject to the Act, the nature and incidents provided by the general law. So all the provision does which I provided by the general law. So all the provision does which I have quoted from s 43 is to protect against notice of any trust or have quoted from s 43 is to protect against notice of any trust or unregistered interest a legal estate acquired for value".unregistered interest a legal estate acquired for value".


VolunteersVolunteersBogdanovic v KoteffBogdanovic v Koteff (1988) 12 NSWLR (1988) 12 NSWLR

472 472 Mrs B looked after Mr K on the basis of a Mrs B looked after Mr K on the basis of a

promise that she would be given an promise that she would be given an interest in the house which would interest in the house which would allow her to stay for life. Son inherited allow her to stay for life. Son inherited house.house.

Breskvar v Wall Breskvar v Wall applied - no distinction is applied - no distinction is

made between volunteers and made between volunteers and purchasers hence indefeasibility is purchasers hence indefeasibility is given to the songiven to the son


VolunteersVolunteersRasmussen v Rasmussen Rasmussen v Rasmussen [1995] 1 VR 613[1995] 1 VR 613 Grandfather farmed a number of properties with Grandfather farmed a number of properties with

his four sons. After he died the property passed his four sons. After he died the property passed through G's will to the grandson H. Hand his through G's will to the grandson H. Hand his father E then argued over who should own the father E then argued over who should own the property as E stated that one property was held property as E stated that one property was held by the father on trust for E. The purpose behind by the father on trust for E. The purpose behind the trust was to avoid tax. H's response was that the trust was to avoid tax. H's response was that he was the registered proprietor and that he had he was the registered proprietor and that he had indefeasibility.indefeasibility.

It was held that ss 42 and 43 bona fide purchaser It was held that ss 42 and 43 bona fide purchaser for value and volunteers other later sections do for value and volunteers other later sections do make a distinction. On this basis the court held make a distinction. On this basis the court held that the in Victoria the legislation only provides that the in Victoria the legislation only provides indefeasibility to purchasers for value.indefeasibility to purchasers for value.


VolunteersVolunteers Valoutin Pty Ltd v Furst Valoutin Pty Ltd v Furst (1998) 154 ALR 119- a (1998) 154 ALR 119- a

decision on the Victorian legislation. Finkelstein decision on the Victorian legislation. Finkelstein J, having referred to J, having referred to KingKing, , Bogdanovic Bogdanovic and and IAC IAC (Finance) Pty Ltd(Finance) Pty Ltd, said, at 136 - 137:, said, at 136 - 137:

"When it is accepted, as it must be, that s 43 does "When it is accepted, as it must be, that s 43 does not relieve a volunteer from equities which not relieve a volunteer from equities which affected his transferor it is difficult to see why s affected his transferor it is difficult to see why s 42 should be held to give that protection. Such a 42 should be held to give that protection. Such a view would be inconsistent with the structure view would be inconsistent with the structure and text of the Transfer of Land Act. It should and text of the Transfer of Land Act. It should also be noted that King v Smail was followed by also be noted that King v Smail was followed by Coldrey J in Rasmussen v Rasmussen [1995] 1 VR Coldrey J in Rasmussen v Rasmussen [1995] 1 VR 613 in preference to Bogdanovic. In my view 613 in preference to Bogdanovic. In my view King v Smail correctly states the law.King v Smail correctly states the law.


VolunteersVolunteers Conlan (As Liquidator Of Conlan (As Liquidator Of

Oakleigh Acquisitions Pty Ltd) -Oakleigh Acquisitions Pty Ltd) -v- Registrar Of Titles & Orsv- Registrar Of Titles & Ors [2001] WASC 201 [2001] WASC 201

Position of Position of Bogdonavic Bogdonavic is preferredis preferred


CaveatsCaveats

Protection of unregistered Protection of unregistered interestsinterests

Section 74F - System of lodging a Section 74F - System of lodging a “caveat” by a person who claims to “caveat” by a person who claims to have a legal or equitable interest have a legal or equitable interest in the property – any further in the property – any further dealing with the property cannot dealing with the property cannot be recorded unless with the be recorded unless with the caveator’s approval – freezes any caveator’s approval – freezes any dealing with the land that would dealing with the land that would impact on the subject of the caveatimpact on the subject of the caveat


CaveatsCaveats

Different types of caveats:Different types of caveats:

1.1. caveat against dealingscaveat against dealings2.2. caveat against improper dealing caveat against improper dealing

where CT has been lostwhere CT has been lost3.3. caveat against improper exercise of caveat against improper exercise of

power of salepower of sale4.4. caveat lodged by RG to protect caveat lodged by RG to protect

interest of a person under a legal interest of a person under a legal disability or on behalf of the Queendisability or on behalf of the Queen


CaveatsCaveats

What is a ”caveatable interest”? Must be What is a ”caveatable interest”? Must be an interest in an interest in land!!!land!!! Not just a Not just a contractual right or personal right – contractual right or personal right – the interest must exist at the time of the interest must exist at the time of lodgment – no future interestslodgment – no future interests

EgEgInterest of a purchaser under a contract Interest of a purchaser under a contract

for salefor saleInterest of an equitable mortgageeInterest of an equitable mortgageeOption to purchase landOption to purchase landAnd many many moreAnd many many more


CaveatsCaveats

How can they be removed?How can they be removed? Lapsing notice with dealing – serve a Lapsing notice with dealing – serve a

notice of lodging a dealing and then notice of lodging a dealing and then 21 days for the caveator to go to SC 21 days for the caveator to go to SC for extension of time – otherwise the for extension of time – otherwise the caveat lapsescaveat lapses

Lapsing notice without dealing – 21 days Lapsing notice without dealing – 21 days to obtain SC order extending caveat - to obtain SC order extending caveat - otherwise the caveat lapsesotherwise the caveat lapses

SC order – no noticeSC order – no notice


CaveatsCaveats

After lapsing further caveat by same After lapsing further caveat by same person based on same interest will be person based on same interest will be of no effect unless court leave has of no effect unless court leave has been obtainedbeen obtained

Wrongful lodgment – if a caveator is Wrongful lodgment – if a caveator is found to have wrongfully lodged a found to have wrongfully lodged a caveat they are liable to compensate caveat they are liable to compensate the person sustaining a pecuniary loss the person sustaining a pecuniary loss – “wrongfully” means in infringement – “wrongfully” means in infringement of the rights of the person against of the rights of the person against whom the caveat is lodgedwhom the caveat is lodged


Section 43ASection 43A

On completion of the contract for sale On completion of the contract for sale of land and before registration the of land and before registration the purchaser has less rights than they purchaser has less rights than they would have under the old system as they would have under the old system as they only have an equitable interest which is only have an equitable interest which is subject to any earlier equitable interest subject to any earlier equitable interest (even though they may have taken the (even though they may have taken the interest for value and without notice) – interest for value and without notice) – under old system they would have had under old system they would have had the legal estate provided they took that the legal estate provided they took that estate without notice of earlier interests estate without notice of earlier interests and for value.and for value.



To remedy this defect in the RPA s43A To remedy this defect in the RPA s43A bestows upon such a purchaser of bestows upon such a purchaser of Torrens land the same rights as they Torrens land the same rights as they would have under old system – that is would have under old system – that is the section declares that they take a the section declares that they take a legal interest after sale but prior to legal interest after sale but prior to registration.registration.Therefore s 43A allows a purchaser of an Therefore s 43A allows a purchaser of an interest in land, who takes for value and interest in land, who takes for value and without notice, to get a legal estate – without notice, to get a legal estate – thus protecting him or her against thus protecting him or her against earlier equitable interestsearlier equitable interests



The interest purchased must The interest purchased must had been effected by a had been effected by a “dealing registrable” that is “dealing registrable” that is you must be able to lodge the you must be able to lodge the dealing for dealing for immediateimmediate registrationregistration



Successive effect – recall priority rule Successive effect – recall priority rule earlier equitable v later legal – bona earlier equitable v later legal – bona fide purchaser for value without fide purchaser for value without notice and the extension on that notice and the extension on that principle – eg principle – eg Wilkes v Spooner Wilkes v Spooner - - later purchasers who buy the original later purchasers who buy the original purchaser’s interest with notice are purchaser’s interest with notice are protected by the original purchaser’s protected by the original purchaser’s title – to allow the purchaser the full title – to allow the purchaser the full right to deal with the property as he right to deal with the property as he or she wishesor she wishes



Eg A buys an estate of B, for Eg A buys an estate of B, for value and without notice of C’s value and without notice of C’s earlier equitable interest in the earlier equitable interest in the property – A takes priority – if a property – A takes priority – if a then sells to D and D knows of then sells to D and D knows of C’s interest he can still take C’s interest he can still take priority over Cpriority over C

So too does s 43A have this So too does s 43A have this “successive effect”“successive effect”



Eg if A buys land from B for value Eg if A buys land from B for value and without any knowledge of the and without any knowledge of the prior equitable interest of D, under prior equitable interest of D, under s 43A A will take the legal estate s 43A A will take the legal estate and D’s interest will be defeated. If and D’s interest will be defeated. If before registering his interest, A before registering his interest, A then executes a mortgage to C, C’s then executes a mortgage to C, C’s interest will still take priority over interest will still take priority over D’s, even if C had notice of D’s D’s, even if C had notice of D’s interest..interest..


Section 43ASection 43A IAC (Finance) Pty Ltd v Courtenay IAC (Finance) Pty Ltd v Courtenay (1963) 110 (1963) 110

CLR 550CLR 550 Courtney bought land off Mrs Austin for Courtney bought land off Mrs Austin for

15000 pounds. 3000 was paid as deposit and 15000 pounds. 3000 was paid as deposit and the rest was secured by a mortgage back to the rest was secured by a mortgage back to Mrs Austin.Mrs Austin.

The documents were not lodged for The documents were not lodged for registration until seven months after registration until seven months after settlement. Mrs Austin's solicitor had retained settlement. Mrs Austin's solicitor had retained these documents to allow the mortgage to be these documents to allow the mortgage to be registered. Later Mrs Austin and the registered. Later Mrs Austin and the Courtney's agree that Mrs Austin would buy Courtney's agree that Mrs Austin would buy the land back. The original transfer and the land back. The original transfer and mortgage had not been registered by this mortgage had not been registered by this time.time.


Section 43ASection 43A Before the second sale was registered Mrs Before the second sale was registered Mrs

Austin agree to sell the land to Denton Austin agree to sell the land to Denton Subdivisions Pty Ltd. She did this without the Subdivisions Pty Ltd. She did this without the Courtney's knowledge. Mrs Austin's solicitor Courtney's knowledge. Mrs Austin's solicitor uplifted the original sale and mortgage uplifted the original sale and mortgage documents from the RG. When the sale to documents from the RG. When the sale to Denton was being settled a question was asked Denton was being settled a question was asked about why these documents had been uplifted. about why these documents had been uplifted. Mrs Austin's solicitor lied and said it was part Mrs Austin's solicitor lied and said it was part of a deal to finalise the resale back to Mrs of a deal to finalise the resale back to Mrs Austin. A copy of the second contract for sale Austin. A copy of the second contract for sale was produced as evidence. Denton's purchased was produced as evidence. Denton's purchased was financed by IAC as mortgagee. The was financed by IAC as mortgagee. The documents were lodged by IAC but before they documents were lodged by IAC but before they were registered the Courtney's commenced were registered the Courtney's commenced their actiontheir action



Held: the Courtney's were entitled Held: the Courtney's were entitled to registration. to registration.

Unregistered interests are Unregistered interests are equitable. The effect of s 43A is to equitable. The effect of s 43A is to confer a legal interest on an confer a legal interest on an equitable interest, to put it into the equitable interest, to put it into the position of protected received by a position of protected received by a bona fide purchaser for value bona fide purchaser for value without notice.without notice.

Why did IAC fail? Why did IAC fail?


Section 43ASection 43A Kitto - the fact that the solicitor withdrew the Kitto - the fact that the solicitor withdrew the

registration without authority meant that s 43A registration without authority meant that s 43A did not give priority to IACdid not give priority to IAC

Taylor - The ordinary rules of priority apply. Taylor - The ordinary rules of priority apply. IAC had notice of the equitable interest of the IAC had notice of the equitable interest of the Courtney's hence they could not satisfy the Courtney's hence they could not satisfy the rule.rule.

Dixon - an unauthorised withdrawal was not a Dixon - an unauthorised withdrawal was not a withdrawal and was ineffective. Hence the withdrawal and was ineffective. Hence the conflict was between an early registrable conflict was between an early registrable interest and a later registrable interest. Section interest and a later registrable interest. Section 43A meant that two registrable dealings would 43A meant that two registrable dealings would be determined by the first in time rulebe determined by the first in time rule


Section 43ASection 43A Jonray (Sydney) Pty Ltd v Partridge Bros Pty LtdJonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) (1969)

89 WN (NSW) Pt 1) 56889 WN (NSW) Pt 1) 568 M contracts to sell land to J. At the date of the contract M contracts to sell land to J. At the date of the contract

M was not the registered proprietor but was a purchaser M was not the registered proprietor but was a purchaser of the land in a contract from A. The land was subject to of the land in a contract from A. The land was subject to a mortgage to B. To settle the sale to J M intended to a mortgage to B. To settle the sale to J M intended to hand over the transfer of the land to J, executed by A at hand over the transfer of the land to J, executed by A at the direction of M, in conjunction with a discharge of the direction of M, in conjunction with a discharge of mortgage executed by B. J was not happy with this mortgage executed by B. J was not happy with this arrangement and said that it wanted to receive the title arrangement and said that it wanted to receive the title from M. J wanted the mortgage discharged before the from M. J wanted the mortgage discharged before the settlement. J sought to rescind the contract. However it settlement. J sought to rescind the contract. However it had not lodged its objections within the time period for had not lodged its objections within the time period for the making of objections to title. The issues were the making of objections to title. The issues were whether a purchaser could refuse a transfer by direction whether a purchaser could refuse a transfer by direction and whether it could require the title free from and whether it could require the title free from incumbrances.incumbrances.


Section 43ASection 43A The court found that the purchaser could not The court found that the purchaser could not

object to the sale by direction as it was still a object to the sale by direction as it was still a sale from the registered proprietor. A sale from the registered proprietor. A purchaser received the same protection as a purchaser received the same protection as a purchaser taking directly from a registered purchaser taking directly from a registered proprietor. proprietor.

As for the objection to the discharge of As for the objection to the discharge of mortgage, the court found that the purchaser mortgage, the court found that the purchaser could not object as uon registration it would could not object as uon registration it would receive indefeasible title. After completion or receive indefeasible title. After completion or prior to registration the purchaser was prior to registration the purchaser was protected by s 43A against any defects of protected by s 43A against any defects of which it had no notice.which it had no notice.



The fact that the holder of an The fact that the holder of an unregistered instrument has not, at unregistered instrument has not, at the time of settlement of the the time of settlement of the transaction, paid the relevant stamp transaction, paid the relevant stamp duty and had the instrument stamped duty and had the instrument stamped by the Office of State Revenue does by the Office of State Revenue does notnot mean that such a holder is not mean that such a holder is not able to obtain the protection offered able to obtain the protection offered by s. 43A: by s. 43A: Diemasters Pty Ltd v Diemasters Pty Ltd v Meadowcorp Pty LtdMeadowcorp Pty Ltd [2001] NSWSC [2001] NSWSC 495 at para 22.495 at para 22.



Section. 43A cannot be relied upon, if the Section. 43A cannot be relied upon, if the instrument is actually registered, and the instrument is actually registered, and the registered proprietor is not a party to any registered proprietor is not a party to any fraud, he or she does get an indefeasible title.fraud, he or she does get an indefeasible title.

In both In both Jonray (Sydney) Pty Ltd v Partridge Jonray (Sydney) Pty Ltd v Partridge Bros Pty LtdBros Pty Ltd (1969) 89 WN (NSW) Pt 1) 568 (1969) 89 WN (NSW) Pt 1) 568 and and Mayer v CoeMayer v Coe (1968) 88 WN (NSW) (Pt 1) (1968) 88 WN (NSW) (Pt 1) 549 it was suggested that if notice of a void 549 it was suggested that if notice of a void instrument was received after completion of instrument was received after completion of the transaction but before its registration, the the transaction but before its registration, the true proprietor could prevent registration of it true proprietor could prevent registration of it by obtaining an injunction to prevent by obtaining an injunction to prevent registration.registration.


Competing unregistered Competing unregistered interestsinterests

Breskvar v WallBreskvar v Wall (1971) 126 CLR 376 - Mr and (1971) 126 CLR 376 - Mr and Mrs Breskvar executed a transfer to Petrie as Mrs Breskvar executed a transfer to Petrie as security for a loan. Petrie fraudulently used security for a loan. Petrie fraudulently used the transfer and sold to his grandson Wall, the transfer and sold to his grandson Wall, who became registered owner. Wall sold to who became registered owner. Wall sold to Alban Pty Ltd but before they could register Alban Pty Ltd but before they could register their interest the Breskvars lodged a caveat their interest the Breskvars lodged a caveat which injuncted the sale. The conflict was which injuncted the sale. The conflict was therefore between the interest of Breskvars therefore between the interest of Breskvars and the interests of Alban Pty Ltdand the interests of Alban Pty Ltd

Barwick : 'title by registration'. What sort of Barwick : 'title by registration'. What sort of interest did Wall have? interest did Wall have? What sort of interest What sort of interest does Alban have? What interest do the Breskvars does Alban have? What interest do the Breskvars have?have?



Heid v Reliance Finance Corporation Pty LtdHeid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, Heid agree to sell land to (1983) 154 CLR 326, Heid agree to sell land to Connell Investments. Connell was owned by Connell Investments. Connell was owned by Newman McKay & Co. Heid accepted advice from Newman McKay & Co. Heid accepted advice from Newman to use their employee (Gibby) as a Newman to use their employee (Gibby) as a solicitor. The solicitor was unqualified. Hied left for solicitor. The solicitor was unqualified. Hied left for overseas and left Gibby to complete the sale and overseas and left Gibby to complete the sale and put part of the proceeds into an investment. The put part of the proceeds into an investment. The remainder of the proceeds were not to be paid by remainder of the proceeds were not to be paid by Connell but to be secured by way of a mortgage in Connell but to be secured by way of a mortgage in favour of Heid. In fact Connell mortgaged the favour of Heid. In fact Connell mortgaged the property to Reliance before it registered the sale property to Reliance before it registered the sale from Heid to Connell. After registering the sale but from Heid to Connell. After registering the sale but before Reliance's or Heid's mortgage could be before Reliance's or Heid's mortgage could be registered, Hied discovered the fraud. Whose registered, Hied discovered the fraud. Whose mortgage took priority?mortgage took priority?



Gibbs CJ focused first on priority based upon Gibbs CJ focused first on priority based upon the time of creation of the relevant equitable the time of creation of the relevant equitable interests, with such priority being displaced interests, with such priority being displaced only if the equities favoured the holder of the only if the equities favoured the holder of the interest created second in point of time. His interest created second in point of time. His Honour, at 333, said:Honour, at 333, said:

In the present case the interest of the In the present case the interest of the appellant was first in time. The question appellant was first in time. The question therefore is whether his conduct … has the therefore is whether his conduct … has the consequence that [the holder of the second consequence that [the holder of the second equitable interest] has the better equity, and equitable interest] has the better equity, and the appellant's interest should be postponed the appellant's interest should be postponed to that of [the holder of the second equitable to that of [the holder of the second equitable interest].interest].



At 341, Mason, Deane JJ observed:At 341, Mason, Deane JJ observed:It will always be necessary to It will always be necessary to

characterize the conduct of the characterize the conduct of the holder of the earlier interest in holder of the earlier interest in order to determine whether, in all order to determine whether, in all the circumstances, that conduct is the circumstances, that conduct is such that, in fairness and in such that, in fairness and in justice, the earlier interest should justice, the earlier interest should be postponed to the later interest.be postponed to the later interest.


Failure to lodge a caveat and Failure to lodge a caveat and postponing conductpostponing conduct

Abigail v Lapin Abigail v Lapin [1934] AC 491 [1934] AC 491 Lapins executed a transfer to Mrs Lapins executed a transfer to Mrs

Heavener (as security for a loan) on the Heavener (as security for a loan) on the understanding that they could redeem it understanding that they could redeem it on repayment. Mrs Heavener became on repayment. Mrs Heavener became registered and mortgaged it to Abigail. registered and mortgaged it to Abigail. The mortgage was unregistered but The mortgage was unregistered but Abigail had not notice of the earlier Abigail had not notice of the earlier interest. He searched the register and interest. He searched the register and found nothing. Lapins sought to rectify found nothing. Lapins sought to rectify the registerthe register



Lapins' interest should be postponed - Lapins' interest should be postponed - they armed Heavener with the means to they armed Heavener with the means to deal with the estates. The failure to deal with the estates. The failure to caveat was one factor to consider in the caveat was one factor to consider in the question of who had the better equity. question of who had the better equity. The question of whether a caveat should The question of whether a caveat should be lodged is a question of conveyancing be lodged is a question of conveyancing practice or whether it was reasonable. practice or whether it was reasonable. Abigails search of the register was not Abigails search of the register was not relevant as it had not been caused by an relevant as it had not been caused by an representation by the Lapinsrepresentation by the Lapins



In In J & H Just (Holdings) Pty Ltd v Bank of New J & H Just (Holdings) Pty Ltd v Bank of New South WalesSouth Wales (1971) 125 CLR 546, the bank (1971) 125 CLR 546, the bank loaned money to Josephson. The bank obtained a loaned money to Josephson. The bank obtained a mortgage in registrable form as well as the mortgage in registrable form as well as the certificate of title but did not register the certificate of title but did not register the mortgage. J & H Just advanced further money to mortgage. J & H Just advanced further money to Josephson on the security of the land. They Josephson on the security of the land. They asked Josephson about the certificate of title and asked Josephson about the certificate of title and accepted his statement that it was with the bank accepted his statement that it was with the bank for safekeeping. J & H Just lodged a caveat. The for safekeeping. J & H Just lodged a caveat. The issue before the High Court was whether the issue before the High Court was whether the bank maintained its priority according to time. bank maintained its priority according to time. The High Court ruled in favour of the bank. By The High Court ruled in favour of the bank. By receiving the title documents the bank had taken receiving the title documents the bank had taken adequate precautions to protect themselves. adequate precautions to protect themselves.



In Osmanoski v Rose [In Osmanoski v Rose [1974] VR 523, A 1974] VR 523, A contracted to sell land to B and then again contracted to sell land to B and then again to C. When C contracted he searched the to C. When C contracted he searched the register and saw that A was the registered register and saw that A was the registered proprietor. B had not lodged a caveat in proprietor. B had not lodged a caveat in relation to his unregistered interest at relation to his unregistered interest at that time but did lodge one before C that time but did lodge one before C lodged a transfer for registration. The lodged a transfer for registration. The court held that B’s failure to lodge a court held that B’s failure to lodge a caveat before C contracted with A was caveat before C contracted with A was postponing conduct as it led to C postponing conduct as it led to C contracting in the belief that there was no contracting in the belief that there was no other interest such as B’s in existence. other interest such as B’s in existence.



Person-to-Person Finances Pty Ltd v SharariPerson-to-Person Finances Pty Ltd v Sharari [1984] 1 NSWLR 745 Tredgolde had a [1984] 1 NSWLR 745 Tredgolde had a registered mortgage over Torrens title land. registered mortgage over Torrens title land. As a registered mortgagee he also held the As a registered mortgagee he also held the certificate of title. Sharari took a certificate of title. Sharari took a subsequent mortgage over the property, but subsequent mortgage over the property, but his solicitor failed to have that mortgage his solicitor failed to have that mortgage registered. Sharari did not lodge a caveat to registered. Sharari did not lodge a caveat to protect his unregistered mortgage. protect his unregistered mortgage. Subsequently Person-to-Person took a Subsequently Person-to-Person took a mortgage over the property after being told mortgage over the property after being told by the owner of the land that Tredgolde had by the owner of the land that Tredgolde had the only other mortgage over the property. the only other mortgage over the property.



Person-to-Person’s search of the Person-to-Person’s search of the register revealed only Treadgolde’s register revealed only Treadgolde’s mortgage. Person-to-Person lodged a mortgage. Person-to-Person lodged a caveat in respect of its unregistered caveat in respect of its unregistered mortgage. The issue before the Court mortgage. The issue before the Court was whether Sharari’s failure to lodge was whether Sharari’s failure to lodge a caveat amounted to postponing a caveat amounted to postponing conduct.conduct.

McLelland J ruled that Sharari was McLelland J ruled that Sharari was guilty of postponing conduct and that, guilty of postponing conduct and that, therefore, Person-to Person had therefore, Person-to Person had priority over Sharari. priority over Sharari.



His Honour, at 738, said:His Honour, at 738, said: [I]t is the settled practice of competent solicitors ... [I]t is the settled practice of competent solicitors ...

acting for second or subsequent mortgagees, to acting for second or subsequent mortgagees, to ensure either the prompt registration of the ensure either the prompt registration of the mortgage or lodgment of a caveat. The failure by mortgage or lodgment of a caveat. The failure by [Sharari] through his solicitor to conform to this [Sharari] through his solicitor to conform to this practice would lead naturally to those who searched, practice would lead naturally to those who searched, such as [Person-to-Person], to believe that there was such as [Person-to-Person], to believe that there was no such outstanding second mortgage, and it is my no such outstanding second mortgage, and it is my opinion that the failure of [Sharari], in the absence of opinion that the failure of [Sharari], in the absence of registration of his mortgage, to lodge a caveat led registration of his mortgage, to lodge a caveat led [Person-to-Person] to acquire its mortgage on the [Person-to-Person] to acquire its mortgage on the supposition that no unregistered second mortgage supposition that no unregistered second mortgage already existed, in circumstances which make it already existed, in circumstances which make it inequitable as between the parties that [Sharari’s] inequitable as between the parties that [Sharari’s] mortgage should have priority over that of [Person-mortgage should have priority over that of [Person-to-Person].to-Person].

(c) cameron stewart 2005 real property 5 associate professor cameron stewart

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