Real Property 5

Real Property 5
Associate Professor
Cameron Stewart
(c) Cameron Stewart 2005
Exceptions to indefeasibility
- Rights in personam
While registration of an interest may

extinguish other unregistered interests
personal rights of action can still survive
sometimes called personal equities
Examples:
Right of specific performance in a sale of
land contract;
Right of beneficiary to call on performance
of trust;
Right to rectify a mistake in a contract
which has bestowed title on the wrong party.
The personal equity must rest on a legal or
equitable cause of action
Bahr v Nicolay (No 2) 1988) 62 ALJR

268.
The registered proprietor (R) was
bound by a personal equity where R
knew of an unregistered interest
and had purchased the property on
the basis that R would recognise and
be bound by that unregistered
interest.
Mercantile Mutual v Gosper (1991)

25 NSWLR 32: Mrs Gosper and the
registered
proprietor
of
land
subject to a mortgage to Mercantile
Mutual.
Mr
Gosper
borrowed
money from Mercantile Mutual and
it was agreed that the loan would
be secured by a variation of the
existing
mortgage
over
Mrs
Gospers
property.
Mr
Gosper
forged his wifes signature to the
variation and it was registered.
After her husbands death Mrs Gosper

discovered what had happened. She
sought orders removing the variation
of the mortgage from her title. The
issue before the court was whether
Mercantile
Mutual
had
an
indefeasible title insofar as the
variation was concerned or whether it
was defeated on the basis of an in
personam claim by Mrs Gosper. By a
majority the Court of Appeal held in
favour of Mrs Gosper.
In Story v Advance Bank the Court of Appeal had to

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

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

records but no resolve disputes s 12 not to
prejudice the rights of interest holders
State Bank of NSW v Berowra Waters
Holdings Pty Ltd (1984) 4 NSWLR 398
James v Attorney-General (1967) 69 SR
(NSW) 361, it was held that the corrections
should be made prior to a bona fide
purchaser or mortgagee obtains an interest
on the faith of the uncorrected register.
Overriding statutes
Other statutes can override the provisions of the RPA

EG rates, taxes and charges on land bind the land
regardless of the indefeasibility provisions
Pratten v Warringah Shire Council, part of Prattens
land was resumed by the Council before he purchased
the land. Before purchasing the land Pratten made
inquiries to the Council to ascertain if it had any
interest in the land. The Council replied that it had no
interest in the land. Pratten also thoroughly searched
the register. After Pratten became registered
proprietor of the land the Council asserted its rights
over the land that had been resumed. The Court ruled
in favour of the Council on the basis that Pratten's
registered interest was subject to overriding
legislation, in this case s. 398 of the Local
Government Act of that time.
Overriding statutes
Hillpalm Pty Ltd v Heaven\'s Door Pty Ltd

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

one that created a charge that took effect by force of
the statute creating it. It did not depend upon
registration. Street J observed that the indefeasibility
provisions of the Real Property Act were of no effect in
the face of overriding legislation that removed the land
from the registration system of the Act as had
occurred in this case. The fact that the Council didnt
apply to have its interest notified upon the register
when it became possible to do so after an amendment
to the Real Property Act did not amount to an estoppel
against the Council. Not did an estoppel arise when in
response to Prattens inquiry, the Council wrote a
letter back saying that it had no interest in the land.
This was so because the Council had no right to
dispose of the land without the consent of the
Governor-in-Council.
Volunteers
King v Smail [1958] VR 273 a husband and wife were
registered as the proprietors of land as joint tenants.
The husband executed a transfer of his interest in
the land to the wife by way of gift. Before the
transfer was registered the husband executed a deed
of arrangement under the bankruptcy legislation.
The trustee lodged a caveat claiming an equitable
interest in the land under the terms of the deed of
arrangement. In proceedings by the wife to remove
the caveat the question was whether the trustee had
an interest which had priority over the registered
title of the wife. Adam J held that s 42 of the
Victorian Act (which is equivalent to s 68) did not
give the wife priority because she was a volunteer
and the doctrine of indefeasibility only protected
bona fide purchasers for value.
Volunteers
Adam J said, at 276:

"Although s 42 of the Transfer of Land Act
1954 in itself affords no ground for
distinguishing between thevolunteer and the
purchaser for value and would appear to give
paramount effect to registered title in either
case, other sections in the Act draw a
distinction between the volunteer and the
purchaser for value and appear tojustify the
conclusion that upon the registration of
dealings subsequent to initial registration
under the Act, it is purchasers for value only
who were intended to have the benefit of s
42.
Volunteers
Kitto J in IAC (Finance) Pty Ltd v Courtenay

(1963) 110 CLR 550 at 572:
"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
unregistered. For the same reason, it has no application even to
one who has become registered, if he acquired his estate or
interest as a volunteer. It is only a person having a legal estate or
legal interest acquired for value whose position is prejudiced by
his having received, before paying his money, direct or
constructive notice of an outstanding equitable interest. This is so
even under the Real Property Act (NSW) for a registered interest
is not (as was suggested in the course of the appellant's argument)
some special kind of statutory interest - it is a legal interest,
acquired by a statutory conveyancing procedure and protected
from competition to the extent provided for by the Act, but having,
subject to the Act, the nature and incidents 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 unregistered interest
a legal estate acquired for value".
Volunteers
Bogdanovic v Kotef (1988) 12 NSWLR 472
Mrs B looked after Mr K on the basis of a
promise that she would be given an
interest in the house which would allow
her to stay for life. Son inherited house.
Breskvar v Wall applied - no distinction is
made between volunteers and
purchasers hence indefeasibility is
given to the son
Volunteers
Rasmussen v Rasmussen [1995] 1 VR 613
Grandfather farmed a number of properties with

his four sons. After he died the property passed
through G's will to the grandson H. Hand his
father E then argued over who should own the
property as E stated that one property was held
by the father on trust for E. The purpose behind
the trust was to avoid tax. H's response was that
he was the registered proprietor and that he had
indefeasibility.
It was held that ss 42 and 43 bona fide purchaser

for value and volunteers other later sections do
make a distinction. On this basis the court held
that the in Victoria the legislation only provides
indefeasibility to purchasers for value.
Volunteers
Valoutin Pty Ltd v Furst (1998) 154 ALR 119- a

decision on the Victorian legislation. Finkelstein
J, having referred to King, Bogdanovic and IAC
(Finance) Pty Ltd, said, at 136 - 137:
"When it is accepted, as it must be, that s 43
does not relieve a volunteer from equities which
affected his transferor it is difficult to see why s
42 should be held to give that protection. Such a
view would be inconsistent with the structure
and text of the Transfer of Land Act. It should
also be noted that King v Smail was followed by
Coldrey J in Rasmussen v Rasmussen [1995] 1
VR 613 in preference to Bogdanovic. In my view
King v Smail correctly states the law.
Volunteers
Conlan (As Liquidator Of

Oakleigh Acquisitions Pty Ltd)
-v- Registrar Of Titles & Ors
[2001] WASC 201
Position of Bogdonavic is preferred
Caveats
Protection of unregistered interests

Section 74F - System of lodging a
caveat by a person who claims to
have a legal or equitable interest in
the property any further dealing
with the property cannot be
recorded unless with the caveators
approval freezes any dealing with
the land that would impact on the
subject of the caveat
Caveats
Different types of caveats:
1. caveat against dealings
2. caveat against improper dealing
where CT has been lost
3. caveat against improper exercise of
power of sale
4. caveat lodged by RG to protect
interest of a person under a legal
disability or on behalf of the Queen
Caveats
What is a caveatable interest? Must be
an interest in land!!! Not just a
contractual right or personal right
the interest must exist at the time of
lodgment no future interests
Eg
Interest of a purchaser under a contract
for sale
Interest of an equitable mortgagee
Option to purchase land
And many many more
Caveats
How can they be removed?
Lapsing notice with dealing serve a
notice of lodging a dealing and then
21 days for the caveator to go to SC for
extension of time otherwise the
caveat lapses
Lapsing notice without dealing 21 days
to obtain SC order extending caveat otherwise the caveat lapses
SC order no notice
Caveats
After lapsing further caveat by same

person based on same interest will be
of no effect unless court leave has
been obtained
Wrongful lodgment if a caveator is
found to have wrongfully lodged a
caveat they are liable to compensate
the person sustaining a pecuniary loss
wrongfully means in infringement
of the rights of the person against
whom the caveat is lodged
Section 43A
On completion of the contract for sale
of land and before registration the
purchaser has less rights than they
would have under the old system as they
only have an equitable interest which is
subject to any earlier equitable interest
(even though they may have taken the
interest for value and without notice)
under old system they would have had
the legal estate provided they took that
estate without notice of earlier interests
and for value.
Section 43A
To remedy this defect in the RPA s43A
bestows upon such a purchaser of Torrens
land the same rights as they would have
under old system that is the section
declares that they take a legal interest
after sale but prior to registration.
Therefore s 43A allows a purchaser of an
interest in land, who takes for value and
without notice, to get a legal estate thus
protecting him or her against earlier
equitable interests
Section 43A
The interest purchased must
had been effected by a
dealing registrable that is
you must be able to lodge the
dealing for immediate
registration
Section 43A
Successive effect recall priority rule
earlier equitable v later legal bona
fide purchaser for value without
notice and the extension on that
principle eg Wilkes v Spooner later purchasers who buy the original
purchasers interest with notice are
protected by the original purchasers
title to allow the purchaser the full
right to deal with the property as he
or she wishes
Section 43A
Eg A buys an estate of B, for

value and without notice of Cs
earlier equitable interest in the
property A takes priority if a
then sells to D and D knows of
Cs interest he can still take
priority over C
So too does s 43A have this
successive effect
Section 43A
Eg if A buys land from B for value

and without any knowledge of the
prior equitable interest of D, under
s 43A A will take the legal estate
and Ds interest will be defeated. If
before registering his interest, A
then executes a mortgage to C, Cs
interest will still take priority over
Ds, even if C had notice of Ds
interest..
Section 43A
IAC (Finance) Pty Ltd v Courtenay (1963) 110

CLR 550
Courtney bought land off Mrs Austin for 15000
pounds. 3000 was paid as deposit and the rest
was secured by a mortgage back to Mrs Austin.
The documents were not lodged for
registration until seven months after
settlement. Mrs Austin's solicitor had retained
these documents to allow the mortgage to be
registered. Later Mrs Austin and the
Courtney's agree that Mrs Austin would buy
the land back. The original transfer and
mortgage had not been registered by this time.
Section 43A
Before the second sale was registered Mrs Austin

agree to sell the land to Denton Subdivisions Pty
Ltd. She did this without the Courtney's
knowledge. Mrs Austin's solicitor uplifted the
original sale and mortgage documents from the
RG. When the sale to Denton was being settled a
question was asked about why these documents
had been uplifted. Mrs Austin's solicitor lied and
said it was part of a deal to finalise the resale
back to Mrs Austin. A copy of the second contract
for sale was produced as evidence. Denton's
purchased was financed by IAC as mortgagee.
The documents were lodged by IAC but before
they were registered the Courtney's commenced
their action
Section 43A
Held: the Courtney's were entitled

to registration.
Unregistered interests are
equitable. The effect of s 43A is to
confer a legal interest on an
equitable interest, to put it into the
position of protected received by a
bona fide purchaser for value
without notice.
Why did IAC fail?
Section 43A
Kitto - the fact that the solicitor withdrew the

registration without authority meant that s 43A
did not give priority to IAC
Taylor - The ordinary rules of priority apply. IAC
had notice of the equitable interest of the
Courtney's hence they could not satisfy the rule.
Dixon - an unauthorised withdrawal was not a
withdrawal and was ineffective. Hence the
conflict was between an early registrable
interest and a later registrable interest. Section
43A meant that two registrable dealings would
be determined by the first in time rule
Section 43A
Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969)

89 WN (NSW) Pt 1) 568
M contracts to sell land to J. At the date of the contract M
was not the registered proprietor but was a purchaser 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 hand
over the transfer of the land to J, executed by A at the
direction of M, in conjunction with a discharge of
mortgage executed by B. J was not happy with this
arrangement and said that it wanted to receive the title
from M. J wanted the mortgage discharged before the
settlement. J sought to rescind the contract. However it
had not lodged its objections within the time period for
the making of objections to title. The issues were whether
a purchaser could refuse a transfer by direction and
whether it could require the title free from incumbrances.
Section 43A
The court found that the purchaser could not

object to the sale by direction as it was still a
sale from the registered proprietor. A
purchaser received the same protection as a
purchaser taking directly from a registered
proprietor.
As for the objection to the discharge of
mortgage, the court found that the purchaser
could not object as uon registration it would
receive indefeasible title. After completion or
prior to registration the purchaser was
protected by s 43A against any defects of
which it had no notice.
Section 43A
The fact that the holder of an

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

instrument is actually registered, and the
registered proprietor is not a party to any
fraud, he or she does get an indefeasible title.
In both Jonray (Sydney) Pty Ltd v Partridge
Bros Pty Ltd (1969) 89 WN (NSW) Pt 1) 568
and Mayer v Coe (1968) 88 WN (NSW) (Pt 1)
549 it was suggested that if notice of a void
instrument was received after completion of
the transaction but before its registration, the
true proprietor could prevent registration of it
by obtaining an injunction to prevent
registration.
Competing unregistered
interests
Breskvar v Wall (1971) 126 CLR 376 - Mr and
Mrs Breskvar executed a transfer to Petrie as
security for a loan. Petrie fraudulently used the
transfer and sold to his grandson Wall, who
became registered owner. Wall sold to Alban
Pty Ltd but before they could register their
interest the Breskvars lodged a caveat which
injuncted the sale. The conflict was therefore
between the interest of Breskvars and the
interests of Alban Pty Ltd
Barwick : 'title by registration'. What sort of
interest did Wall have? What sort of interest
does Alban have? What interest do the Breskvars
have?
interests
Heid v Reliance Finance Corporation Pty Ltd (1983)

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

the time of creation of the relevant equitable
interests, with such priority being displaced
only if the equities favoured the holder of the
interest created second in point of time. His
Honour, at 333, said:
In the present case the interest of the appellant
was first in time. The question therefore is
whether his conduct has the consequence
that [the holder of the second equitable
interest] has the better equity, and the
appellant's interest should be postponed to that
of [the holder of the second equitable interest].
interests
At 341, Mason, Deane JJ observed:
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.
Failure to lodge a caveat and

postponing conduct
Abigail v Lapin [1934] AC 491
Lapins executed a transfer to Mrs
Heavener (as security for a loan) on the
understanding that they could redeem it
on repayment. Mrs Heavener became
registered and mortgaged it to Abigail.
The mortgage was unregistered but
Abigail had not notice of the earlier
interest. He searched the register and
found nothing. Lapins sought to rectify
the register

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

postponing conduct
In J & H Just (Holdings) Pty Ltd v Bank of New

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

postponing conduct
In Osmanoski v Rose [1974] VR 523, A

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

postponing conduct
Person-to-Person Finances Pty Ltd v Sharari

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

postponing conduct
Person-to-Persons search of the register

revealed only Treadgoldes mortgage.
Person-to-Person lodged a caveat in
respect of its unregistered mortgage.
The issue before the Court was whether
Shararis failure to lodge a caveat
amounted to postponing conduct.
McLelland J ruled that Sharari was
guilty of postponing conduct and that,
therefore, Person-to Person had priority
over Sharari.

postponing conduct
His Honour, at 738, said:

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

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(c) Cameron Stewart 2005

While registration of an interest may

Bahr v Nicolay (No 2) 1988) 62 ALJR

(c) Cameron Stewart 2005

Mercantile Mutual v Gosper (1991)

After her husbands death Mrs Gosper

In Story v Advance Bank the Court of Appeal had to

Vassos v State Bank of South Australia , the bank

RG can fix up administrative errors in the

Other statutes can override the provisions of the RPA

Hillpalm Pty Ltd v Heaven\'s Door Pty Ltd

The Court held that the resumption by the Council was

(c) Cameron Stewart 2005

Adam J said, at 276:

Kitto J in IAC (Finance) Pty Ltd v Courtenay

"A provision that a person is not to be affected by notice of prior

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

Grandfather farmed a number of properties with

It was held that ss 42 and 43 bona fide purchaser

(c) Cameron Stewart 2005

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

(c) Cameron Stewart 2005

Conlan (As Liquidator Of

(c) Cameron Stewart 2005

Protection of unregistered interests

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

After lapsing further caveat by same

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

(c) Cameron Stewart 2005

Eg A buys an estate of B, for

Eg if A buys land from B for value

(c) Cameron Stewart 2005

IAC (Finance) Pty Ltd v Courtenay (1963) 110

(c) Cameron Stewart 2005

Before the second sale was registered Mrs Austin

(c) Cameron Stewart 2005

Held: the Courtney's were entitled

Kitto - the fact that the solicitor withdrew the

(c) Cameron Stewart 2005

Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969)

(c) Cameron Stewart 2005

The court found that the purchaser could not

(c) Cameron Stewart 2005

The fact that the holder of an

(c) Cameron Stewart 2005

Section. 43A cannot be relied upon, if the

(c) Cameron Stewart 2005

Heid v Reliance Finance Corporation Pty Ltd (1983)

Gibbs CJ focused first on priority based upon

Failure to lodge a caveat and

(c) Cameron Stewart 2005

Failure to lodge a caveat and

Failure to lodge a caveat and

In J & H Just (Holdings) Pty Ltd v Bank of New

Failure to lodge a caveat and

In Osmanoski v Rose [1974] VR 523, A