9.0 EXCEPTIONS TO INDEFEASIBILITY
OVERVIEW
• Unregistered prior interests can operate as exceptions and defeat indefeasible title
• 1. Express exceptions created by Torrens legislation:
o See s 42(1) and (2):
§ Fraud
§ Prior folio (s 42(1)(a))
§ Wrong description of boundaries (s 42(1)(b))
§ Reservations in the crown grant (s 42(2)(a))
§ AP = adverse possession (s 42(2)(b))
§ Public rights of way (s 42(2)(c))
§ Easements howsoever arising (s 42(2)(d))
• *Note: no profit exception to indefeasibility
§ Tenant in possession (s 42(2)(e))
§ Unpaid tax, rates or charges (s 42(2)(f)
• 2. Power of the Registrar to correct register (s 103)
• 3. Overriding statutes
• 4. Judicial exceptions (arising through TLA interpretation) a. In personam exceptions
b. Volunteers in Vic
9.1 EXPRESS STATUTORY EXEMPTIONS
§ In all jurisdictions, the title of the registered proprietor of an estate or interest is subject to all estates, interests or encumbrances notified on the Register.
o TLA – s 42(1)
§ Whilst this may seem fair, though, it often produces problems.
§ There are many legal interests in land that are not reflected in land, and even more equitable interests which are not reflected on the register.
§ Bursill v Berger Bros Trading
o HCA held that that if an interest is noted on the Register, even if it is noted under the wrong name, the RP is bound by it if by some further searching he or she could have discovered the exact nature of the interest.
EASEMENTS
§ Torrens Statutes in all jurisdictions provide that particular unregistered easements are an exception to indefeasibility of the registered proprietor’s title.
§ The scope of the exception varies from jurisdiction to jurisdiction.
o TLA – s 42(2)(d)
ADVERSE POSSESSION
• Adverse possession is an exception to indefeasibility o TLA – s 42(2)(b)
TENANCIES
• Land included in any folio of the Register or registered instrument is subject to the interest of the tenant in possession of the land, notwithstanding the same is not specifically recorded as an encumbrance.
o TLA – s 42(2)(e)
• Perpetual Trustee’s v Smith
o Federal Court reiterated that the effect of statutory protection is to deprive the RP of indefeasibility of title which would otherwise be accorded to it, the tenant does not then automatically take priority over the registered interest holder.
o Rather, the competition between the interests is decided by the application of common law principles as if between two unregistered interests.
Transfer of Land Act – Section 42 Section 42 – Paramount Interests
• (1) Encumbrances recorded on the register
o See effect of ‘notice’ here as to what can reasonably be constituted as notice of an encumbrance
• (1)(a): Prior certificate
o Two folios issued and are partly or completely incompatible – interest in the first folio has priority
• (1)(b): Boundary of property incorrectly described o Bona fide purchaser protected
• (2)(a): Reservations in grant
o In practice covers mineral rights, but now vested in Crown by legislation
• (2)(b): Adverse possession
• (2)(c): Public rights of way
• (2)(d): Easements
• (2)(e): Interests of tenants in possession (incl all rights other than options) o Recent case law [key]
§ Perpetual Trustees v Smith [2010]
• Leases: 3-years or less cannot be registered; cf. tenants in possession, will be protected if they cannot register their interest
• [Key]: paramount interests under 42(2)(e) only is not an absolute paramount interest like the others. Instead, it has the effect of treating them both as unregistered interests and applying the standard priority rules (cf. the other paramount interests which manifestly take precedence over the registered interest)
o But then see notice? Operates as if you will always have constructive notice (2)(f): Unpaid land taxes, rates, etc
Perpetual Trustee Company Ltd v Smith (2010) 186 FCR 566 KEY WORDS: Tenants in Possession – TLA – S 42(2)(e) PROCEDURAL HISTORY:
VSC – VCA - FCAFC PRINCIPLES:
• Section 42(2)(e) of the TLA does not give absolute priority to the interest of a tenant in possession. Its effect is to deprive the new registered proprietor of indefeasibility, so that competition between the interests is determined by the application of general law principles.
• Tenancy for life is an exception to certainty of duration for leases.
• Anything ‘incidental’ to a tenancy will also be captured bycont this exception.
FACTS
• Retirees owned multiple properties
• They sold the properties to MFLPH (Money For Living Property Holdings) who became registered proprietors
• Time 1: There were three agreements relevant to the case that were all executed on the same day:
o Contract of sale
§ This was subject to a condition that the RP would grant the tenants a lease back for their lives and pay the outstanding purchase price in a series of instalments that effectively mirrored an annuity
o Residential tenancies agreement o Deed agreement.
• Time 2: Perpetual becomes a registered mortgagee
o MFLPH cannot afford repayments and they default on their mortgage
o Perpetual exercises power of sale.
o Perpetual tries to argue that the retirees’ interests are destroyed by their mortgage o Retirees argue that they’re protected under s 42(2). Their interests are:
§ Vendors lien over unpaid purchase price
§ Tenancy in possession
§ Tenancy for life.
ISSUE:
• Should the priorities dispute be determined by reference to HOLDING:
Middleton J (Trial):
The retiree’s interests came into existence prior to the creation and registration of the mortgages, and Perpetual’s interests were subject to the retiree’s interests as tenants in possession under s 42(2)(e) of the TLA.
COA:
Simply because you have a paramount interest – a tenancy in possession – it doesn’t mean that you automatically have the better interest. It just means that you treat the RP as if they were unregistered – then it turns into a priorities dispute.
FCAFC (Moore and Stone JJ, Dawson J agreeing):
Section 42(2)(e) of the TLA does not give absolute priority to the interest of a tenant in possession. It’s effect is to deprive the new registered proprietor of indefeasibility, so that competition between the interests is determined by the application of common law law principles.
REASONING:
STONE J AND MOORE J
Was each of the respondents a ‘tenant in possession’?
• For the exception to indefeasibility codified in s 42(2)(e) of the TLA to apply each of the respondents had to be characterised as a ‘tenant in possession’ for the purposes of the Act.
• RULE: As between the vendor and purchaser, the right to possession is governed by the terms of the contract between them.
• RULE: A lease for life is not invalid for uncertainty of duration.
• Perpetual tried to argue that the mortgage had preceded the registration of transfer between MFLPH and the respondents.
o This was rejected by the Stone and Moore JJ
o Until MFLPH had registered the transfer, they couldn’t legally get a mortgage from the bank –the land which they would use as collateral wasn’t owned by them (*Check this w/ NIlo)
o This accords with s 34(3) of the TLA which says that if two or more instruments are registered on the same the Registrar will register the instruments in a way that gives effect to the intentions of the parties.
Held: Each of the respondents was a tenant in possession.
a) Notice
• RULE: Caveat’s may be used as a way to give notice to ‘all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat.’
• Perpetual had constructive notice:
o Application:
§ Number of mortgages – Perpetual ‘entered into many mortgages’ with MFLPH.
§ Money Loaned – Perpetual had lend substantial sums of money to the MFLPH.
§ These two factors combined to create an inescapable inference that Perpetual had constructive notice.
§ It would have been extremely imprudent to create so many mortgages, and lend so much money, without having any idea of the nature of the MFLPH’s business.
• In normal mortgage transactions banks would have a lot of information about the mortgagor to ensure that they were actually capable of repaying the loan.
§ The bank should have known what business MFLPH was in – retirement homes.
§ IF they should’ve known that MFLPH ran retirement homes then they should’ve known that there were tenants on the property.
DAWSON J Notice (Dissenting)
• Dawson J says that there is insufficient evidence to decide on the notice point – would have preferred to defer the matter back to the Trial judge.
CLASS NOTES:
• Exception in s 42(2)(e) is very broad
o Only people that aren’t really protected are those that o Exception does not encompass a vendor’s lien.
o Whatever is covered by the exception has to be an incident of the tenancy.
§ Vendor’s lien is not an interest to which the retirees
• Case undermines the Mirror and Curtain principle from the Torrens system.
• Section 42(2)(e) includes a specifically enforceable lease and includes an equity to rectify a legal lease or an option to renew.
9.2 FRAUD
OVERVIEW
• Exception designed to protect the interest of the person who has been defrauded
• A registered proprietor who has acquired registered title through fraud will obtain defeasible title as against the party defrauded (s 44(1), Breskvar)
o Cf. other express exceptions where the registered proprietor will get burdened title (eg. Easements)
• Although the RP’s interest is defeasible and open to challenge by the defrauded party, their title will be able to support a contract with a third party.
Transfer of Land Act – Sections 42-44
S 42 RP holds land free of all encumbrances but subject to the paramount interests “except in the case of fraud”
This provision means that the RP’s title will not be burdened by prior RP in cases of fraud but will cease to exist S 43 A party may rely on the register as conclusive evidence of title except in the case of fraud
S 44 (1) Relates specifically to fraud only and acts as an express exception to the RP’s indefeasible title created through registration:
• “Any folio of the register…. procured or made by fraud shall be void as against any person defrauded”
(2) Relates to innocent third parties affected by fraud:
• A RP who is a bona fide purchaser for value without notice of fraud obtains indefeasible title (immune from previous RP’s fraud)
REQUIREMENTS FOR FRAUD
1) Must relate to the conduct of the party seeking to rely on registration (Frazer, Breskvar, Pyramid, s 44(1)) 2) Must take place prior to or during registration (Loke Yew)
a. AKA Causal relationship/’but for’ test
3) Must meet the standard of “personal dishonesty” or “moral turpitude” (Assets Ltd Co, affirmed in Pyramid)
a. *Dicta Pyramid – Wilful Blindness/Reckless Indifference - If it is proved a person’s suspicions were aroused and they avoided making further inquiries for fear of discovering the trust the court MAY find fraud (VCA in Scorpion Hotels).
4) Must be “brought home” to the person getting registered (Assets Ltd Co, affirmed in Pyramid)
WHAT WILL/WON’T CONSTITUTE FRAUD
• Mere notice of a prior unregistered interest does not of itself constitute fraud (Mills v Stokman)
o EG. Mills v Stokman à Mrs M had notice of equitable profit prior to registration but not enough to constitute fraud
• Simply failing to make inquiries will not amount to wilful blindness/fraud (Pyramid)
• Mere notice plus a dishonest disregard for rights will constitute fraud (Loke Yew) Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491
KEY WORDS: Torrens Title – Sale Induced By Fraud – Rectification of the Register PROCEDURAL HISTORY:
PC.
PRINCIPLES:
• Fraud has to take place prior to registration
• Notice + dishonest acts constitute fraud (cf. Mills)
• Mr G’s actions constituted fraud:
o Inducement: dishonest representation to induce transaction o But for: without representation no transfer
FACTS
• Sultan grants 322 acres of land to Eusope (E) in fee simple
• E has an obligation to pay each year for each acre of land to the Sultan
• E grants parcels of 1 acre in exchange for yearly rent
• LY acquires 58 acres but doesn’t register (equitable interest)
• E enters into negotiations with PSR for purchase of 322 acres
• E refuses to sell without an assurance in writing that LY’s unregistered interest will be protected
• Mr Glass (PSR’s solicitor acting as PSR’s agent) gives a verbal assurance to E and then signs a document stating PSR would make their own “arrangement” with respect to LY’s 58 acres (representing would pay him out)
• E’s 58 acres was not included in the price of sale and E transfers
• PSR registers 322 acres
• PSR then writes a letter to LY offering 20,000 (instead of 70,000) for LY to surrender interest (but denying existence of interests)
• LY declines and brings proceedings to have the register rectified to exclude his 58 from the 322 transferred
• PSR brings subsequent action to have YL ejected
ISSUE:
Was PSR’s title obtained by fraud and therefore defeasible to the interest of LY?
HOLDING:
PSR obtained execution of the transfer through a deliberate misrepresentation that amounted to fraud. The Register would be rectified to reflect LY’s interest. As PSR purchased the property from LY with notice of LY’s interest, the property was to be held on constructive trust.
REASONING:
PRIVY COUNCIL (LJ’s Atkinson, Shaw, MacNaghten and Moulton present)
• Mr G not called as a witness by PSR at trial and court gives weight to this fact (inference of fraud and knowledge by PSR)
• PSR had more than “mere knowledge” of LY’s interest
• Went further by making the representation that they would look after LY
• Mr G made a “false and fraudulent” representation to E (prior to registration) that the company had no intention of using the land and would look after LY’s interests
• PSR knew they wouldn’t get the full transfer of 322 acres unless they made this representation
• Mr G’s statement acted as a deliberate inducement for E to execute the conveyance and but for the fraudulent representation, there would not have been a transfer
Pyramid Building Society v Scorpion Hotels [1998] 1 VR 188
KEY WORDS: Fraud – Dishonesty or Moral Turpitude – Actual Fraud Requirement – Want of Due Care Insufficient.
PROCEDURAL HISTORY:
VSC – VCA PRINCIPLES:
• Fraud requires actual dishonesty or moral turpitude Eusope= RP1 with 322 acres
seeking to protect LY from effects
of transfer Loke Yew= 58 acres unregistered PSR= RP2 obtained transfer from E fradulently of all 322 acres
• *Dicta - If it is proved that a person’s ‘suspicions were aroused’ and they abstained for making further inquiries out of
‘fear for discovering the truth’ this MAY constitute fraud.
FACTS
• SH à Mortgagor; P à Mortgagee
• SH grants mortgage to P over the property (*wife signs mortgage doc but isn’t a director = invalid)
• SH fails to make repayments and P to exercise power of sale
• SH argue exception to indefeasibility based on fraud
• 4 arguments they contend amounted to reckless indifference or wilful blindness on the part of P’s solicitor relating to the registered mortgage document:
1) Illegal loan purpose: SH needed $$ to buy out minority shareholders (illegal) and SH argues P knew or should have known through making inquiries
2) P’s solicitors obtained a company search prior to settlement which would have showed the wife was not a director 3) P chose to settle the transaction without viewing any minutes from the board authorizing SH to enter
4) P hadn’t followed up on viewing the agreement to buy out the minority shareholders ISSUE:
Was P recklessly indifferent/wilfully blind to the validity of the mortgage instrument? (Fraud) HOLDING:
Trial Judge (VSC): Mortgage had not been validly executed and the mortgagee had been fraudulent in procuring the registration of the mortgage. He declared the mortgage void but gave judgment for the mortgagee for the mortgage debt.
VCA: If the mortgage instrument that was registered was not executed by the mortgagor (and in that sense was not its instrument), that fact, standing alone, did not affect the title which the mortgagee acquired on registration of the mortgage.
REASONING:
BROOKING, TAGDELL AND HAYNE JJ.A Fraud
• Assumption made by the judges that the Wife did not have authority to enter into the transaction.
o Therefore, no agent relationship à important for distinguishing in hypo’s
• Section 42 of the TLA
o The fraud exception in section 42 is limited only to acts of fraud by or on behalf of the person obtaining registration.
• Classic statement of fraud from Assets v Mere Rohli (Privy Council Case) o Fraud means:
§ Actual fraud à i.e dishonesty of some sort.
§ The mere fact that someone might have found out if he had been more vigilant does not in and of itself prove fraud.
§ *Dicta à However, if it is proved that ‘his suspicions were aroused’ and that the person ‘abstained from making further inquiries for fear of learning the truth’ this MAY constitute fraud.
§ A person who tries to register a document that is fraudulent and honestly does not know of its fraudulence is not guilty of fraud.
• No evidence that P (or solicitors) had any knowledge that the attestation was made by a person who was not a director o Therefore the point above about suspicions being aroused is DICTA.
• SH didn’t suggest that P’s solicitors failed to make further inquiries for fear of learning the truth and there was no evidence that P’s solicitor’s suspicions were aroused
• The mere fact that if P’s solicitors had made further inquiries he would have gained notice of the fraud does not of itself constitute fraud
• The threshold for fraud is actual dishonesty rather than mere want of due care eg. in not thoroughly checking company search
In Personam Claim
• SH also tried to argue that they had an in personam claim against Pyramid.
• Threshold Issue: To make an IP claim the party seeking to set aside the mortgage needs a common law cause of action o SH tried to argue they had a claim in negligence against P’s solicitor
o VCA rejects this.
o Therefore, the in personam claim must fail.
FRAZER V WALKER
WAS THERE FRAUD? • Mrs F acted fraudulently but she was not the party obtaining registration (R’s registered their mortgage and then sold to A)
BRESKVAR V WALL
WAS THERE FRAUD? • Although P and W acted fraudulently in obtaining the transfer from B’s, A was the party seeking registration and therefore the fraud of P and W were not relevant
• B’s could have had the transfer set aside on the basis of fraud if they acted prior to A’s contract of sale with W (didn’t act in time)
IMPORTANCE • Fraud must be attributed to the party seeking registration
• Fraud is able to vitiate and reverse registration if the defrauded party acts in time
EXTRA POINTS.
• Section 87(d)
o Meaning of fraud in the legislation may vary depending on its context o We’re talking about the meaning of fraud as an exception to indefeasibility
• High End of Fraud: Fraud requires actual “moral turpitude” or “personal dishonesty” or at least “wilful blindness”
o Requires actual intention to want to deprive someone else of their interest in land o This is incredibly difficult to prove.
• Low End of Fraud: Wilful Blindness
o If it is proved a person’s suspicions were aroused and they avoided making further inquiries fro fear of discovering the trust the court MAY find fraud (VCA in Scorpion Hotels).
• Fraud furnishes an exception to indefeasibility only against the defrauded, who could be either:
o A prior registered proprietor (i.e Pyramid; Ferguson)
o A prior unregistered interest holder (Loke Yew; Bahr v Nicolay; Nicolay v Waimiha) o The Registrar (Russo and Australian Guarantee Co. v De Jager in MGG)
• Fraud requires subjective mindset
• Fraud must have a causal connection to issues (Loke yew)
• Fraud must happen before the registrations
o Subject to dissenting judgment of French CJ in Bahr.
• Fraud must happen against a defrauded party who could be either:
o A prior registered proprietor (i.e Pyramid; Ferguson)
o A prior unregistered interest holder (Loke Yew; Bahr v Nicolay; Nicolay v Waimiha) o The Registrar (Russo and Australian Guarantee Co. v De Jager in MGG)
• Fraud’s consequence is limited to the defrauded party o Breskvar v Wall.
o *Unless in personam or notice.
9.3 IN PERSONAM
§ This exception acknowledges that the concept of indefeasibility of title enshrined in the Torrens legislation does not affect personal obligations of the registered proprietor
o I.e just because you’re registered as the owner of land, it doesn’t mean you can’t still hold obligations and duties in your personal capacity.
§ This essentially means that a registered proprietor is subject to contracts he or she has entered into and also to trusts, whether express or implied, over the property.
o If an RP enters into a contract for the sale of land and refuses to complete, the purchaser can seek specific performance of the contract.
§ In Personam v Fraud
o Often, where one is made out, the other will be.
o There is a very thin dividing line between the two, and in some cases there is no dividing line at all.
§ See Mason CJ & Dawson J in Bahr
o For example. If a registered proprietor had actual or constructive “notice” of a prior unregistered interest, this notice is insufficient to bind the RP in personam.
o However, if an RP have notice of a prior unregistered interest and implies that he or she will abide by that interest, and then subsequently refuses to do so, this action may not constitute fraud, but could come within the in personam exception.
THE REQUIREMENTS FOR AN IN PERSONAM EXCEPTION
• 1. Some form of unconscionable conduct on the part of the RP (*or agent)
o It must be unconscionable for the RP to assert unencumbered title for equity to provide a remedy o In personam claims don’t require the same threshold of personal dishonesty/ moral turpitude (cf. fraud)
• 2. Must be based on a known cause of action in law or in equity
o EG. Deceit; statutory obligations; misleading/deceptive conduct; unconscionable conduct leading to the imposition of a trust (Bahr)
• 3. Must be capable of sustaining a proprietary remedy
o The claim must be able to be satisfied by burdening the RP’s interest with the unregistered interest claimed o Mere neglect (want of due care) will not suffice bc not based on a cause of action/not generating a remedy in
equity
Bahr v Nicolay (1988) 164 CLR 604
KEY WORDS: fraud – timing – exceptions to indefeasibility PROCEDURAL HISTORY:
WASC – HCA PRINCIPLES:
• Fraud and timing: majority and minority differ in relation to the issue of fraud and TIMING
• Majority: Fraud for the purposes of the TLA must occur before registration
• Minority: Fraud for the purposes of the TLA can occur following registration if it’s a dishonest repudiation.]
FACTS
• B (RP1) sells land to N for $32,000
• Clause 6 – option: N leases back to B under 3 year lease with option to purchase for $45,000 recorded in cl 6 (equitable interest; not registered)
• N then transfers to T who registers (RP2)
• Clause 4 – Acknowledgement of option: in contract of sale between N and T: “the purchaser acknowledges than an agreement exists between B and N”
• T then refuses to allow B to repurchase claiming indefeasibility ISSUE:
1. Was there fraud?
2. Was there an in personam claim?
HOLDING:
1. No.
a. Mason and Dawson JJ: Dissenting 2. Yes.
a. Mason and Dawson JJ: on the basis of an express trust
b. Wilson and Toohey JJ: Brennan J: On the basis of a constructive trust REASONING:
WILSON AND TOOHEY JJ Fraud (s 42 and 43 TLA)
§ No fraud here because “more is needed”
o 1) there was no dishonesty prior to or during registration (only mere notice of pre-existing interest acknowledged in the contract)
o 2) Reneging on an acknowledgment to honour the option happened after registration.
In Personam
§ Focus is on the letter sent by T’s to B’s following registration
§ The letter contained 2 offers based on B’s relinquishing their rights in respect of the option to repurchase
§ Their Honours feel that, when considering the matrix of circumstances, the only explanation for these offers is that T’s had accepted their obligation in terms of cl 6 and attempting to extinguish it
§ The indefeasibility provisions do not protect a RP “from the consequences of his own actions where those actions give rise to a personal equity in another. Such an equity may arise from conduct of the RP after registration”
§ T’s knew that N wouldn’t sell lot 340 without obligation to sell to B’s and cl 4 gives effect to the common understanding of their obligation to sell to B’s
§ Although cl 4 on its own was not sufficient to constitute an in personam claim, the letter including the 2 offers puts beyond doubt that T’s had acknowledged their obligation to sell to the B’s
§ Through their personal conduct in sending the letter to B’s, they had accepted their obligation to sell to B’s Remedy: CT
§ T’s subject to a constructive trust in favour of B’s
§ T’s by their own actions (cl 4 in contract with N + letter with offers) constituted themselves as trustee for B’s and therefore court to impose a trust as equitable remedy
§ The terms of the trust were that the title to lot 340 would be returned to B’s
§ T’s take B’s pre-existing equitable interest with them upon registration MASON & DAWSON JJ (Minority)
§ Discussion of Breskvar
o Discuss the court holding that the principle of indefeasibility and corresponding sections does not protect an RP against equities arising out of subsequent transactions providing the equity does not conflict with Torrens legislation.
Fraud
§ RULE: There is no fraud on the part of a registered proprietor in merely acquiring title with notice of an existing unregistered interest or in taking a transfer with knowledge that its registration will defeat such an interest.
o Affirms Mills v Stokman
§ T’s registration affected by fraud despite the fact that the letter and the subsequent repudiation occurred after registration
§ The Courts decision in Loke Yew.
o Do not see the precedent or the statute as confining fraud to dishonest acts prior to or during registration à want to construe the exception of fraud liberally
§ “Why should the exception not embrace fraudulent conduct arising from the dishonest repudiation of a prior interest which the RP has acknowledged or has agreed to recognize as a basis for obtaining title as well as fraudulent conduct which enables him to obtain title or registration?”
§ “The repudiation is fraudulent because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer”
o A dishonest statement and a dishonest repudiation is the same as an honest statement followed by a dishonest repudiation (after registration) because the result is the same
In personam
§ Acts as a window for failed fraud arguments à parties cannot agree to something and then shed their obligations purely because they have registered their interest.
§ Develop a “matrix of circumstances” to evaluate the conduct of T’s (note: unclear)
§ The unconscionable conduct on the part of the T’s is:
§ Knowledge that N will be put in breach of contract with B’s and N liable to pay damages
§ Knowledge that B’s interest will be destroyed through registration
§ The purpose of cl 4 was to provide that the transfer to T was subject to the rights of B’s under the contract and B’s rights to be enforceable against T’s
Remedy and Intention
§ Their Honours paid regard to the matrix of circumstances in analysis clause 4
§ Clause 4, on its own, would amount to no more than notice of the appellant’s right and could therefore be destroyed by subsequent registration.
§ However, the context of the transaction and the broader matrix of circumstances necessarily influenced the interpretation of Clause 4
o The broader circumstances imputed an intention on behalf of T to create an express trust on B’s behalf through his agreeing to clause 4 in the contract.
o Clause 4 was more than mere acknowledgment of Bahr’s rights.
o The purpose/intent of the clause was to provide that the transfer would be made subject to the rights of the Bahrs’
§ This is where their Honour’s found an intention to create an express trust.
b)
HELD: Thomson held the Bahr’s option on express trust for the Bahr’s.
Vassos v State Bank of South Australia [1993] 2 VR 316 [332-333]
KEY WORDS: subsequent registration – in personam – indefeasibility exceptions PROCEDURAL HISTORY:
VSC PRINCIPLES:
• Just because a party has not assented to a transaction which has been subsequently registered, this does not mean that the party will be given a right in equity enforceable by in personam action.
• Unconscionability on behalf of the Registered proprietor is needed.
FACTS
• P, his daughter A, and his son T, are tenants in common in equal shares in a property
• Property is subject to a registered mortgage for $130k
• P asks to refinance the existing mortgage
• T borrows $500k by forging the signatures of his sister and his dad.
• Bank registers the mortgage and claims indefeasible title.
• The bank had no knowledge that the signatures were forged when it registered.
• Father and Daughter (P and A) bring a claim against the bank seeking to reverse the mortgage through claiming exceptions to indefeasibility.
ISSUE:
Was there an exception to the bank’s indefeasible mortgage?
HOLDING:
Unsuccessful attempt at in personam claim – more than neglect of the bank in verifying the signatures needed (no cause of action)
REASONING:
HAYNE J Fraud
§ No
§ The forgery had been committed by the son and the bank had nothing to do with it – also weren’t wilfully blind.
In personam
§ The bank needed to do more than act with neglect for P and A to rely on the in personam exception.
o “There was no misrepresentation by it, no misuse of power, no improper attempt to rely upon its legal rights, no knowledge of wrongdoing by any other party”
§ Hayne on ‘personal equities’
o Despite the fact that the bank had potentially acted neglectfully, there was nothing to suggest that they had acted unconscionably
o In personam remedies will only be available in situations where equity would intervene.
§ I.,e in cases which equity would categorise as unconscionable or unconscientious.
§ Bare fact of forgery was not enough to constitute an in personam claim enabling the father to have the transaction reversed
§ “That flies in the face of indefeasibility of title for without fault of any kind on the part of the mortgagee he could always be compelled to discharge his security and his title obtained by registration could
CLASS NOTES
• Something not inconsistent with the policy of the TLA
o Eg. if your claim is purely that the RP had notice of your unregistered interest prior to registering then this may be inconsistent with the TLA as s 43 of the TLA specifically says that mere notice is insufficient.
