Week 7: In personam exceptions
Summary of last few weeks:
- Process of registrations
- Indefeasibility
- Exceptions - Fraud (including effect of fraud on joint tennant on another)
Effect of R in TT land is to give RP indefeasibility of title to that interest. Once registered, that person takes free of any unregistered interests. Not an absolute rule, and there are known exceptions. RP acquired their interest subject to the unregistered interest that arises pursuant to that relevant exception. Gives priority to holders of UR interest over the holder of RI ini TT land.
Competition between interests.
In personam exceptions:
Role of equity to a statutory right (Registered Prorpietor). Historically, most important roles of equity is to protect beneficiaries of a trust.
On the other hand, there are caveats in the legislation to protect unregistered interests. Indefeasibility does in no way deny the right of a plaintiff to bring a claim in personam against a RP in personam, in law or equity, for such relief as a court acting in personam may grant.
In personam can upset the title of the RP.
e.g. if RP entered into a binding contract to sell the property, the courts of equity will generally order specific performance. RP can't hide behind indefeasibility of title to refuse to perform that part of the title.
Difficulty in these exceptions is ascertaining how far they extend - which actions against RP will be allowed to defeat the RT.
These can be:
- Breach of contract.
- Expressive and constructive trusts.
- Unjust enrichment.
- Knowing receipt constructive trust.
- Undue influence of now RP.
- Unconscionable conduct.
Courts have decided that the courts do have a role to play.
In personam claim is against another person, rather than the property itself. Wrongful conduct of the RP, or the knowledge of and involvement in someone elses wrongful conduct that create this IP exception.
Particular terms of relationship will dictate the relationship one has with another. i.e. Contract, Trust.
In a number of cases - not all species of equitable fraud stand outside the statutory conception of fraud. In many cases these cases will amount to equitablee fraud.
E fraud relies on notice - has to be reconciled with the notice condition in the RPA - mere notice will defeat an equitable interest, and is not fraud.
There is a tension between equitable fraud and statute.
One particular characteristic of the personam exception is that it doesn't have the same temporal limits as the fraud exception. It can arise out of conduct giving rise to an equity after registration.
Important to note:
- Claim has to confined to known legal and equitable causes of action.
- Not necessary to show personal dishonesty, of the kind necessary to sustain a case of fraud within the statutory exception. E based on UC or unconscietous conduct or breach of fiduciary duty will suffice.
There has been some inconsistencies inter-juristicionally.
Cases:
Bahr v Nickolay (No 2) (1988) 164 CLR 604:
Behaviour of the RP themselves.
Facts: in 1979 - the B's obtained licnse of crown land in WA - on building of commercial premises the B's could transform license into crown grant and become RP of the property. To finance the building of the premises, they entered into an agreement with an investor named Nickolay. He was to purchase the property and grant the Bahr's a 3 year lease, and then re-sell the property back to the B's after 3 years. During that 3 year term, N then sold the property to the Thompsons - in the contract there was an acknowledgement of the B's agreement (clause 4), the prop was sold and T's became RP's - commenced negotiations of resale of property with N, but then later refused to transfer the property. T's argument was that they had notice of the agreement, and claimed indefeasibility of title. They argued that they weren't obligated to go through with that because they had I T.
First joint judgement (Mason and Dawson): Broadest interp - not all species of E fraud stand outside the statutory exception of fraud. In this case, they held that the behaviour of the T's does amount to fraud, b/c it was a dishonest repudiation of a prior interest which the RP had acknowledged or agreed to recognise as the basis for obtaining the title. Repudiation was after they became registered.
Second (Wilson and Toohey): Actions of the T's in commencing the negotiations of the resale amount to more than mere notice - by the time they did this they were already registered. So even though the evidence may fall short of stat def. of fraud, it does amount to evidence of the creation of a constructive trust - constitutted by the acknowledgement of the right of the B's.
E will intervene on the basis of conscience or UC of the T's. It was more than mere notice - it was UC and they held the P on constructive trust. UNtil the R has been amended, the register still remains conclusive - but if the T's had gone and mortgaged the property before the R was amended that wouldn't affect the third party - tenuous situation.
Brennan: Held that the acknowledgement of the B's rights in the contract gave rise to a collateral contract.
Essence - actions of RP led to creation of the in personam exception - T's might have purchased the land in hope of keeping the land, but could not rely on indefeasibility of title to do so.
Actions of the T's amounted to more than mere notice.
^ This shit is very confusing. I hate these Simpsons examples...
Breach of trust or fiduciary duty
Barnes v Addy (1874) LR 9 - Established that a person can become a constructive trustee without authority - Trustee des en-taut?
Farah Constructions v Say-Dee [2007] HCA 22.
Tara Shire v Garner & Ors [2002] QCA 232: Jan 1997 - G were RP of land in QLD, and on land was Motel and water bore for township of Mooney. In Aug 1997 - Council offered to purchase land where the water bore was located for $65,000. G's agreed to sell that part of the property, but needed to register a subdivision so the bore could be sold as a separate lot to the motel. Council paid the purchase price in full, but that interest wasn't reigstered. G was registered as RP for both lots.
Raises tension between statutory indefeasibility of title and equitable principles. G's entered into a contract to sell to Archaic Pty Ltd - argued that before C's were drawn up and transfers were signed, they told A's reps that were staying at the motel, that the land where the bore stood was already sold to the council - and could not be sold to Archaic. Now despite this, transfers of both lots were limited, and A refused to recongise council interest - and relied on indefeasibility of title.
How could this go through contractually? It was sloppy contractually. Lots were incorrectly described - and both went through to A and were registered.
J Atkinson - held A was defeasible on basis that they had knowingly recieved property on the breach of trust. The C argued A was subject to a exception to the ID of title, based on the action of known receipt. Based on the general principle of law. After execution of contract, a vendor of land holds the property on trust for the benefit of the purchaser, until the transfer to the P is complete.
Paid vendor - Garners: held property on trust to purchaser.
Levels of knowledge - Baden v Société Générale pour Favoriser le Developpement du Commerce et de l'Industrie en France [1983] BCLC 325:
No difference between someone who has provided value for their property and one that has recieved one as a gift in NSW. They all become RP upon registration.
However - there are some scattered references in the act. Section 42(1C), 118(1D2), 118(1E) - specifically for bona fide purchasers for value.
Contrast - in Victoria, cases such as Rasmussen v Rasmussen [1995] 1 VR 613, have relied on these provisions to deny indefeasibility of title to a volunteer - following the case of:
King v Smail [1958] VR 273: (prior to Fraser v Walker and Breskvar v Wall)
Justice Adam: Protection given by the notice provisions - to a registered prop. against the consequences of notice (actual or constructive of trust, or equities affecting his transfer) has point when legal owner is a purchaser for value. A P for V has by virtue of this section, the immunity for prior equities of a bona fide purchaser of the legal estate without notice under the general law - then on the other hand:
Gifts:
Milroy v Lord [1862] EWHC J78:
Lord Justice Tuner
(Turner LJ):
In M and L - shares, which were incomplete.
Joint tennants:
Principle of survivorship. What they can do, and trying to do, is change the way they hold the property to tennancy in common.
Corin v Patton (1990) 164 CLR 540:
Behaviour of the RP themselves.
Facts: in 1979 - the B's obtained licnse of crown land in WA - on building of commercial premises the B's could transform license into crown grant and become RP of the property. To finance the building of the premises, they entered into an agreement with an investor named Nickolay. He was to purchase the property and grant the Bahr's a 3 year lease, and then re-sell the property back to the B's after 3 years. During that 3 year term, N then sold the property to the Thompsons - in the contract there was an acknowledgement of the B's agreement (clause 4), the prop was sold and T's became RP's - commenced negotiations of resale of property with N, but then later refused to transfer the property. T's argument was that they had notice of the agreement, and claimed indefeasibility of title. They argued that they weren't obligated to go through with that because they had I T.
First joint judgement (Mason and Dawson): Broadest interp - not all species of E fraud stand outside the statutory exception of fraud. In this case, they held that the behaviour of the T's does amount to fraud, b/c it was a dishonest repudiation of a prior interest which the RP had acknowledged or agreed to recognise as the basis for obtaining the title. Repudiation was after they became registered.
Second (Wilson and Toohey): Actions of the T's in commencing the negotiations of the resale amount to more than mere notice - by the time they did this they were already registered. So even though the evidence may fall short of stat def. of fraud, it does amount to evidence of the creation of a constructive trust - constitutted by the acknowledgement of the right of the B's.
E will intervene on the basis of conscience or UC of the T's. It was more than mere notice - it was UC and they held the P on constructive trust. UNtil the R has been amended, the register still remains conclusive - but if the T's had gone and mortgaged the property before the R was amended that wouldn't affect the third party - tenuous situation.
Brennan: Held that the acknowledgement of the B's rights in the contract gave rise to a collateral contract.
Essence - actions of RP led to creation of the in personam exception - T's might have purchased the land in hope of keeping the land, but could not rely on indefeasibility of title to do so.
Actions of the T's amounted to more than mere notice.
^ This shit is very confusing. I hate these Simpsons examples...
Breach of trust or fiduciary duty
Barnes v Addy (1874) LR 9 - Established that a person can become a constructive trustee without authority - Trustee des en-taut?
Farah Constructions v Say-Dee [2007] HCA 22.
Tara Shire v Garner & Ors [2002] QCA 232: Jan 1997 - G were RP of land in QLD, and on land was Motel and water bore for township of Mooney. In Aug 1997 - Council offered to purchase land where the water bore was located for $65,000. G's agreed to sell that part of the property, but needed to register a subdivision so the bore could be sold as a separate lot to the motel. Council paid the purchase price in full, but that interest wasn't reigstered. G was registered as RP for both lots.
Raises tension between statutory indefeasibility of title and equitable principles. G's entered into a contract to sell to Archaic Pty Ltd - argued that before C's were drawn up and transfers were signed, they told A's reps that were staying at the motel, that the land where the bore stood was already sold to the council - and could not be sold to Archaic. Now despite this, transfers of both lots were limited, and A refused to recongise council interest - and relied on indefeasibility of title.
How could this go through contractually? It was sloppy contractually. Lots were incorrectly described - and both went through to A and were registered.
J Atkinson - held A was defeasible on basis that they had knowingly recieved property on the breach of trust. The C argued A was subject to a exception to the ID of title, based on the action of known receipt. Based on the general principle of law. After execution of contract, a vendor of land holds the property on trust for the benefit of the purchaser, until the transfer to the P is complete.
Paid vendor - Garners: held property on trust to purchaser.
Levels of knowledge - Baden v Société Générale pour Favoriser le Developpement du Commerce et de l'Industrie en France [1983] BCLC 325:
- Actual knowledge.
- Wilfully shutting one's eyes to the obvious.
- Wilfully and recklessesly failing to make such enquiries as an honest and reasonable person would make.
- Knowledge of circumstances which would indicate the facts to an honest and reasonable person.
- Knowledge of circumstances which would put and honest and reasonable person on enquiry.
In Australia:
Knowledge that falls in 1-4 are sufficient to establish recipient liability - and that the A agents level of knowledge to render them subject them to the equity.
Rendered A liable - and was subject to constructive trust.
Majority of QLD allowed an exception to indefeasibility on the basis of this in personam claim.
Distinguish between a mere notice of a trust, to notice of a breach of trust. A became constructive trustees of the council.
L H K NOMINEES PTY LTD -v- MAUREEN ADA KENWORTHY (as Administratrix of the Estate of LIONEL KENWORTHY) & ANOR [2002] WASCA 291:
Facts: Lionel Kenworthy's first wife had left prop on trust to her two sons. Trustee was company, and sons were directors of company and were beneficiaries. After she died, LK remarried and lived in the property, but held in the name of the trustee company. LK had a great deal of influence over his sons, and persuaded them to transfer the property to him saying because he was a pensioner - the property would be liable to less tax - and transfer was at a substantial undervalue (breach of trust). Evidence that he said to his sons 'don't worry, you'll get it back evenutally'. He died, and didn't have a second will, and the property transferred to his wife. She wanted to keep the property and not give it back to them. The son's argued unsuccessfully that a knowing receipt constructive trust had arisen in their favour, they said their father had taken the prop (which was subject to trust) at an undervalue which was a breach. The court held that an in personam right could not arise because there was no evidence of dishonest behaviour on the behalf of LK, something more than mere knowledge of the existence of the trust, or that the transfer was of the breach of trust was a necessary element of that statutory action (needed something more than notice). Absent any TT style fraud, knowledge of a breach of trust would not defeat the registered interest.
Case left uncertainty: inconsistent state decisions.
Indication that HCA preferred LHK case decision.
Gleeson: no evidence of dishonesty, no evidence that LK's assurance that the property would be given back to the trust was not given in good faith. Point of distinction between this case and Bahr and Nickolay - LK's death that prevented him to return the property - no evidence that he would have refused if he was asked.
FARAH CONSTRUCTIONS V SAY-DEE [2007] HCA 22:
Facts: SDC and FC entered into a joint venture to purchase and redevelop property in burwood. Directors of SDC had no prior experience in property development, and FC was a company controlled by Mr Farah Elias - who was an experienced property developer. Parties agreed that SDC would finance, and FC would manage progress of development application with B council and construction and development. Profits would be divided equally by the two. B Council refused the application on the basis that the site was too narrow for the construction that they were intending to undertake. Mr Elias wanted to go ahead with the dev, but the directors of SDC were rediscent to put in more money. Unknown to SDC, Mr E acquired adjoining properties, and had them put into the names of his wife and daughters, and another company controlled by him. Note that at this stage, his wife and daughters were volunteers - they didn't pay any money for this property to be put into their names - and went into the registered.
Went into court of appeals - find that Mr E owed F Duties to SDC because of his failure to disclose to SDC the council's opinion if the site could only be amalgamated with other adjoining properties. Remedy of this breach of fiduciary duty was the creation of a constructive trust, so wife and daughters could be said to be in receipt of trust property - and so subject to an ation in personam for knowing receipt constructive trust - imputed to them as they said that Mr E was a their agent.
Interesting case for doctrinal examination - very forcefully overturned by the HCA - they said that in order to upset the indefeasibility of a RP of Torrens Land, wha tis necessary is a finding of either fraud or an inpersonam exception, and that the action based simply knowing is not enough. You need either F or IP exception. Knowing is not enough.
Much of the confusion now was removed.
CLEAR: When you're looking at the interests of a RP to see whether or not it would be indefeasible, you need some sort of dishonest or UC behaviour (i.e. undue influence) more than mere notice. Line that the court has consistently followed.
Volunteers:
- What is the status of the volunteer?
Old system - General Priority Rules: in order for the holder of a legal estate to take priority, they had to show that they were a purchaser of the legal estate for value. If someone hadn't provided valuable consideration, then usually equity wouldn't assist them by making an order for equitable relief such as specific performance.
i.e. It would be difficult for a donee of a gift to enforce the trasnfer of property to them.
Torrens Title:
Do V's enjoy the same indefeasibility of title and protection as a purchaser who gave value for title?
In NSW, there is no requirement that the RP has provided value for their interest in order to obtain the benefits
L H K NOMINEES PTY LTD -v- MAUREEN ADA KENWORTHY (as Administratrix of the Estate of LIONEL KENWORTHY) & ANOR [2002] WASCA 291:
Facts: Lionel Kenworthy's first wife had left prop on trust to her two sons. Trustee was company, and sons were directors of company and were beneficiaries. After she died, LK remarried and lived in the property, but held in the name of the trustee company. LK had a great deal of influence over his sons, and persuaded them to transfer the property to him saying because he was a pensioner - the property would be liable to less tax - and transfer was at a substantial undervalue (breach of trust). Evidence that he said to his sons 'don't worry, you'll get it back evenutally'. He died, and didn't have a second will, and the property transferred to his wife. She wanted to keep the property and not give it back to them. The son's argued unsuccessfully that a knowing receipt constructive trust had arisen in their favour, they said their father had taken the prop (which was subject to trust) at an undervalue which was a breach. The court held that an in personam right could not arise because there was no evidence of dishonest behaviour on the behalf of LK, something more than mere knowledge of the existence of the trust, or that the transfer was of the breach of trust was a necessary element of that statutory action (needed something more than notice). Absent any TT style fraud, knowledge of a breach of trust would not defeat the registered interest.
Case left uncertainty: inconsistent state decisions.
Indication that HCA preferred LHK case decision.
Gleeson: no evidence of dishonesty, no evidence that LK's assurance that the property would be given back to the trust was not given in good faith. Point of distinction between this case and Bahr and Nickolay - LK's death that prevented him to return the property - no evidence that he would have refused if he was asked.
FARAH CONSTRUCTIONS V SAY-DEE [2007] HCA 22:
Facts: SDC and FC entered into a joint venture to purchase and redevelop property in burwood. Directors of SDC had no prior experience in property development, and FC was a company controlled by Mr Farah Elias - who was an experienced property developer. Parties agreed that SDC would finance, and FC would manage progress of development application with B council and construction and development. Profits would be divided equally by the two. B Council refused the application on the basis that the site was too narrow for the construction that they were intending to undertake. Mr Elias wanted to go ahead with the dev, but the directors of SDC were rediscent to put in more money. Unknown to SDC, Mr E acquired adjoining properties, and had them put into the names of his wife and daughters, and another company controlled by him. Note that at this stage, his wife and daughters were volunteers - they didn't pay any money for this property to be put into their names - and went into the registered.
Went into court of appeals - find that Mr E owed F Duties to SDC because of his failure to disclose to SDC the council's opinion if the site could only be amalgamated with other adjoining properties. Remedy of this breach of fiduciary duty was the creation of a constructive trust, so wife and daughters could be said to be in receipt of trust property - and so subject to an ation in personam for knowing receipt constructive trust - imputed to them as they said that Mr E was a their agent.
Interesting case for doctrinal examination - very forcefully overturned by the HCA - they said that in order to upset the indefeasibility of a RP of Torrens Land, wha tis necessary is a finding of either fraud or an inpersonam exception, and that the action based simply knowing is not enough. You need either F or IP exception. Knowing is not enough.
Much of the confusion now was removed.
CLEAR: When you're looking at the interests of a RP to see whether or not it would be indefeasible, you need some sort of dishonest or UC behaviour (i.e. undue influence) more than mere notice. Line that the court has consistently followed.
Volunteers:
- What is the status of the volunteer?
Old system - General Priority Rules: in order for the holder of a legal estate to take priority, they had to show that they were a purchaser of the legal estate for value. If someone hadn't provided valuable consideration, then usually equity wouldn't assist them by making an order for equitable relief such as specific performance.
i.e. It would be difficult for a donee of a gift to enforce the trasnfer of property to them.
Torrens Title:
Do V's enjoy the same indefeasibility of title and protection as a purchaser who gave value for title?
In NSW, there is no requirement that the RP has provided value for their interest in order to obtain the benefits
No difference between someone who has provided value for their property and one that has recieved one as a gift in NSW. They all become RP upon registration.
However - there are some scattered references in the act. Section 42(1C), 118(1D2), 118(1E) - specifically for bona fide purchasers for value.
Contrast - in Victoria, cases such as Rasmussen v Rasmussen [1995] 1 VR 613, have relied on these provisions to deny indefeasibility of title to a volunteer - following the case of:
King v Smail [1958] VR 273: (prior to Fraser v Walker and Breskvar v Wall)
Justice Adam: Protection given by the notice provisions - to a registered prop. against the consequences of notice (actual or constructive of trust, or equities affecting his transfer) has point when legal owner is a purchaser for value. A P for V has by virtue of this section, the immunity for prior equities of a bona fide purchaser of the legal estate without notice under the general law - then on the other hand:
Distinction between: someone who has given value and someone who hasn't.
Especially between notice provisions and paramountcy provisions.
Bogdanovic v Koteff (1988) 12 NSWLR 472:
Dispute over property - claimant was Mrs B, who claimed that RP of house (SK) had promised that he would leave her a life estate in return for house keeping and nursing services that she provided for him. K then left the property to his son Norman, who tried to remove Mrs B from the house, relying on his RPship. Accepting in NSWCA that Mrs B did have an equitable interest in the land - problem was that she was a volunteer. Could N take free of her interest. Said that he was aware that B lived in house with his father, but he had no knowledge of the arrangement made between B and his father. Entire case revolved around whether volunteers could claim the benefits of ID in the same way that N could. (Norman was the volunteer) - in the light of her action. CoA said that he could claim the benefits of ID, and R (whether voluntary or for value). Following F and W and B and W - the only exceptions were those in the act, given that there was no clear exception relating to V's, they obtained ID of title with registration.
This approach has been followed in Western Australia too in Conlan v Registrar of Titles [2001] WASC 201:
Where Owen in the WASC held that V's acquired indefeasible title.
Peter Butt: Australian Law Journal 2001 - Public confidence in the Torrens system requires registration to be rock solid.
Recently affirmed in NSW case Arambasic and Visa?
What if V has not managed to be Registered?
In the absence of registration (and lack of indefeasibility), they won't have a legal or registered interest - but they do have an interest that E will recognise.
2 equitable maxims:
- E will not assist a volunteer;
- E will not protect a perfect gift.
Contract Law - valuable consideration: forbearance (or benefit for another). Law relating to V's is not quite settled. They need to show that they have a perfect or complete gift.
Gifts:
Milroy v Lord [1862] EWHC J78:
Lord Justice Tuner
(Turner LJ):
In M and L - shares, which were incomplete.
Joint tennants:
Principle of survivorship. What they can do, and trying to do, is change the way they hold the property to tennancy in common.
Corin v Patton (1990) 164 CLR 540:
Facts: Mrs P was terminally ill - and owned prop with her estranged husband, which she tried to sever. She signed a transfer of property to her brother (did she sever her interests?). Since transfer wasn't registered, but was it complete in equity?
Because Mr C hadn't provided consideration so he couldn't seek E's assistance to have it registered or specifically performed.
Milroy v Lord judgement: donor must have done everything necessary to make it binding - all that was necessary by donor (Mrs P), so long as the donee has been equipped to tansfer legal ownership the gift is complete in equity. HCA held that since Mrs P had not arranged for the production of the CT, she had not done everything necessary to be done by her. Accordingly the JT was not severed, and on her death the property passed to her husband.
Even when donor took all steps that he or she could, it may not be too late for the donor to change their minds.
Costin v Costin (1995):
- Dad intened to transfer land to son 1 and gave Transfer to Sol to create CT,
- Son l wanted to ask for other parties permission, hence CT was not produced Dad changed mind and wanted to transfer land to other son
- Son 1 claimed gift was complete in equity Two Limbs:
- Donor did everything necessary
- GIft was beyond recall In this case there was no second limb so not binding
Son 1 and father had a falling out and decided to transfer to Son 2 - was completed.
Costin was followed in Stone v Registrar of Titles [2012] WASC 21:
Old man with terminal cancer tried to sever joint tennancy with his new 3rd wife in order to leave half property to 3 children. Was not complete as wife changed the locks - and made an application to have a new CT issued, and also to RG to dispense the nessecity of CT.
New wife was unable to find CT until after husbands death - and took the whole house under principle of survivorship. A lot depends on the actual circumstances of the case.
V - big difference between situation after R, where absence of fraud or other disentitling conduct, the V will take ID title, in NSW, and situation b4 R, where they must show the transfer is complete and the T to them has already taken place so they don't need E's assistance to complete the transfer.
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