Week 7 - Exceptons to indefeasibility: Fraud
Week 7 lecture
Certain situations where deferred indefeasibility can be just, but most cases are regarding immediate indefeasibility.
Exceptions to Indefeasibility:
i.e. Fraud
There are a number of exceptions to indefeasible title. Register is everything, but there are 2 main exceptions to this absolute statement
(1) Specific provisions of the RPA, particularly s 42, and non statutory sections (in personum sections - arisen out of equitable intervention into the Torrens system, and extent to which they've affected title - HCA has a line of defence against too much equity, but this can change.). Section 42 - Fraud, and 1D (short-term tenancies). Fraud (under Section 43) - Title of the RT will be defeasible.
Three issues we need to look at:
Mere notice isn't fraud - mere notice that unregistered interest is in existence, and that this will be defeated by registration is not enough. Prior UR is not enough. Mere knowledge is not classified as dishonesty.
Assets v Mere Roihi - If it be shown that his suspicions be aroused and he abstain making enquiries for fear of learning the truth, fraud made be ascribed to him - wilful blindness. s 43 (notice is not fraud, can know but not fraud).
Students tend to be confused as to what you have to be wilfully blind to - everyone's title is now defeasible? Answer: you have to be wilfully blind to a fraud, not just an unregistered interest. Has to be actual dishonesty, or wilful blindness to actual dishonesty.
Q: Who has to be guilty of that fraud?
F has to be occasioned either by the RP, or his or her agent.
Certain situations where deferred indefeasibility can be just, but most cases are regarding immediate indefeasibility.
Exceptions to Indefeasibility:
i.e. Fraud
There are a number of exceptions to indefeasible title. Register is everything, but there are 2 main exceptions to this absolute statement
(1) Specific provisions of the RPA, particularly s 42, and non statutory sections (in personum sections - arisen out of equitable intervention into the Torrens system, and extent to which they've affected title - HCA has a line of defence against too much equity, but this can change.). Section 42 - Fraud, and 1D (short-term tenancies). Fraud (under Section 43) - Title of the RT will be defeasible.
Section 43: Purchaser from the registered proprietor not to be affected by notice:
(1) Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such registered owner or any previous registered owner of the estate or interest in question is or was registered, or to see the application of the purchase money or any part thereof, or shall be affected by notice direct or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.Three issues we need to look at:
- What does fraud actually look like for the purposes of the RPA?
- Who has to be guilty of the fraud?
- When does it actually have to occur?
Mere notice isn't fraud - mere notice that unregistered interest is in existence, and that this will be defeated by registration is not enough. Prior UR is not enough. Mere knowledge is not classified as dishonesty.
Assets v Mere Roihi - If it be shown that his suspicions be aroused and he abstain making enquiries for fear of learning the truth, fraud made be ascribed to him - wilful blindness. s 43 (notice is not fraud, can know but not fraud).
Students tend to be confused as to what you have to be wilfully blind to - everyone's title is now defeasible? Answer: you have to be wilfully blind to a fraud, not just an unregistered interest. Has to be actual dishonesty, or wilful blindness to actual dishonesty.
Q: Who has to be guilty of that fraud?
F has to be occasioned either by the RP, or his or her agent.
Challenge: If RP's conduct amounts to mere knowledge or prior interest, or there is element of personal dishonesty.
In Australia - Fraud must occur in the process of getting onto the R itself, and anything that happens after registration isn't relevant to the determination of fraud. If you act honestly up until registration, anything you do dishonestly after R isn't relevant to the determination of fraud as far as RPA is concerned. Called super venal fraud. Can be relevant for in personum exceptions.
Conduct that fraudulent, will not lead to RP's title being defeasible under the RPA unless it occurs prior to or during registration.
Cassegrain v Gerard Cassegrain & Co Pty Ltd:
Decided in 2013 by HCA.
Respondant company was RP of TT land in NSW, and was a dairy farm GC. Two directors, Claude C and his sister. Previous action that CC was involved in with CSIRO, and was settled at $9.5million, paid to the company. After that, a loan account of $4.5million was created in favour of Claude C, and company accepted that they didn't owe him any money. Eventually interest was transferred to CC and wife as joint tenants. They way they purchased it, the price was debited from the loan account as full satisfaction of the price, so debt was created and purchase price was meant to come from debt, but there was never a debt - and obtained title tot the farm without paying anything for it.
in 1996, 4 of CC's siblings brought a pression precedings against CC, his sister and mother, and made out that conduct in treating the 4.5miliion loan account as his entitlement, and his drawing upon that account was oppressive and unprejudicial against other members of the company.
CC transferred to himself and wife, and after transferred an estate in fee simple to his wife for consideration of $1. This came out because share holders bought a representative action, and sought orders that wife transfer estate back to company and that it should be rescinded back to company for fraud. It wasn't ever alleged that wife (Felicity) was any participant of fraud or notice of CC's fraud, and was CC was the one who organised the transfer, and transferred to her the fee simple for nominal of consideration.
3 arguments concerning F's title.
- First was that CC was acting as F's agent, and she was tainted with his fraud.
- Second argument was that fraud in exceptions 118D and s 42 of RPA applied so as to render F's title as defeasible, as she was a joint title holder with CC, her title was infected by fraud through CC (as they were 'one person').
- Thirdly, F's title was D because it was a proceeding brought by a person deprived of land by fraud within the meaning of s118(D), and as a person who derived their title through fraud in s118(1D2).
As to the application of s42, since it had been accepted that F herself had not been implicated in the fraud, question was whether C was her agent. Trial judge said that he wasn't, and that 1181D didn't apply because it couldn't be said that an aciton could be brought against someone who was RP through fraud.
Majority of CoA held that CC was F's agent, but HCA disagreed and confirmed the trial judge's view. See p 41 of the case.
- He wasn't acting as her agent merely because F obtains some sort of advantage by the transaction.
s100 of the RPA - deals with joint tennancy. HCA had to look at nature of an interest held by joint tenant.
At CL, there are 2 major forms of co-ownership:
1) Tenant in common: are considered to be separate - so far as they can dispose of their interests separately by will. Both own half, and can do whatever they want of their half of the property. Separate.
2) Joint tennants: subject to principle of suvivorship - if one tenant dies, the interests of the other tenants enlarges. Both own 100% - and can't bequieth that through will. But this can be severed.
Severing of the joint tenancy is what CC did, and transfered to F where she became sole proprietor of title.
in Cassegrain - in Wright and Gibbons - Dixon: joint tenancy - for nothing and for everything, indistinguishable title.
HCA held that deeming effect by s100 dealing with JT, denies all persons R as JP the protection given by s42, would constitute significatnt departure from accepted principle that actual fraud must be fraud home to the person whose title is impeached.
HCA agreed with Justice Baston in appeal.
At p55, F's title as JT of dairy farm was not defeasbile by showing that CC had acted fraudulently to deprive C company of land - and not brought home to F, and title as JT was indefeasible.
Despite JT's, CC's fraud could not be brought back to her.
Application of s 118 - majority says that def of F has to be read in the same breath as s 42 - then an action can be brought against them in the recovery of land - that didn't apply to F, but s 1181D2 - as she had taken her interests through someone who had taken their interests from F.
IN this case - F did take one half of the title (not her own) through CC through the second transfer, and he was guilty of Fraud. She derived that interest from or through someone who was a RP through fraud. She didn't provide valuable consideration.
RESULT: company could recover CC's half of the property, it couldn't recover her half. Court said at p65 - F's title was not defeasible on account of CC's fraud - CC wasn't her agent, nor did it follow from F's registration as JT that her title was defeasible. s100 does not require that fraud of one of the persons registered as JP, denies all those persons protection otherwise given by s 42(1), the fraud must be broguht home to the person whose title was impeached. CC's fraud was not brought home to F.
APPLY: s 41(1) of the RPA and ask whether the RP is guilty of fraud. In this case, F wasn't, nor was CC her agent, and nor did the fact that they were registered as JT that her interest was tainted by his fraud. Interests were treated differentially.
APPLY: s 118 - did the person claiming indefeasibility take interest through someone who became interested as a result of fraud - YES - F came by the section of title that was CC's by fraud. - Did they take as a bona fide purchaser of value - F did not - half of JT had to be rescided to the comapny whereas she could maintain her own.
Dissenting judge - Justice Keane - CC's fraud tainted her title.
Majority of CoA held that CC was F's agent, but HCA disagreed and confirmed the trial judge's view. See p 41 of the case.
- He wasn't acting as her agent merely because F obtains some sort of advantage by the transaction.
s100 of the RPA - deals with joint tennancy. HCA had to look at nature of an interest held by joint tenant.
At CL, there are 2 major forms of co-ownership:
1) Tenant in common: are considered to be separate - so far as they can dispose of their interests separately by will. Both own half, and can do whatever they want of their half of the property. Separate.
2) Joint tennants: subject to principle of suvivorship - if one tenant dies, the interests of the other tenants enlarges. Both own 100% - and can't bequieth that through will. But this can be severed.
Severing of the joint tenancy is what CC did, and transfered to F where she became sole proprietor of title.
in Cassegrain - in Wright and Gibbons - Dixon: joint tenancy - for nothing and for everything, indistinguishable title.
HCA held that deeming effect by s100 dealing with JT, denies all persons R as JP the protection given by s42, would constitute significatnt departure from accepted principle that actual fraud must be fraud home to the person whose title is impeached.
HCA agreed with Justice Baston in appeal.
At p55, F's title as JT of dairy farm was not defeasbile by showing that CC had acted fraudulently to deprive C company of land - and not brought home to F, and title as JT was indefeasible.
Despite JT's, CC's fraud could not be brought back to her.
Application of s 118 - majority says that def of F has to be read in the same breath as s 42 - then an action can be brought against them in the recovery of land - that didn't apply to F, but s 1181D2 - as she had taken her interests through someone who had taken their interests from F.
IN this case - F did take one half of the title (not her own) through CC through the second transfer, and he was guilty of Fraud. She derived that interest from or through someone who was a RP through fraud. She didn't provide valuable consideration.
RESULT: company could recover CC's half of the property, it couldn't recover her half. Court said at p65 - F's title was not defeasible on account of CC's fraud - CC wasn't her agent, nor did it follow from F's registration as JT that her title was defeasible. s100 does not require that fraud of one of the persons registered as JP, denies all those persons protection otherwise given by s 42(1), the fraud must be broguht home to the person whose title was impeached. CC's fraud was not brought home to F.
APPLY: s 41(1) of the RPA and ask whether the RP is guilty of fraud. In this case, F wasn't, nor was CC her agent, and nor did the fact that they were registered as JT that her interest was tainted by his fraud. Interests were treated differentially.
APPLY: s 118 - did the person claiming indefeasibility take interest through someone who became interested as a result of fraud - YES - F came by the section of title that was CC's by fraud. - Did they take as a bona fide purchaser of value - F did not - half of JT had to be rescided to the comapny whereas she could maintain her own.
Dissenting judge - Justice Keane - CC's fraud tainted her title.
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