Lecture 7: Priorities Caveats S43A
Competing claims in TT - need to look at UR interests.
S41 - suggests there is no place for UR interests, or E interest under TT - but we know that is not the case.
S41 - suggests there is no place for UR interests, or E interest under TT - but we know that is not the case.
E interest in TT was discussed in Barry v Heider (1914) 19 CLR 197:
B was RP of TT land - singed document of T, in which we agreed to T land to Schmidt for 1,200 pounds. T said it was paid, but B said that he nhad never received any money. Brought action said that he has old, and had little business exp - and S had tricked him. Thought that it was not a T, but a contract, and the agreed price was 4000 pounds.
Evidence that witness to B's signature, solicitor, wasn't present when B signed. CT wasn't given to S, as the land was subvidided and new CT had to be issued. Trial judge was satisfied that B was defrauded - and that the T was void and of no effect.
Decided in 1914 and R was manual - took a long time for dealings to be R. S had created mortgages over the propery - Gail Heider, who lent money to S over secuirty over his apparent interest as evidenced by the documents that B handed over.
B is trying to invalidate the E mortgages, as he has an E interest in the property. Court held that Mrs H had an E mortgage over the property, created by what Isaacs J described an estoppel situation. By ahdning over the docs, B had shown to H that S was the beneficial owner of the land, and able to grant the mortgage to her - and he was estopped of denying the truth.
Two equitable interests - Barry's E interest as an unpaid vendor, and Heider's later E interest as an equitable mortgagee.
In conduct of each. B's actions in signing the T that S was entitled to interest in land and sent letter to RG, was enough to render his interest postponable to Mrs Heider's interests as the equitable mortgagee.
UR interest can be susceptibale to defeat by R interest. But UR have a place in TT, there are 3 possible priority scenarios:
The CoA and HCA agreed - holding that failing to give notice by a failure to lodge a C did not entitle people dealing later with the property to regard the title as clear of any outstanding E'able interests.
Propert purpose of a caveat is to act as a warning to the RG that an inconsistent I is claimed. Absence of a C cannot be taken to be notice to all and sundrie that no interest is claimed.
Person-to-Person Finances Pty Ltd v Sharari [1984] 1 NSWLR 745:
Tredgold had a R M over TT land - common practice he also had possession of CT. Sharari took subsequent mortgage ovet the prop, but solicitor failed to have it registered, nor did S lodge a caveat to protect his UR mortgage. Subsequently, P2P took a 3rd mortgage over the prop after being told by the owner of the land that TG had the only other mortgage of the property. P2P's search of the R and could only find TG's mortgage, and lodged a caveat in respect of it's UR mortgage.
Issue: S's failure to lodge a caveat amounted to postponing conduct.
McLeland ruled: S was guilty of postponing conduct - and that P2P had priotiry over S.
Caveat.
Black v Garnock [2007] HCA 31:
Approach of J Callinan has not really been followed - courts generally follow J Barwick in Just Holdings.
Callinan: strongly disagreed with the approach of Barwich in J and H Just - since a caveat gave notice to anyone who searched the register of the interest in land of the caveator - the decision by Barwick would be subversive of the whole scheme of the Torrens system - as it allowed someone who acquired an interest to be suddenly and unexpectedly saddled with or postponed to an E'able estate or interest in land, which could've been but was not made subject of protection by prompt lodgement of a instrument or the filing of a C pending lodgement.
Gleeson: Endorsed early remarks by Barwick.
Subsequent cases:
Caveats - Barwick's view is the one that's been held so far.
SECTION 43A of the Real Property Act:
Conveyancing:
Period of time betwee settlement (completion) and registration in Torrens System.
Until R - the interest is E.
Purchaser of TT is potentially in a worse position in the period after settlement and before R - than their general law counterpart. Because on settlement - P receives legal title to the land, provided they were bona fide purchaser - they will prevail over any equitable interests in the land.
Torrens: Act of R that is necessary to transfer tittle. At S, purchaser only has E interest in land. Purchaser of Torrens Land, once registered, prior E interest doesn't make difference.
Before R, two E interests - where the first in time principle applies.
SECTION 43A:
Section 43A of the Real Property Act 1900 (NSW) - diffculty section, and subject to refinements.
Section 43 - gives TT P protection of notice against prior E interests and trusts:
Section 43 - courts have held that this section only applies after registration - not when a TT purchaser needs it most.
Because of that interpretation - settlement (gap), section 43 is not going to apply. S43A says that P has protection under CL, as a bona fide P of value without notice.
Section 43 A: despite being obscurely worded, it does incorporate BFP without notice characteristics at settlement. P has no notice of PEI - deemed legal estate holds free of that interest.
Once R, has ID title.
Number of issues:
What is the meaning of 'For the purpose only of protection of notice?
B was RP of TT land - singed document of T, in which we agreed to T land to Schmidt for 1,200 pounds. T said it was paid, but B said that he nhad never received any money. Brought action said that he has old, and had little business exp - and S had tricked him. Thought that it was not a T, but a contract, and the agreed price was 4000 pounds.
Evidence that witness to B's signature, solicitor, wasn't present when B signed. CT wasn't given to S, as the land was subvidided and new CT had to be issued. Trial judge was satisfied that B was defrauded - and that the T was void and of no effect.
Decided in 1914 and R was manual - took a long time for dealings to be R. S had created mortgages over the propery - Gail Heider, who lent money to S over secuirty over his apparent interest as evidenced by the documents that B handed over.
B is trying to invalidate the E mortgages, as he has an E interest in the property. Court held that Mrs H had an E mortgage over the property, created by what Isaacs J described an estoppel situation. By ahdning over the docs, B had shown to H that S was the beneficial owner of the land, and able to grant the mortgage to her - and he was estopped of denying the truth.
Two equitable interests - Barry's E interest as an unpaid vendor, and Heider's later E interest as an equitable mortgagee.
In conduct of each. B's actions in signing the T that S was entitled to interest in land and sent letter to RG, was enough to render his interest postponable to Mrs Heider's interests as the equitable mortgagee.
UR interest can be susceptibale to defeat by R interest. But UR have a place in TT, there are 3 possible priority scenarios:
- Between Registered and Registered.
- Registered and Unregistered.
- Unregistered and Unregsitered.
Between R and R:
- Section 36 ss 9 of the RPA - priority between competing R interests is determined by order of R, not by date of execution of documents.
Between R and UR:
- Although E interests are recognised in TT, they are quite fragile. They can be extinguished by R interests, even if the person that R has notice of them. Unless there is an exception to ID under in personam claims.
- R interest is generally ID, they will most likely acquire their title free of UR interests even if they have notice of them. Notice doesn't matter.
UR and UR:
- Nature of E interests.
- Priority is determined by principles of OST - cases such as Rice v Rice.
- Two additional factors that apply: Effect of Caveat system, and effect of s43A of the RPA.
Caveat provisions:
Caveats - is a warning. Effectively prevents the R of any dealing (except statutory exceptions). Will prevent subsequent dealing, unless C has been removed, withdrawn or has lapsed.
Can be used to protect interest in land that cannot be registered. i.e. Trusts, or mortgage by deposit of title deeds, or a claim for adverse possession.
SECTION 74F - CAVEATS
Number of circumstances in which a caveat may be lodged:
- When a person claims to be entitlted to a legal or E estate with an interest in land.
- Where the RP has lost the CT, and fears that there may be some sort of impropoer dealing with the land.
- Prevent possessory application.
- Prevent improper excercise of a mortgagee of a power of sale.
- Lodged by RG to protect a person under a legal dissabilty or on behalf of the crown.
C has to be in an approved form - and include important information. Has to be described in detail.
RG has to give notice in writing to the RP. C will then stay on the register until proceedings to remove are brought, or an inconsistent dealing is lodged for R. i.e. Family Law disputes.
While C remain - RG can't register a dealing that's prohibited by the C. If an inconsistent dealing happens to be lodged, the claimant is given notice of this inconsistent - and have 21 days to lodge an extension with the supreme court.
Onus is on the caveator to posivitely do something - or else they'll lose that caveat.
It must protect a caveatable interest - i.e. estate or an interest in land.
e.g. Interest of a purchaser under the contract for a SoL, the interest of a mortgagee, interest of a grantee for the option to purchase. Has to be an interest in the land.
Contractual right of the payment of a debt - doesn't give rise to any legal or E interest of land, and isn't caveatable. Look at textbook for examples.
Beneficiary under discretionary trust doesn't have interest until discretion by trustee is excercised. Another one is - a mere E is assumed not to be a caveatable interest - mere E is a claim to set aside a transaction because of fraud of misrepresentation. Claim because it hasn't been set aside by the courts.
Remedy of a constructive trust is discretionary - doesn't necessary doesn't have interest in land. Mere and personal E's are a contentious area.
C has to establish that they have an interest in the land.
C - existence; what if you don't caveat? Will you automatically lose priority of a priority dispute.
Cases: NO - won't automatically lose priority.
Number of cases - J and H Just (Holdings) Pty Ltd v Bank of New South Wales - [1971] HCA 57:
J was RP of land in Sydney, in september of 1962 - security of overdraft, gave bank a mortgage in registerable form and CT. Bank could hold documents - which is what they did. J went and borrowed money from J and H Just Holdings (JH), and he also gave them a mortgage in registerable form - and told them that the land was unincumered. And CT held by bank was for safe custody - as he might die while abroad - and money he borrwed from JH was for the flight.
JH then searched the register and found nothing on the register (as the bank had not registered their interest). So on the 5th of June 1964, they lodged a caveat. In August 1964 - the bank became concerned about J's financial status, and lodged it's mortgage for R. They then discovered the caveat - and were notfied of the registration.
JH then commenced proceedings against the bank to state that they had priority over the bank in the interests in the land.
In December J was made bankrupt, and in Feb 1968 he died. Trial judge took evidence of the conveyancing practice at the time, and heard that anyone who advanced money simply on the strength of a search of a register without obtaining the CT would be mad. Haivng considered the banks failure to lodge a caveat - it did not disentitle the bamk from the priority, that it's earlier interest gave it.
The CoA and HCA agreed - holding that failing to give notice by a failure to lodge a C did not entitle people dealing later with the property to regard the title as clear of any outstanding E'able interests.
Propert purpose of a caveat is to act as a warning to the RG that an inconsistent I is claimed. Absence of a C cannot be taken to be notice to all and sundrie that no interest is claimed.
Person-to-Person Finances Pty Ltd v Sharari [1984] 1 NSWLR 745:
Tredgold had a R M over TT land - common practice he also had possession of CT. Sharari took subsequent mortgage ovet the prop, but solicitor failed to have it registered, nor did S lodge a caveat to protect his UR mortgage. Subsequently, P2P took a 3rd mortgage over the prop after being told by the owner of the land that TG had the only other mortgage of the property. P2P's search of the R and could only find TG's mortgage, and lodged a caveat in respect of it's UR mortgage.
Issue: S's failure to lodge a caveat amounted to postponing conduct.
McLeland ruled: S was guilty of postponing conduct - and that P2P had priotiry over S.
Caveat.
Black v Garnock [2007] HCA 31:
Approach of J Callinan has not really been followed - courts generally follow J Barwick in Just Holdings.
Callinan: strongly disagreed with the approach of Barwich in J and H Just - since a caveat gave notice to anyone who searched the register of the interest in land of the caveator - the decision by Barwick would be subversive of the whole scheme of the Torrens system - as it allowed someone who acquired an interest to be suddenly and unexpectedly saddled with or postponed to an E'able estate or interest in land, which could've been but was not made subject of protection by prompt lodgement of a instrument or the filing of a C pending lodgement.
Gleeson: Endorsed early remarks by Barwick.
Subsequent cases:
Caveats - Barwick's view is the one that's been held so far.
SECTION 43A of the Real Property Act:
Conveyancing:
Period of time betwee settlement (completion) and registration in Torrens System.
Until R - the interest is E.
Purchaser of TT is potentially in a worse position in the period after settlement and before R - than their general law counterpart. Because on settlement - P receives legal title to the land, provided they were bona fide purchaser - they will prevail over any equitable interests in the land.
Torrens: Act of R that is necessary to transfer tittle. At S, purchaser only has E interest in land. Purchaser of Torrens Land, once registered, prior E interest doesn't make difference.
Before R, two E interests - where the first in time principle applies.
SECTION 43A:
Section 43A of the Real Property Act 1900 (NSW) - diffculty section, and subject to refinements.
Section 43 - gives TT P protection of notice against prior E interests and trusts:
Section 43 - courts have held that this section only applies after registration - not when a TT purchaser needs it most.
Because of that interpretation - settlement (gap), section 43 is not going to apply. S43A says that P has protection under CL, as a bona fide P of value without notice.
Section 43 A: despite being obscurely worded, it does incorporate BFP without notice characteristics at settlement. P has no notice of PEI - deemed legal estate holds free of that interest.
Once R, has ID title.
Number of issues:
- What is the meaning of 'For the purpose of protection of notice?
- What is a dealing Registerable?
- What is a deemed legal estate
What is the meaning of 'For the purpose only of protection of notice?
- TT has on completion (Before R): E interest, only acheive ID only when they register their dealing.
- Normally lose priority dispute with an earlier E interest because it's earlier in time.
- Doesn't really achieve anything.
- Protection against prior E interests - rather than notice.
What is a dealing Registerable?
- Narrow - there are requirements: Formally in order, must be on the approved form, completed attested, person receiving the dealing must have possession of CT or be in a position to compel it's production, immediately registerable, must be immediately R'able (no immediate D that need to be R before it), the person claiming protection of section should have dealt with RP themselves, and the dealing must not be void.
What is a deemed legal estate?
IAC (Finance) Pty Ltd v Courtenay - [1963] HCA 64:
- Kitto: S43A provides same degree of protection against notice before registration, that S43 provides after registration. Does not need to worry about notice of trust or other earlier E interest.
- Taylor (narrower - adopted): If S43A was intended to advance in point of time the unqualified protection given by S43 - it would have simply said that. Expression 'LE' was used advisedly, with a view of affording at most protection at CL to a person who has acquired a LE in land without notice of a prior equitable interest. Obtains not an ID estate, but a CL legal estate.
- Crucial differnece in views - effect of notice prior to settlement.
- Kitto - A person who otherwise fulfils their requirements of S43A, will be protected from notice whenever it is received. Either before or after settlement.
- Taylor - Protection against prior interest only where notice of earlier interest was received after settlement, and earlier than that they will not be protected until they register - where they get ID title.
Cases:
Case: 29th Nov - company owned by DC (Son of C) - lent D another $33,000. Original broker who acted for his mother.
30th of Jan 2013 - D told Zhai that he would give her the property if she would discharge the debt to AMP and to her. She agreed - D and Z exchanged contracts for P of Prop for $460,000 - amount owed to discharge AMP mortgage.
Z lodged caveat as P for contract of sale.
15th of Feb - DC lodged caveats on the title in favour of his mother, but were drawn on the 22nd of Feb so that a second mortgage could be registered for the re-financing of the first two loans. No title search was undertaken, so the refinancing company was not aware of the contract of sale.
Z denied having any notice of I of C and Stone Leaf Capital. On the 13th of March, D told DC that he was selling the unit - DC instructed solicitors to lodge 2nd and 3rd mortgages, but this time sale to Z had already been completed, with a mortgage to Westpac - and took them in R form, but didn't lodge them in registration until the 19th/20th of March.
On 18th of March, plaintiff lodges caveat claiming an interest as E chargees - and preventing R of Z's transfer and Westpac's mortgage.
Z claimed S43A protection, and if that didn't work then claimed priority under rules of competing equitable interests.
Decide: Held that purchase was for value, even though consideration was $460,000, including the loans outstanding to Z, was below the market price for the land. Although she had constructive notice of the caveats when they were first lodge, the withdrawal of the caveats indicated that the caveators were no longer claiming an interest in the land. [38] There was no evidence that the usual practice of conveyances in such circumstances would be to make enquiries of the caveators to investigate why they had withdrawn their caveats, or to investigate whether the claimed debts had been repaid, or that the caveators still maintained an interest in the land notwithstanding the withdrawal of the caveats.
Didn't have knowledge of the caveats.
Court referred to P2P and Sharari - McLeland.
Plaintiffs withdrew their caveats to assist the refinancing, and knowingly took the risk that their interest could be defeated - and were experienced in this type of dealing.
Look at what dealings happened when.
Barlin Investments v Westpac [2012] NSWSC 699:
Further:
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