FACULTY OF LAW

LAWS5012REAL PROPERTY (PT 1)

Topics:

(1) Old System Title

(2) Torrens Title

© R. M. 2014! ! 1

Table of Contents

(0) STATUTE OF FRAUDS: FORMALITIES FOR CREATING/TRANSFERRING INTERESTS IN LAND(0 .1) CREATION OF LEGAL INTERESTS.......................................................................................................................! 6

......................................................................................................................................................(a) Must use a deed (Old System Title)! 6................................................................................................................................(b) Creation of legal lease without a deed: s 23D(2)! 7

(0.2) CREATION OF EQUITABLE INTERESTS................................................................................................................! 7........................................................................................................................(a) Purported Immediate Transfer of Equitable Interest ! 7

............................................................................................................................................(b) Contracts Creating Equitable Interests...! 8............................................................................................................................................................................(a) Enforceable Contracts! 9

...........................................(i) When will written contracts to create/transfer interest in land or grant lease be enforceable?! 9..................................................................................................................(ii) When will oral/unwritten contracts be enforceable?! 9

(1) OLD SYSTEM TITLE & PRIORITIES(1.1) REGISTRATION OF TITLE (DIV 1 OF PART 23 OF THE CONVEYANCING ACT ..............................................)! 12

..................................................................................................(a) Registration of title (Div 1 of Part 23 of the Conveyancing Act)! 12......................................................................................................................................................................(b) Registration for Priority! 12

...................................................................................................................................................................(i) Competing instruments! 12..........................................................................................................................................................................(ii) Bona fides & notice! 13

..................................................................................................................................................................(iii) Valuable consideration! 14.........................................................................................................................................................(iv) Void or voidable instrument! 14

........................................................................................................................................................................(v) Effect of registration! 14.................................................................................(vi) Registered instrument to take priority over unregistered instrument! 15

....................................................................................................................................................................(vii) Registration as notice! 15.........................................................................................................(viii) The rules apply to equitable as well as legal interests! 15

(1.2) GENERAL LAW PRIORITY RULES......................................................................................................................! 17(1.2.1) CATEGORY A: EARLIER INTEREST IS LOWER IN HIERARCHY THAN LATER INTEREST................................! 18

....................................................................................................................................(a) Prior equitable interest v later legal interest ! 18........................................................................................................................................(ii) Notice: Actual, Imputed, Constructive! 19

.................................................................................................................................................................(iii) Extension of Protection! 20.........................................................................................(iv) Tabula in naufragio (plank in a shipwreck); doctrine of tacking ! 20

.....................................................................................................................(b) Prior mere equity v later equitable (or legal) interest! 21.....................................................................................................................................................................(i) What is a mere equity?! 21

.......................................(ii) What circumstances are there where a ‘mere equity’ rather than an equitable interest exists?! 22(1.2.2) CATEGORY B: EARLIER INTEREST IS HIGHER THAN OR EQUAL TO THE LATER INTEREST.........................! 23

............................................................................................................................................................(a) Prior legal vs subsequent legal! 23....................................................................................................................................................(b) Prior legal vs subsequent equitable! 23

..........................................................................................(i) Exception #1 - legal owner himself creates the equitable interest! 23........................................................(ii) Exception #2 - Legal owner fraudulently connives in creation of equitable interest! 24

..................................................................................................................................................(iii) Exception #3: Agency exception ! 24.......................................................................................(iv) Exception #4: Gross negligence - failure to ‘get in’ the title deeds! 25

......................................................................................................................................................................................(v) Exception #5! 25.......................................................................................................................................................(c) Prior Equitable v Later Equitable! 26

(2) TORRENS TITLE(2.1 ) INTRODUCTION ................................................................................................................................................! 27(2.2) MAJOR ELEMENTS OF TORRENS SYSTEM........................................................................................................! 28

............................................................................................................................................................................................(a) The Register! 28..................................................................................................................................................................................(b) Certificate of title! 28

...................................................................................................................................................................................................(c) Dealings! 29..........................................................................................................................................................................................(d) Effect as deed! 29

...............................................................................................................................................................................(e) Title by registration! 30.....................................................................................................................................(i) Evidence of title (mirror of title concept)! 30

..................................................................................................................................................................................................(ii) Trusts! 31...................................................................................................................................(f) Assurance fund: Compensation under Torrens! 31

...........................................................................................................................................................(i) Indefeasibility and recovery! 31.....................................................................................................................................................................(ii) Right to sue generally! 31

................................................................................................................................................(iii) Right against the insurance fund! 31(2.3) INDEFEASIBILITY................................................................................................................................................! 32

....................................................................................................................................(a) ‘Immediate’ versus ‘deferred’ indefeasibility! 33..................................................................................................................................................................(i) Deferred indefeasibility! 33

.............................................................................................................................(ii) Immediate indefeasibility (current position)! 33

R. M. ! (1) Table of Contents! 2

...............................................................................................................................................................(b) The Indefeasibility Umbrella! 34...............................................................................................................................(i) Forged mortgages & ‘all moneys’ mortgages! 34

..........................................................................................................................(ii) Effect of statute: s56C & 117 Real Property Act! 35(2.4) CAVEATS.............................................................................................................................................................! 36

.............................................................................................................................................................(a) When can a caveat be lodged?! 36................................................................................................................................................................................(i) Types of Caveats! 36

........................................................................................................(b) Is the interest caveatable? — must be a proprietary interest ! 37....................................................................................................................................................(i) Examples of caveatable interests! 37

........................................................................................................................(c) Have the formal requirements been complied with?! 38................................................................................................................................................................................(d) Effect of lodgement! 38

...........................................................................................................................................................................................(i) Exceptions! 39..................................................................................................................................................(ii) Injunction to restrain lodgement! 39

.............................................................................................................................................................(e) How can caveats be removed?! 40......................................................................................................................................(i) Withdrawal by caveator or other person! 40

............................................................................................................................(ii) Lapsing notice with dealing (partial lapsing)! 40......................................................................................................................(iii) Lapsing notice without dealing (entire lapsing)! 41

........................................................................................................................................(iv) Supreme Court: no notice, no dealing! 41...........................................................................................................(v) After a caveat has lapsed...and further caveat is sought! 41

...................................................................................................................................................................................(f) Extending caveats! 42............................................................................................................................................................(i) Serious question to be tried! 42

........................................................................................................................................................(ii) The ‘balance of convenience’! 42..........................................................................................................................................................(iii) Undertaking as to damages! 42

...............................................................................................................................(g) Lodgement of caveat without reasonable cause! 43..............................................................................................(i) Caveator who has a caveatable interest still liable under s74P?! 43

..................................................................................................................................................................................(ii) Compensation ! 43............................................................................................................................................................................(iii) Mitigation of loss! 43

(2.5) UNREGISTERED INTERESTS ..............................................................................................................................! 44......................................................................................................................................................(a) Recognition of equitable interests! 44

(2.6) PRIORITIES AND THE EFFECT OF CAVEATS ON UNREGISTERED INTERESTS...................................................! 45.........................................................................................................................................................................(a) Registered v Registered! 45

.....................................................................................................................................................................(b) Registered v Unregistered! 45.................................................................................................................(c) Unregistered vs unregistered: who has the better equity! 46

......................................................................................................................(i) Notice: Relevance of failure to make title search! 46.................................................................................................................................(ii) Lodgement of Caveat as a mater of course! 46

.....................................................................................................................................(iii) Postponing conduct & failure to caveat! 47(2.7) SECTION 43A (PERIOD BETWEEN SETTLEMENT AND REGISTRATION ..........................................................)! 52

...............................................................................(a) Purpose of s43A(1): Importation of bona fide for value without notice rule! 52(2.7.1) REQUIREMENTS FOR APPLICATION OF S ...............................................................................................43A! 54

......................................................................................................................................(a) Req 1 – Purchaser for value without notice! 54........................................................................................................................................................(i) Must be a purchaser for value! 54

...................................................................................................................................................................(ii) Must be without notice! 54......................................................................................................................................................(b) Req 2: Dealing must be registrable! 55....................................................................................................................................................(i) Must have possession of the CT! 55

.................................................................................................................................................................(ii) Immediately registrable! 55.................................................................................(c) Req 4 – Defects in the dealing: Title must come from registered proprietor! 56

...............................................................................................................................................................................(d) Req 3 – Stamp Duty! 57...................................................................................................................................................................(e) Req 5 – Prompt Lodgement! 57

............................................................(f) Successive Effect (way around requirement that must deal with registered proprietor)! 58........................................................................................................................................................(g) Writs and Unregistered Interests! 59

...............................................................................................................................................................................(h) Competing Equities! 59(2.8.1) STATUTORY EXCEPTIONS TO INDEFEASIBILITY — THE FRAUD EXCEPTION..............................................! 60

............................................................................................................................................(a) Fraud as an exception to indefeasibility! 60....................................................................................................................................................................................(i) What is fraud?! 60

..................................................................................................................................................................(ii) When must fraud exist?! 61.............................................................................................................................................................................(b) Fraud against whom ! 61

.................................................................(i) Fraud against prior registered holder (i.e. fraud against the Registrar-General)! 62................................................................(ii) Fraud against the holder of a prior unregistered interest (i.e. fraud and notice)! 64

.....................................................................................................................(iii) Fraud by the Agent of the Registered Proprietor! 66(2.8.2) STATUTORY EXCEPTIONS TO INDEFEASIBILITY — ESTATES AND INTERESTS RECORDED IN A FOLIO....! 68(2.8.3) STATUTORY EXCEPTIONS TO INDEFEASIBILITY — EXPRESS EXCEPTIONS .................................................! 69

.....................................................................................................................................................(a) Prior folio of the Register: 42(1)(a)! 69................................................................................................................................(b) Omitted or misdescribed easements: s42(1)(a1)! 69

.......................................................................................................................(c) Omitted or misdescribed profits a prendre: s42(1)(b)! 69

R. M. ! (1) Table of Contents! 3

.............................................................................................................................................(d) Wrong description of parcels: s42(1)(c)! 70...................................................................................................................................(e) Tenancies not exceeding three years: s42(1)(d)! 70

(2.9) PERSONAL EQUITIES/RIGHTS IN PERSONAM..................................................................................................! 72.........................................................................................................................................................................(a) The in personam claim ! 72

......................................................................................................................................................................................(b) Cause of Action! 72.................................................................................(c) The requirement of an element of unconscionability (careless not enough)! 72

...............................................................................................................................................................................(d) Rights in personam ! 73.............................................................................................................................................................................(i) Breach of Contract! 73

..................................................................................................................................................................(ii) Rectification of contract! 74.......................................................................................................(iii) Contract for Sale of land (right of specific performance)! 74

........................................................................................................................................................(iv) Breach of Constructive Trust! 74..............................................................................................................................(e) Knowing receipt and assistance: Barnes v Addy! 76

..............................................................................................................................................................(i) Knowing receipt (1st limb)! 76.........................................................................................................................................................................(ii) Knowing assistance! 77

(2.10) REGISTRAR-GENERAL’S POWER OF CORRECTION.......................................................................................! 78............................................................................................................................................................................(a) Errors on the register ! 78

...............................................................................................................................(i) Power to serve notice; failure to restrain RG! 78.......................................................................(b) Discretion to refuse: may request identity checks (relevant for fraud exception)! 79

................................................................................................................................................................(c) Power of the court to correct! 79.......................................................................................................(d) Mortgages: confirmation of identity - see Printy and English! 80

(2.11) OVERRIDING STATUTES..................................................................................................................................! 82..............................................................................................................................(a) Overriding State laws: The Latter Shall Prevail! 82

......................................................................................................................(b) Overriding Commonwealth laws: Governed by s109 ! 84(2.12) VOLUNTEERS....................................................................................................................................................! 86

................................................................................................................................................................(a) Volunteers & Indefeasibility! 86...................................................................................................(i) Victorian position: Volunteers do not obtain indefeasibility! 86

.....................................................................................................................(ii) NSW position: Volunteers obtain indefeasibility! 87

R. M. ! (1) Table of Contents! 4

(0) Statute of Frauds: Formalities for Creating/Transferring Interests in Land(0 .1) CREATION OF LEGAL INTERESTS

(a) Must use a deed (Old System Title)• A deed is a written document on paper which is signed sealed and delivered, whereby:

o an interest or right passes, or o an obligation is created; or o there is an affirmation of some act where an interest, right or property has passed.

Conveyancing Act 1919 (NSW)Section 23B - Assurances of land to be by deed(1) No assurance of land shall be valid to pass an interest at law unless made by deed.(2) This section does not apply to:

(d) a lease or tenancy or other assurance not required by law to be made in writing,...(3) This section does not apply to land under the provisions of the Real Property Act 1900 .

Four%requisites%for%a%valid%deed%(s%38(1)%Conveyancing+Act)(1) Signing;

(2) Sealing-(legisla/on-imputes-a-sealing-of-the-document)

(3) Delivery-(a-deed-is-delivered-when-the-inten/on-has-manifested-that-the-deed-become-opera/ve);-and

(4) ABesta/on

Section 38 - Signature and attestation(1) Every deed, whether or not affecting property, shall be signed as well as sealed, and shall be attested by at least

one witness not being a party to the deed; but no particular form of words shall be requisite for the attestation.(1A) For the purposes of subsection (1), but without prejudice to any other method of signing, a deed is sufficiently signed by a person if:

(a) by the direction and in the presence of that person the deed is signed in the name of that person by another person,(b) the signature is attested by a person who is not a party or signatory (except by way of attestation) to the deed, and(c) he person attesting the signature certifies in his or her attestation that he or she is a prescribed witness and that the signature was

affixed by the direction and in the presence of the person whose signature it purports to be.(1B) For the purposes of subsection (1) but without prejudice to any other method of signing, a deed is sufficiently signed by a person if:

(a) that person affixes his or her mark to the deed,(b) the affixing of the mark is attested by a person who is not a party or signatory (except by way of attestation) to the deed, and(c) the person attesting the affixing of the mark certifies in his or her attestation:

(i) (i) that, before the mark was affixed, he or she explained the nature and effect of the deed to the person making the mark, and

(ii) (ii) that he or she believed, at the time the mark was affixed, that the person making the mark understood the explanation.

(2) Indenting shall not be necessary in any case....Requirements at Common Law‣ Goddard’s case (1584) 2 Co Rep 4b

o There are but three things of essence and substance of a deed, that is to say, writing in paper or parchment, sealing and delivery.

R. M. ! (0) Formalities for Creating/Transferring Interests in Land! 6(0.1) CREATION OF LEGAL INTERESTS

(b) Creation of legal lease without a deed: s 23D(2)Conveyancing Act 1919 (NSW)

23D Creation of interests in land by parol(1) All interests in land created by parol and not put in writing and signed by the person so creating the same, or

by the person’s agent thereunto lawfully authorised in writing, shall have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.

[If-one-purports-to-create-a-document-orally-or-verbally-(no-document-at-all),-then-all-that-the-grantee-gets-is-an-‘interest-at-will’-H-an-

interest-un/l-it-is-revoked-by-the-grantor.]

(2) Nothing in this section or in sections 23B or 23C shall affect the creation by parol of a lease at the best rent which can reasonably be obtained without taking a fine taking effect in possession for a term not exceeding three years, with or without a right for the lessee to extend the term at the best rent which can reasonably be obtained without taking a fine for any period which with the term would not exceed three years.

[Three-requirements-to-obtain-a-lease-which-is-effec/ve-at-law-under-this-provision,-even-though-the-lease-may-be-oral:

(1)Must-be-at-the-best-rent-which-can-reasonably-be-obtained-without-taking-a-fine-(market-rent-H-maBer-of-expert-evidence);-

(2)Must-take-effect-in-possession-H-must-give-the-lessee-an-immediate-right-to-possession;-and

(3)The-term-plus-any-op/on-must-not-exceed-three-years.

Thus,-if-there-is-a-lease-granted-orally,-for-a-term-of-three-years,-no-op/on-to-renew,-its-for-a-market-rent-and-the-lessee-is-immediately-

en/tled-to-possession-H-that-lease-will-be-effec/ve-at-law.

(0.2) CREATION OF EQUITABLE INTERESTS

(a) Purported Immediate Transfer of Equitable Interest• Section 23C(1)(a) allows one to transfer an equitable interest to another by a written and signed document that

does not conform to the requirements of a deed (with/without consideration) - referring to a purported act of transfer - an immediate transfer of the interest to another.

Conveyancing Act 1919 (NSW)Section 23C - Instruments required to be in writing(1) Subject to the provisions of this Act with respect to the creation of interests in land by parol:

(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of law,

• Applies-when-there-is-a-disposi/on-without-a-preHexis/ng-agreement.

• Allows-crea/on-of-an-equitable-(not-legal)-interest-in-Old-System-land-by-a-wriBen-and-signed-instrument-(not-in-the-form-of-a-deed)-

even-without-considera/on.

(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will,

(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person’s will, or by the person’s agent thereunto lawfully authorised in writing.

(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.Section 23E - Savings in regard to secs 23B, 23C, 23DNothing in section 23B, 23C, or 23D shall:

(d) affect the operation of the law relating to part performance.

R. M. ! (0) Formalities for Creating/Transferring Interests in Land! 7(0.1-0.2) CREATION OF LEGAL INTERESTS/CREATION OF EQUITABLE INTERESTS

(b) Contracts Creating Equitable Interests...

A+contract+to+grant+an+interest+would+be+effec7ve+to+grant+that+interest+in+equity:+(1) Where%an%enforceable%contract%to%grant%or%transfer%an%interest%in%land%exists;%and

o Must-have-a-valid-contract;-

๏ See- s-54A(1):- Contract- is- enforceable- if- (1)- agreement- itself- is- in- wri/ng;- or- (2)- there- is- a-note- or-

memorandum-of-the-agreement-in-wri/ng;-and-(3)-it-is-signed-by-the-party-you-want-to-sue-(party-to-be-

charged)-or-the-agent-of-that-party.

๏ Oral-contract-(see-Enforceability-of-oral-contracts):-s54A(2)-H-part-performance

(2) Where%equity%would%decree%specific%performance%of%the%contract;%theno Most- contracts- to- transfer-property- rights- to- land- are- specifically-enforceable- and-most- contracts- to- transfer-

other-property-rights-are-not:-Adderley' v'Dixon.- -This-is-because-the-right- to- specific- performances-arises-only-

when- the- right- to- compensa/on- is- regarded- in- equity- as- an- inadequate- subs/tute- for- performance- of- the-

contract.

o Some-contracts-of-sale-can-be-specifically-enforced-under- the-rules-of-equity.-- In-such-cases, -the-buyer-has-an-

equitable-personal- right-to- specific-performance-of-the-obliga/on- to-transfer- ownership,-in- addi/on- to-a-legal-

personal-right-to-damages-if-the-seller-fails-to-keep-that-promise.--

(3) The%interest%contracted%to%be%granted%or%transferred%is%regarded%in%equity%as%already%having%been%granted/transferred.o This-is-accordance-with-the-principle-that-“equity-regards-as-done-that-which-ought-to-be-done”.

o Construc/ve-Trust:

๏ In-accordance-with-the- fundamental-equitable- maxim-that-equity-deems-that-to-be-done- which-ought-to-be- done,-equity-has-held-

that-a- contract-for- the- sale-of-land-confers-a-beneficial- /tle- upon-the-purchaser,- condi/onal-upon-the- payment-of-the- balance- of-

the- purchase- price,- at- the- point- when- the- contract- becomes- enforceable.- - This- transforms- the- vendor’s- /tle- into- that- of- a-

construc/ve-trustee-and-confers-an-enforceable-beneficial-/tle-upon-the-purchaser.

Land• Equitable regards contracts to transfer an interest in land as being able to give the transferee rights in equity, even though the contract itself

has not been performed...Section 23C(1)(a) deals with the purported immediate transfer, but there are equitable interests which can arise without a transfer, provided that there is a contract to transfer the interest in land.

‣ Lysaght v Edwards (1876) 2 Ch D 499 [applies to both old system & torrens title land]o ...the moment you have a valid contract for the sale the vendor becomes in equity a trustee for the

purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase-money, a charge or lien on the estate for the security of that purchase-money, and a right to retain possession of the estate until the purchase money is paid, in the absence of express contract as to the time of delivering possession...

‣ Chang v Registrar of Titles (1976) 137 CLR 177 (per Mason J)o Situation of the buyer after consideration has been paid in pursuance of a valid contract:

๏ It has been accepted...that at least when the purchaser has paid the purchase money the vendor becomes a constructive trustee of the property sold and that he is a trustee of property...equity regards done that which ought to be done.

o Situation of the buyer after the contract, but before payment of consideration (purchase money):๏ In equity, if the transferee has not given consideration, then we must look to whether

the contract is specifically performable unique (e.g. land). o The exact interest the transferee has under a constructive trust sub modo is unclear. What we know is

that the transferee will have first priority and that the transferor is not permitted to sell the property to a third-party.

Leases‣ Walsh v Lonsdale (1882) 21 Ch D 9

o The equitable jurisdiction will uphold an agreement to grant a lease, despite its non-compliance with legal formalities, in circumstances where the court determines that the agreement is specifically enforceable. “The tenant holds under an agreement for lease. He holds, therefore, under the same terms in equity as if the lease had been granted, it being a case in which both parties admit that relief is capable of being given by specific performance. That being so, he cannot complain of the exercise by the landlord of the same rights the landlord would have if a lease had been granted. On the other hand, he is protected in the same way as if the lease had been granted; he cannot be turned out by six months’ notice as a tenant from year to year.”

R. M. ! (0) Formalities for Creating/Transferring Interests in Land! 8(0.2) CREATION OF EQUITABLE INTERESTS

(a) Enforceable Contracts

(i) When will written contracts to create/transfer interest in land or grant lease be enforceable?• Where a contract clearly contemplates that a formal instrument is to be later executed (i.e. an executory contract) which will effectuate the

grant or transfer required by the contract (i.e. an executory contract), then s54A and not s 23C will be relevant: Baloglow v Konstanidis cited in Ciaglia v Ciaglia.

Conveyancing Act 1919 (NSW)54A Contracts for sale etc of land to be in writing(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any

interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.

o Can-only-enforce-a-contract-to-sell-or-create-an-interest-in-land:

(1)If-the-agreement-itself-is-in-wri/ng;-or

(2)There-is-a-note-or-memorandum-of-the-agreement-in-wri/ng;-and-

(3)It-is-signed-by-the-party-you-want-to-sue-(party-to-be-charged)-or-the-agent-of-that-party.(2) This section applies to contracts whether made before or after the commencement of the Conveyancing

(Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court.

(ii) When will oral/unwritten contracts be enforceable?• A contract that is not in writing may still be enforceable under two principles:

(1) Principle of part performance — must be able to prove existence of oral agreement.(2) A statute must not be an instrument of fraud (more flexible principle)

Doctrine of Part Performance‣ *Maddison v Alderson (1883) 8 App Cas 467

(1) In a suit founded on part performance of a parol contract relating to land, the defendant (promisor) is really ‘charged’ upon the equities arising out of the promisees performance of the contract, and not (within the meaning of the statute) upon the contract itself. If such equities were excluded, injustice of a kind which the statute cannot be thought to have had in contemplation would follow.

๏ [In order to be an act of part performance] it is not enough that an act done should be a condition of, or good consideration for, a contract, unless it is, as between the parties, such a part execution as to change their relative positions as to the subject-matter of the contract.”

(2) All the authorities shew that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged

(3) The acts of part performance, exemplified by a long series of decided cases in which parol contracts concerning land have been enforced, have been (almost, if not quite, universally) relative to the possession, use or tenure of the land [the acts of part performance must relate to the use or possession of the land (how the land is actually held) in order to be a good act of part performance].

๏ Exception to the general rule: The law of equitable mortgage by deposit of title deeds depends upon the same principles” [most cases dealing with acts of part performance relate to the sale of land/grant of lease over land, but another prominent area in which the doctrine of part performance applies is mortgage by deposit of title deeds - oral agreement to grant a mortgage, because the agreement is oral it won’t be enforceable under s 54A(1), but if there is an oral contract, and the title deeds are handed over, this is regarded as an act of part performance].

๏  Payment of money alone will not be a sufficient act of part performance as it is equivocal (it may be an act of part performance if it is combined with another type of act (e.g going into possession).

‣ Regent v Millett (1976) 133 CLR 679o The Earl of Selborne’s test in Maddison v Alderson has been consistently accepted as a correct statement

of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged.

R. M. ! (0) Formalities for Creating/Transferring Interests in Land! 9(0.2) CREATION OF EQUITABLE INTERESTS

Statute must not be an instrument of fraud‣ Theodore v Mistford Pty Ltd [2005] HCA 45; 221 CLR 612

o Equity will not allow a statute to be an instrument of fraud:๏ In the absence of a contract to grant a formal mortgage, the title deeds/certificate of title must have been

deposited with the intention of providing security over the land to which they relate, the onus of proof lying on the mortgagee (c.f. Schultz v Turner) A mortgage is not created where the title deeds are deposited for some reason other than giving security. Thus, where there is the requisite intention, followed by an immediate act which creates the mortgage such that the purported mortgagee acts on the faith that a mortgage has been granted, the mortgagor cannot plead the statute of frauds as a reason why the mortgage was not validly granted. To do so would be unconscionable, and would be using s23C as an instrument of fraud. Equity will not allow a statute to be an instrument of fraud.

o In the present case...๏ ... it was because Mrs Theodore’s actual intention was to create a security, and she gave the son authority

to do an act that had the appearance of creating a security and which in fact permitted the sale to proceed to settlement that it would be unconscientious for her to deny that there was an equitable mortgage. I.e. It would be using using the equivalent of s23C as an instrument of (equitable) fraud for her to deny that her intention had been effectively carried out.

๏ Although the equitable mortgage arose, it did not arise on the basis of part performance. It arose on the equitable principle that equity will not allow a statute to be an instrument of fraud. There was no contract to create a mortgage, thus part performance inapplicable (i.e. no contract that could be enforced for the purposes of s 54A(1) and its exception s54A(2)).

o [Glen Theodore guaranteed1 the obligations of his company under a contract to purchase a business whereby payment of part of the purchase price was deferred. The vendor asked for a mortgage to secure Glen’s obligations under the guarantee (standard procedure). His mother, Mrs Theodore authorised him to lodge with the vendor’s solicitors, as security for Glen’s obligations under the guarantee, the certificate of title for her Torrens Title land she owned. Mrs Theodore therefore knew that her son was going to hand the duplicate certificate over as a security for the purchase price.. Before settlement the solicitors held the certificate of title on account of Mrs Theodore, and after settlement as security for moneys owing to the vendor.]

‣ Ciaglia v Ciaglia (2010) 14 BPR 27,479; [2010] NSWSC 341o Constructive Trust

๏ When a mortgagee acquires legal title to a property as security for a loan, upon the loan being repaid, the mortgagee holds the property on a constructive trust for the mortgagor. The arising of that constructive trust is the creation of an interest in land, and thus within s 23C(1)(a). However, s23C(2) takes constructive trusts out of s23C. Thus it would be no obstacle to the recognition of the constructive trust that it arose through a set of events (i.e. the agreement that the transaction was in effect a security and the repayment of the loan) that were not in writing.

o Statute cannot be used as an instrument of fraud - must overcome obstacle of s23C(1)(a) & s 54A(1)๏ S23C(1)(a) obstacle: Before the above reasoning can be established, the plaintiff must first establish that the agreement

between the plaintiff and the mortgagee was in effect a security. S23C prevents proof that the transaction was in effect a security. But, to use s23C to prevent proof that the transaction was in effect a security would be to use 23C as an instrument of fraud, and equity does not permit this - “Equity will not permit a party to rely upon s 23C of the Conveyancing Act to resist proof that an apparently absolute conveyance was intended to be by way of security only and to deny a mortgagor's right to redeem and obtain a retransfer of the mortgaged property. To do otherwise constitutes a fraud on the statute” (White J)

๏ S54A obstacle: However, in the present case, there was a contract. S54A applies to that contract. Therefore, it would be fraud on the statute for the defendant to rely on that contract not having been in writing - “If the issue arises under s 54A, as I think it does, the same wider principle applies that a party cannot use the Statute as an instrument of fraud to deny an agreement for the grant of a mortgage” (White J).

o Court followed Khoury v Khouri: There can be an overlap between ss54A and s23C If there is an agreement that a particular state of affairs exists, then both s54A and s23C are obstacles that need to be overcome before the oral disposition can take effect (i.e. if A agrees with B that A has an equitable interest in the land, and there is no written transfer of that interest). The principle that a statute cannot be used as an instrument of fraud applies where the alleged act is an immediate act of disposition, and also applies where the act is a contract (i.e both to s23C(1)(a) and to s54(1)).

R. M. ! (0) Formalities for Creating/Transferring Interests in Land! 10(0.2) CREATION OF EQUITABLE INTERESTS

1 A is obliged to perform a contractual act or repay a debt to X, C can guarantee the performance. It is a third party obligation by which the guarantor guarantees the performance of the debtor to the creditor.

(1) Old System Title & PrioritiesOverview of Old System Title• Definition: A system of land title under which ownership is established by a chain of transactions and events reaching back to an acceptable

starting point.• The chain of transactions must be examined to establish a good title to the land.• In practice, tracing title in an unbroken chain back to a good root of title not less than 30 years old usually gives rise to a reasonable

confidence that the title is secure. But it does not guarantee a secure title.• In old system title, the way that one effects transfers, mortgages etc. is through the practicality of deeds (see above).

(1.1) REGISTRATION OF TITLE (DIV 1 OF PART 23 OF THE CONVEYANCING ACT)

(a) Registration of title (Div 1 of Part 23 of the Conveyancing Act)• Registration of title - title is acquired through the transactions. Registration provides a system where that transaction becomes publicly

known and provides secondary evidence of that conveyance and has ramifications for the priorities between the parties.• In a deeds system, legal property rights are created by deeds and the priorities of those rights are protected by registration of those deeds.• The priority principles considered below have been modified by legislation (i.e. s184G). Under the relevant legislation, priority between

competing interests in old system title land is determined by the order in which the instruments embodying those interests are registered.General Register of Deeds• Section 184C of the Conveyancing Act 1919 requires the Registrar General to maintain a General Register of Deeds. The Register is open to

public inspection: s199.• To register an instrument in the Register, the original and a copy (the ‘registration copy’) are delivered to the Registrar-General, or the

original only is delivered to the Registrar-General with a request for the Registrar-General to prepare a registration copy.• The Registrar-General gives the instrument a ‘distinctive reference’ (s184E). Instruments are registered in the order in which the distinctive

references are allocated to them (s184E(5). The registration copy is retained by the Registrar-General and becomes part of the Register (s184C(2)(b)).

What can be registered• Any instrument can be registered as long as it includes a deed, will or Act of Parliament: s7(1). However, registration of an instrument that

does not affect land is effective for purposes of record only; there is no priority for a registered instrument unless it deals with land.

(b) Registration for PriorityConveyancing Act 1919 (NSW)

Section 184G - Instruments affecting land to take effect according to priority of registration(1) All instruments (wills excepted) affecting, or intended to affect, any lands in New South Wales which are

executed or made bona fide, and for valuable consideration, and are duly registered under the provisions of this Division...shall have and take priority not according to their respective dates but according to the priority of the registration thereof only. [I.e.-Instruments-affec/ng-land-to-take-effect-according-to-priority-of-registra/on...the-effect-of-this-sec/on-

is-that…-an-earlier-interest-will-be-defeated-by-a-later-interest…if-that-later-interest-is-registered-first.]

(2) No instrument registered under the provisions of this Division or the Registration of Deeds Act 1897 shall lose any priority to which it would be entitled by virtue of registration thereunder by reason only of bad faith in the conveying party, if the party beneficially taking under the instrument acted bona fide, and there was valuable consideration given therefor.

• Requirements-which-must-be-sa/sfied...

(1) Compe/ng-Instruments-–-the-interests-must-not-be-compa/ble;-the-instrument-must-be-in-wri/ng.-

(2) Bona-Fide-–-the-purchaser-must-act-in-good-faith;-and-without-no/ce.

(3) Valuable-Considera/on-–-can-be-inadequate-but-must-not-be-nominal;-a-deposit-will-suffice.

(i) Competing instruments[Distinguish between interests that are created by an instrument and instruments that are not.]• For s184G to apply...

o The interests must not be compatible (i.e. must be competing/conflicting). The instruments must refer to the same interest.

o The conflicting interests must each have been created by instruments which are in writing (i.e. a transaction that is in writing); e.g. a deed (s23B); writing complying with s23C.

• Thus the general law priority rules will apply if...o ...you have a conflict between an interest created by an instrument, and an interest created without an

instrument. S184G will not obtain because both competing interests must be created by an instrument.

R. M. ! (1) Old System Title! 12(1.1) PRIORITIES: REGISTRATION OF TITLE

o Examples of interests created without an instrument are: mortgage by deposit of title deeds; oral contracts to sell or mortgage land (if there are sufficient acts of part performance); vendor’s lien for unpaid purchase price; leases less than 3 years recognised under s 23D(2) Conveyancing Act; purchaser price resulting trust.

• [CRITICAL COMMENT: If an instrument, although not strictly required, is in fact brought into existence and left unregistered, the interest it embodies will be defeated by a competing interest embodied in an instrument that is registered. As a result, where it is possible to refrain from bringing an instrument into existence, it may be advantageous for priority purposes deliberately to so refrain: see discussion in White v Hunter.]

‣ Scholes v Blunt (1916) 17 SR (NSW) 36o [The vendor conferred an easement to the first purchaser by means of an unregistered instrument...the vendor then sold the

estate to the second purchaser who registered his instrument first...the sale to the second purchaser was subject to all easements.]o The instruments were expressed to be subject to each other; therefore s184G did not arise.o The second purchaser obtained the land subject to the easement.

(ii) Bona fides & noticeBona fide• The instrument under which priority is claimed must have been ‘executed or made bona fide’ (i.e.the party who is claiming

priority by virtue of s184G(1) must be bona fide - he/she has to be acting in good faith.)

• Fraud or deceit...o ...an instrument is not executed or made bona fide if it is actuated by motives of fraud or deceit.

• Mala fides on the part of the conveying party alone does not deprive the instrument of priority by registration: s184G(2).

Without notice• Bona fides connotes more than mere personal integrity or honest: Wilde v Spratt. Bona fides also means absence

of notice...o ...an instrument is not executed or made bona fide if the person taking under it had notice of the earlier

interest over which priority is sought by registration...o ...the notice may be actual, constructive, or imputed: Scholes v Blunt

‣ Marsden v Campbell (1897) 18 LR (NSW) (Eq) 33o Notice of an other’s interest...

๏ if the purchaser has notice that someone other than the vendor has an interest in the land…then he or she is said to be notified and will not have priority based upon registration (i.e. cannot defeat that interest by registration).

o Notice received before instrument is entered into...๏ ...will preclude the instrument from gaining priority by registration [i.e. if the purchaser has notice

before the execution of the instrument that someone other than the vendor has an interest in the land…then he or she will not have priority based upon registration.]

‣ Burrows v Crimp (1887) 8 LR (NSW) (L) 198o Notice received after instrument is executed but before registration...does not preclude priority by

registration.๏ ‘Where a person has become owner of property, bona fide and honestly, and hears that there is a prior deed in

existence relating to the same property, it is a perfectly honest thing for him to promptly register his conveyance. That is what the law intends. The object of the law of registration is to keep people awake, and make them alive to their duties. It will not disentitle the registering vendee to the benefit of the Act.’

Contracts for sale of land‣ Scholes v Blunt (1916) 17 SR (NSW) 36

o Special considerations apply to contracts for sale of land...๏ A purchaser’s notice of the existence of an earlier interest between the making of the contract

and the conveyance will deprive the conveyance of protection afforded by registration.• Three stages for sale of land:

(1) Vendor offers land for sale generally through agent;(2) Vendor and purchaser enter into a contract for sale (in writing) and purchaser pays deposit— not an immediate sale; interim

period between contract and conveyance for the parties to deal with certain practical and legal issues.๏ Purchaser in interim period: finalising finance; making certain inquiries about the land.

(3) Actual settlement: Vendor gives title documents to Purchaser etc.

R. M. ! (1) Old System Title! 13(1.1) PRIORITIES: REGISTRATION OF TITLE

(iii) Valuable consideration• Can be inadequate but must not be nominal; a deposit will suffice; Consideration may be valuable despite being

commercially inadequate: Doe d Peacock v King• Section 184G(1) of the Conveyancing Act 1919 confers priority only on instruments executed or made for ‘valuable consideration’. Section

7(1) defines valuable consideration ton include marriage, but not nominal consideration.• The courts apply the contract law concept that the consideration must be ‘sufficient’, but that once the threshold of sufficiency is reached

no further enquiry is necessary as to whether it is adequate.

‣ Bullen v a’Beckett (1863) 1 Moore NS 223o Consideration must not be so inadequate as to be merely nominal - meaning by nominal, consideration

so low as to be manifestly illusory.‣ Scholes v Blunt (1916) 17 SR (NSW) 36

o An interest acquired for nominal consideration...๏ ...should nevertheless still be registered… this will prevent subsequent purchasers from

obtaining priority (i.e. the transaction will not be bona fide because of constructive notice).(iv) Void or voidable instrument• If the instrument is void or voidable (e..g signed fraudulently), registration does not cure that imperfection —

registration does not give any greater efficacy than it would otherwise have had...o ...thus registration does not render effective an instrument impugned for...

๏ fraud: Kerley v Moule;๏ mistake: Sutherland v Peel; or๏ forgery: Re Cooper

‣ Re Cooper; Cooper v Vesey (1882) 20 Ch D 611o The Court held in favour of the executors. The mortgage was a forgery and the mortgagee could not

rely on forged documents. Registration under s184G did not in any way alter this fact.o [Thomas Cooper in his will appointed his son of the same name one of his executors and trustees. The father died. The son had

possession of the title deeds to land. The son concealed the fact of his father’s death and without the consent of the other executors and trustees, mortgaged the land, representing the mortgage to be one from his (deceased) father. The mortgagee registered the mortgage. The other executors and trustees, upon discovering the facts, sought recovery of the title deeds and a declaration that the mortgage was of no effect.]

(v) Effect of registration• Registration operates to fill the title of the conveyor who otherwise would have no title to give. • [e.g. O conveys the legal fee simple to A and then purports to convey the legal fee simple to B. The nemo dat rule prescribes that B

acquires nothing. But if registered before the conveyance to A, the conveyance to B takes ‘priority’ - though formerly ineffective, it is now effective to pass the legal estate, giving the later efficacy that it would not otherwise have had.]

‣ Fuller v Goodwin (1865) 4 SCR 66.o Registration in effect abrogates the ‘nemo dat’ rule — Registration of the later conveyance ‘feeds the

title’: it gives the conveyor, despite the earlier (unregistered) conveyance, a good title as against the earlier conveyee, a title which the later conveyee acquires immediately on registration.

‣ Boyce v Beckham (1890) 11 LR (NSW) (L) 139o Interests in old system land are acquired through registered instruments; the failure to register will

result in the loss of title to the land.

R. M. ! (1) Old System Title! 14(1.1) PRIORITIES: REGISTRATION OF TITLE

(vi) Registered instrument to take priority over unregistered instrument• S184G deals with priority between registered and un-registered instruments...

o Thus, a registered instrument takes priority over a competing unregistered instrument.• One of the underlying reasons for the legislation was to promote publicity of interests, to promote a secondary

resource (copies of the instruments), and to encourage registration. S184G(1) provides a tangible legal benefit, and if one were to argue that it did not apply to unregistered instruments, the practical effect of the legislation would be almost a nullity (i.e would undermine spirit and intent of legislation).

‣ Fuller v Goodwin (1865) 4 SCR 66o The view that priority is conferred only where both competing instruments have been registered, so

that an unregistered instrument could not be defeated by a later registered instrument was rejected on the basis that it subverts the purpose of the legislation.

(vii) Registration as notice• Registration may constitute constructive notice. This is explicable on the basis that prior registered interests

take priority and that a purchaser has constructive notice of them.o I.e.: If a party has registered his/her interest derived from an interest in the register, then subsequent

interest holders also deriving their interests from instruments are deemed to have notice of that prior registered instrument.

• However, if a person has registered her interest, that person is not required to search the Register for later registered instruments that may affect the exercise of rights under the registered instrument.

(viii) The rules apply to equitable as well as legal interests• Section 184G(1) draws no distinction between legal and equitable interests: Darbyshire v Darbyshire (1905) 2 CLR

787o Legal v legal: An earlier legal interest will be defeated by a later legal interest if the later interest is

registered first; o Equitable v Legal: an earlier equitable interest will be defeated by a later legal interest if the later interest

is registered first. ๏ Alternatively, a registered earlier equitable interest could trump an unregistered later legal

interest or a subsequently registered legal interest (cf general priority rules): see Moonking Gee v Tahos.

o Equitable v equitable: an earlier equitable interest will lose its priority over a later equitable interest if the later interest is registered first; and

o Legal v Equitable: an earlier legal interest will lose its priority over a later equitable interest if the equitable interest is registered first.

‣ *Moonking Gee v Tahos [1963] SR (NSW) 935o Priority follows according to the date of registration between competing instruments, and will attach to a

registered instrument conferring an equitable title over one conferring a legal title.o Priority dispute between registered earlier equitable interest v unregistered legal interest

๏ The first purchaser had an equitable constructive trust under the rule in Lysaght v Edwards (that was registered).

๏ The second purchaser had a legal estate and priority at common law under the rule in Pilcher v Rawlins.

๏ Registration nevertheless confers priority to the first purchaser under s184G. Thus Moonking’s registered equitable interest trumped the unregistered legal interest.

• Moonking was entitled to an order for specific performance against the the owner, to give Moonking the legal estate. The second purchaser lost his legal estate because he was unregistered.

o [The vendor (Tahos) sold the estate to the first purchaser (Moonking)...there was an exchange of contracts and consideration...the vendor sold the estate to the second purchaser and completed the sale...the first purchaser then proceeded to register his contract...the first purchaser was not aware of the conveyance in favour of the second purchaser (i.e. bona fide without notice)]

R. M. ! (1) Old System Title! 15(1.1) PRIORITIES: REGISTRATION OF TITLE

(1.2) GENERAL LAW PRIORITY RULES

(1) Ascertain%the%interests%of%the%affected%parHes%and%their%order;(2) Which%priority%rule%applies?

Hierarchy%of%Interests(1) Legal'interest

(2) Equitable'interest

(3) A'“mere”'equity'(or'simply'“an'equity”)

General%law%priority%rulesCategory+A:+Where,%in%the%hierarchy,%the%earlier%interest%is%lower%than%the%later%interest

o prior-equitable-v-later-legal-

o prior-mere-equity-v-later-equitable-(or-legal)-

• Rule:'Earlier'interest'has'priority'unless'later'interest'was'taken'bona'fide'for'value'without'noGce'

Category+B:+Where,%in%the%hierarchy,%the%earlier%interest%is%higher%than%or%equal%to%the%later%interesto prior-legal-v-later-legal

o prior-legal-v-later-equitable-

o prior-equitable-v-later-equitable-

o [a`er-Double'Bay'Newspapers:-where-the-mere-equity-is-the-later-interest?]-

• Rule:'Earlier'interest'has'priority'unless'the'holder'of'that'interest'is'guilty'of'some'form'of'‘postponing’'conduct'

Examples of Legal Interests• Old system land

o s23B deed; o 23D(2) legal lease; o legal old system mortgage

Examples of Equitable Interests• Beneficiary’s right under a trust• Right of purchaser under a valid agreement (specifically performable contract) for sale of land: Lysaght v Edwards• Right of mortgagee/lessee under a valid agreement (not a deed) to grant mortgage/lease: Walsh v Lonsdale• Right of a mortgagor in the mortgaged land which is Old System title (equity of redemption); n.b. this is not a mere equity.• Right of a second or subsequent mortgagee - The second or subsequent mortgagee acquires an interest in the equity of redemption.• Right of mortgagee under mortgage by deposit of deeds (principle of part performance): Ex parte Langston

o ...in equity, the deposit of title documents to property as security for money advanced is prima facie evidence of an agreement to grant a mortgage over the property. Writing is not necessary for the deposit of title deeds, because the act of depositing the deeds with the lener is an act of part performance: s23E; s54A(2).

• Grantee of an option (general approach)• Unpaid vendor (vendor’s lien):• Purchase price resulting trust: Where one person provides whole purchase price and transfers it into the name of another who has given no

valuable consideration, the titleholder will hold the property pursuant to a resulting trust for the benefit of the purchaser: Napier v Public Trustee.

• A profit a" prendre which is in writing but not in the form of a deed• Unregistered Torrens interest - transaction behind instrument

R. M. ! (1) Old System Title! 17(1.2) GENERAL LAW PRIORITY RULES

(1.2.1) CATEGORY A: EARLIER INTEREST IS LOWER IN HIERARCHY THAN LATER INTEREST

Category%A:%Where,%in%the%hierarchy,%the%earlier%interest%is%lower%than%the%later%interest(a) prior-equitable-v-later-legal-

(b) prior-mere-equity-v-later-equitable-(or-legal)-

• Rule:'A'prior' equitable'interest'will' be'defeated'by'a' later' legal' interest'where'the'holder' of'the' later' legal' interest' has'

taken'bona'fide'for' value'without' noGce'of' the'prior' equitable'interest:-Pilcher'v'Rawlins-(interested- in-the-conduct- and-

state-of-mind-of-the-holder-of-the-later-interest.

(a) Prior equitable interest v later legal interest• Thus: In order for later legal interest to succeed, five requirements must be satisfied: Pilcher v Rawlins

(1) Bona Fide — i.e. act in good faith/without fraud.(2) Purchaser — i.e. anyone who acquires for value an interest in the land. It is not limited to a ‘purchaser’

of the fee simple, but extends to any person who provides value in return for an interest in the property, including mortgagees and lessees: Goodright d Humphreys v Moses; cannot be a volunteer.

(3) For Value — i.e. consideration in money or money’s worth; includes promise to marry: Floyer v Bankes (1863); cannot be nominal; cannot be a sham; must be genuine; need not be market value.

(4) Legal Estate — i.e. must be a legal interest; cannot be an equitable interest.(5) Notice — i.e. the purchaser cannot have notice of the prior equitable interest; actual, constructive,

imputed.• If the subsequent legal owner satisfies these requirements, then the equitable interest will be extinguished.‣ Pilcher v Rawlins (1872) 7 Ch App 259

o Where you have prior equitable vs later legal, the later legal wins provided that the holder of the legal interest is a bona fide purchaser of the legal estate for value without notice.

๏ ‘I am clearly of the opinion ... that where a trustee in breach of trust conveys away a legal estate which he possesses, and that legal estate comes into the possession of a purchaser for valuable consideration without notice, the purchaser can hold the property against the cestuis que trust who were defrauded by the conveyance ...” – Sir G Mellish LJ

๏ “I propose simply to apply myself to the case of a purchaser for valuable consideration, without notice, obtaining, upon occasion of his purchase, and by means of his purchase deed, some legal estate ... and, according to my view of the established law of this Court [of Equity], such a purchaser’s plea of a purchase for valuable consideration without notice is an absolute, unqualified, unanswerable defence, and an unanswerable plea to the jurisdiction of this Court.” – Sir WM James LJ

‣ Basset v Nosworthy (1673) Rep Finch 102o ‘...A purchaser, bona fide, without notice of any defect in his title at the time of the purchase made, may

lawfully buy in a statute or mortgage, or any other incumbrance; and if he can defend himself at law by any such incumbrances bought in his adversary shall never be aided in a court of equity by setting aside such incumbrances; for equity will not disarm a purchaser, but assist him...(Lord Nottingham LC)

‣ Oliver v Hintono Negligence of legal estate holder getting in the title deeds...

๏ ...a purchaser obtaining the legal estate, but making no inquiry for the title deeds, or making inquiry and failing to take reasonable means to verify the truth of the excuse made for not producing them or handing them over, is, although perfectly honest, guilty of such negligence as to make it inequitable for him to rely on his legal estate so as to deprive a prior incumbrancer of his priority.”

o [Oliver v Hinton applied where it was prior equitable v later legal and the later legal holder didn’t get the deeds - in that case they couldn’t claim to be without notice (i.e. will be deemed to have constructive notice)]

R. M. ! (1) Old System Title! 18(1.2.1) GENERAL LAW PRIORITY RULES: CATEGORY A: EARLIER INTEREST IS LOWER IN HIERARCHY THAN LATER INTEREST

(ii) Notice: Actual, Imputed, Constructive• There are three forms of notice (s 164(1) Conveyancing Act):

(a) Actual Notice - s164(1)(a): i.e. ‘own knowledge’ — subjective knowledge; the purchaser is actually aware of the act or instrument or thing which gives rise to the interest; the purchaser does not need to know that the act, instrument or thing has particular consequences.

(b) Constructive Notice - s164(1)(a): a person is construed as having notice of a interest of which they would have had actual notice had they made a reasonable inquiries.

๏ will extend to ‘deliberately shutting your eyes to the obvious’.๏ will extend to ‘a failure to make a reasonable inquiry’.

(c) Imputed Notice - s164(1)(b): i.e. agency-principal knowledge — where the agent has actual or constructive notice of an interest ‘in the same transaction’, then that notice is imputed to the principal.

Conveyancing Act 1919Section 164 - Restriction on constructive notice(1) A purchaser shall not be prejudicially affected by notice of any instrument, fact, or thing, unless:

(a) it is within the purchaser’s own knowledge [i.e.-actual-no/ce], or would have come to the purchaser’s knowledge, if such searches as to instruments registered or deposited under any Act of Parliament, inquiries, and inspections had been made as ought reasonably to have been made by the purchaser [i.e.-construc/ve-no/ce], or

(b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of the purchaser’s counsel as such, or of the purchaser’s solicitor or other agent as such, or would have to come to the knowledge of the purchaser’s solicitor or other agent as such, if such searches, inquiries, and inspections had been made as ought reasonably to have been made by the solicitor or other agent [imputed-no/ce].

(1A) Omission to search in any register or list kept by, or filed with, the Australian Securities and Investments Commission, whether within New South Wales or elsewhere, shall not of itself affect a purchaser of land with notice of any mortgage or charge.• [When-dealing-with-land-transac/ons,-you-don’t-need-to-go-off-and-search-registers-held-by-the-Australian-Securi/es-and-Investments-

Commission- (i.e.- you-don’t-have- construc/ve- no/ce- of- interests- in- land- which-you-would-have- discovered-had- you- searched-the-

company’s-register.)]

(2) This section shall not exempt a purchaser from any liability under or any obligation to perform or observe any covenant, condition, provision, or restriction contained in any instrument under which the purchaser’s title is derived, mediately or immediately, and such liability or obligation may be enforced in the same manner and to the same extent as if this section had not been enacted.

(3) A purchaser shall not by reason of anything in this section be affected by notice in any case where the purchaser would not have been so affected if this section had not been enacted.

• S164-also-applies-to-priority-contests-between-two-unregistered-interests-in-Torrens-Title-land.

‘searches...inquiries...and inspections...[that] ought reasonably to have been made by the purchaser’• You have constructive notice of any interest of which you would have had actual notice had you carried out

the following searches and inspections:(1) Search the title documents:

๏ for old system land, search of title deeds back to a good root of title of at least 30 years old: Conveyancing Act, s 53 (can be absolute transfer or an old system legal mortgage)

๏ Torrens: search of the Register to see what interest the Register discloses.(2) Inspection of the land to ascertain who is in possession (eg, a tenant) or who is using it (e.g. holder of

an easement):๏ Hunt v Luck [1902] 1 Ch 428: A purchaser who knows that any person is occupying or using the

property - whether or not as a tenant - is on notice (constructive) of the occupant’s or user’s proprietary rights and takes subject to them (i.e. you are deemed to have constructive notice of any interest which would have been indicated or discoverable had you inspected the land.)

• The time when the notice is relevant is the time at which the consideration is paid.

R. M. ! (1) Old System Title! 19(1.2.1) GENERAL LAW PRIORITY RULES: CATEGORY A: EARLIER INTEREST IS LOWER IN HIERARCHY THAN LATER INTEREST

(iii) Extension of Protection• [In a priority contest between A who has an earlier equitable interest and B who has a later legal interest. B is going to win if they are a

bona fide purchaser of a legal estate for value without notice - B will take free of A’s earlier equitable interest. If C takes the legal estate from B, C can also shelter behind B’s status as bona fide purchaser of a legal estate for value without notice, even though C had notice of A’s earlier equitable interest, or even if C was a volunteer.]

‣ Wilkes v Spooner [1911] 2 KB 473o The priority enjoyed by a bona fide purchaser of the legal estate for value without notice extends also

to persons claiming through that purchaser, even persons who take with notice of the earlier equitable interest or are mere volunteers. Thus a purchaser who buys with notice from a purchaser who bought without notice ‘may shelter himself under the first purchaser’ [i.e. a subsequent purchaser is in the same shoes as the legal estate holder...even when the purchaser has notice of the original equitable interest.]

๏ Rationale: “ ... in justice to the owner of the land who had no notice when he acquired the land, it would not be right to hamper his power of dealing with his own land, because certain persons, who possibly would be his only customers for the land likely to pay the best price, have such notice.” (i.e. B, once they get priority, should be able to deal with the land free of the earlier equitable interest)

o Exception๏ But protection cannot be claimed by a trustee repurchasing property sold in breach of trust or

a fraudulent party repurchasing property acquired by fraud and then sold to a bona fide purchaser (Vaughan Williams LJ). [e.g. T holding on trust for B. In breach of trust, T transfers legal title to X. A priority contest between the earlier equitable interest of B and the later legal interest of X. X is going to win if X is a bona fide purchaser for value without notice of B’s earlier interest. If X were later to sell the land to Y, Y can shield behind X’s status as bona fide purchaser for value without notice, even though Y had notice that T had transferred in breach of trust. HOWEVER, if X were later to sell to T, T can’t shield behind the protection.]

o In the present case: ๏ The surrender of the lease of Premises #1 to the Landlord was a transfer of the legal lease to the Landlord. The

Landlord was a bona fide purchaser of that legal estate for value (the grant of a new lease to the Son) without notice of the equitable interest of the Apprentice in the lease (the benefit of the restrictive covenant).

๏ The Landlord took free of the restrictive covenant, as did the Son, who took a legal interest from the Landlord (the new Lease). The Son could “shelter” behind the protection of the Landlord even though the Son did have notice of the Apprentice’s equitable interest.

o [Father carried on business of a pork butcher at Premises #1 under a lease that restricted him to that use. Father carried on business as a general butcher at Premises #2 under a lease from a different landlord. Father assigned the lease and sold the business in regard to Premises #2 to his Apprentice. Father granted to the Apprentice a restrictive covenant in respect of his lease of Premises #1 limiting the use to that of a pork butchery. Father negotiated with Landlord of Premises #1 a surrender of his lease and the grant of a new lease to Son, allowing use of the land as a general (and not just a pork) butchery: Issue: Was Son bound by the Father’s restrictive covenant burdening his lease of Premises #1 in favour of Premises #2? No.]

(iv) Tabula in naufragio (plank in a shipwreck); doctrine of tacking• [Prior equitable v later equitable (apply equitable rules concerning dispute between two equitable interest holders) ➞ where the later

equitable interest holder later acquires the legal estate, and wants to rely on the bona fide purchaser for value without notice rule, the Court measures the question of notice at the time that the legal interest holder initially acquired the equitable interest]

• Under the tabula doctrine...o ...if the later equitable interest was acquired for value and without notice (actual, constructive or

imputed) of the earlier, and...o ...if the holder of the later interest subsequently acquires the legal estate in the land...o ...then that holder can ‘squeeze out’ the earlier equitable interest by ‘tacking’ the later equitable interest

onto the legal estate.• By this means, the holder of the later equitable interest is able to invoke the priority that ownership of the legal

estate confers: Brace v Duchess of Marlborough (1728) 2 P Wms 491; Taylor v Russell [1892] AC 244; Bailey v Barnes [1894] 1 Ch 25

• The requirement of purchase ‘without notice’ must be satisfied at the time the later equitable holder acquires that equitable interest...

o But...it is no bar to the doctrine’s application that the later equitable holder has notice of the earlier equitable interest by the time of acquiring the legal estate.

• Example: If the owner of land grants a legal mortgage to A, followed by an equitable mortgage to B, followed by an equitable mortgage to C, then the order of priority is normally A, B and C. But, if C later acquires the legal estate from A (e..g by ‘purchasing’ it from A and taking an assignment of the legal mortgage from A), then C acquire priority over B.

R. M. ! (1) Old System Title! 20(1.2.1) GENERAL LAW PRIORITY RULES: CATEGORY A: EARLIER INTEREST IS LOWER IN HIERARCHY THAN LATER INTEREST

(b) Prior mere equity v later equitable (or legal) interest• Because the earlier mere equity is lower in the hierarchy than the later equitable interest, the later equitable

interest has priority over an earlier mere equity if the later equitable interest was taken bona fide, for value, and without notice of the earlier equity

o Also applies where the later interest is a legal interest: Smith v Jones‣ *Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265

o A mortgagee company (“Latec”) fraudulently exercised its power of sale by selling the mortgaged land to “Southern”, a subsidiary of Latec, who was thus a party to the fraud. The mortgagor (“Terrigal”) had a mere equity in the land because it had a right to set aside the sale. Southern granted an equitable mortgage to MLC Nominees, who as a bona fide purchaser of an equitable interest for value without notice of Terrigal’s prior interest, took free of it.

o [A company ‘Latec’ had been granted a mortgage. The mortgagor (‘Terrigal’) was in default and Latec exercised power of sale, but Latec did so fraudulently by selling the land to a subsidiary company (‘Southern’) (i.e. not regarded as as separate sale because Latec has full control over the subsidiary so it’s almost the same as selling to yourself). That sale was effective to transfer title but the sale could be set aside by the mortgagor because Latec had been guilty of fraud. Because the sale could be set aside, the mortgagor had a mere equity in the land. Southern is a party to Latec’s fraud, so Southern doesn’t get indefeasible title - so Terrigal still has a mere equity in the land. However, Southern grants an unregistered and therefore equitable mortgage to MLC Nominees. A priority contest therefore arises between Terrigal’s earlier mere equity against the later unregistered equitable mortgage held by MLC. MLC wins the contest because they were a bona fide purchaser of an equitable estate for value without notice of Terrigal’s prior interest.]

‣ Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1997) 42 NSWLR 409 o Prior mere equity v later equitable interest

๏ “ ... equities (or mere equities) do not participate in competitions of priorities on the same basis as equitable interests; they may be defeated by equitable interests acquired for value without notice of them; yet they may prevail against equitable interests which are acquired with notice of them.”   ‘... a mere equity, meaning a claim to have an equitable interest which can only be enforced by succeeding in some claim to a court for equitable relief ... does not participate in competitions of priorities with equitable interests which have been acquired in good faith, for valuable consideration and in a manner which can be clearly shown without obtaining any decision of the court upholding them.’

(i) What is a mere equity?• There are different strengths of equitable interests:

(a) strong interests (e.g. equitable trust, equitable mortgage, equitable charge).(b) weak interests (e.g. right to set aside a transaction, right to rectify a document).

• These weak interests are also known as mere equities and are (objectively) not equal or comparable with strong interests.

‣ Westpak Banking Corporation v Ollis [2008] NSWSC 824o On the difference between a ‘mere equity’ and a full equitable interest:

๏ ‘Mere equity’: an in personam right in equity – which requires the intervention of the court to flower into a full equitable estate; (i.e. an in personam right to go to court and get some form of equitable relief — once the court makes it order, the equitable interest arises at the date of the order. Before the order, there is only a mere equity)

๏ An equitable interest: does not [require the intervention of the court to flower into a full equitable estate] because it already consists of such estate.” (i.e. The full equitable interest arises independently of any court order. The court may later give a ruling that an equitable interest existed, but the equitable interest exists prior to and independently of the court order.)

‣ Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1997) 42 NSWLR 409 o A mere equity —

๏ “ ... a mere equity [is] a claim to have an equitable interest which can only be enforced by succeeding in some claim to a court for equitable relief.

๏ Such as: a claim for rectification, a claim to set aside a conveyance obtained by fraud or (as I think) a claim the enforcement of which depends upon the doctrine of part performance) ...” – Bryson J

R. M. ! (1) Old System Title! 21(1.2.1) GENERAL LAW PRIORITY RULES: CATEGORY A: EARLIER INTEREST IS LOWER IN HIERARCHY THAN LATER INTEREST

(ii) What circumstances are there where a ‘mere equity’ rather than an equitable interest exists?‣ Smith v Jones [1954] 1 WLR 1089

o Claim to rectify deed for mistake o [e.g. A and B enter into a deed which gives B an interest in A’s land. But, the deed doesn’t accurately record the true agreement

between the parties. A or B can go to court to get the deed rectified - to have it re-written so it complies with the actual agreement between the parties. Before that is done, B has a mere equity in the land - B needs the assistance of the court of equity to have their claim given effect to]

‣ *Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 o Claim to set aside a transfer on the basis of fraudo [B is the owner of land, B transfers the land to C because of some kind of fraudulent misrepresentation on the part of C or

because of some other fraudulent conduct on the part of C. Legal title has passed from B to C, B however has the right to court to get the deed set aside because it was procured by C’s fraud. From the time of the fraud, the time the land was conveyed to C - B only has a mere equity. If B were to go to court and get an order saying that B’s execution of the deed can be set aside because of C’s fraud, at the time of that order, B would get a full equitable interest in the land. The court order would probably then require C to execute a deed of conveyance back to B. And, at the time of the execution of the deed of conveyance, B would then get a legal interest.]

‣ Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1997) 42 NSWLR 409 o Claim to enforce contract based on part performance? - contentious

๏ - “The mortgage [document] taken by the plaintiff does not identify what debt or other obligation is charged upon the land, and does not set out what agreement was made for the time of payment. It is defective in that it does not comply with the statutory provisions which require interests in land to be created or evidenced in writing.” [Either requires rectification or enforcement on the basis of part performance.] - Bryson J

o [I.e. where you are relying on the doctrine of part performance, you don’t get an equitable interest until the court makes it order. Before the court makes it order, all you get is a mere equity’. cf orthodox position: Even before the order, if the contract is contract enforceable through part performance, and equity would decree specific performance of the contract, you get a full equitable interest]

Is a mere equity a proprietary interest?• It is a proprietary interest in the sense that it can be binding against third parties - it can be binding against

someone other than the party to the deed.• It can be binding against someone who is not guilty of the fraud (i.e. a successor in title to someone who is

guilty to the fraud may be bound by the mere equity)• Mere equity can be left by will: Stump v Gaby (1852) 2 De GM&G 623 cited in Latec Investments.

R. M. ! (1) Old System Title! 22(1.2.1) GENERAL LAW PRIORITY RULES: CATEGORY A: EARLIER INTEREST IS LOWER IN HIERARCHY THAN LATER INTEREST