Monash Law Students’ Society

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Property B
2023
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 TOPIC ONE: MORTGAGES

Mortgagee (Lender) Mortgagor (Purchaser)

Property Rights underMorgagee has a legal fee simple over Mortgagor has an equity of redemption
a General Law the property (equitable right to get the property back)
Mortgage
Property Rights underMortgagee has only a legal charge overMortgagor retains the legal fee simple over the
a Torrens System the land. There is no transfer of title s property. Mortgagor also has a right of
Mortgage 74(2) TLA discharge once the mortgage has been paid off

This charge is a registerable interest (s

72(1A) TLA

• Legal Mortgages
o Torrens System: The mortgage must be registered on the Register of Titles (s 42 TLA)
o General Law Mortgage: The mortgage must be in deed form (s 52 PLA)

Clogs on the Equity of Redemption

Equity will operate in certain circumstances to protect a mortgagor’s rights to redeem the land upon
repayment of the debt. Equity will not allow—
• The mortgagee to fetter or restrict the mortgagor’s right to deal with the equity of redemption
(Toohey)
• The mortgagor to extinguish or give away the entire equity of redemption. Will override those terms to
allow mortgagors to get their property back upon payment of debt, interest and costs
• The mortgagee to postpone the mortgagor’s equity of redemption to such an extent that it renders it
oppressive, illusory or unconscionable (Fairclough).
• The mortgagee to restrict the equity of redemption to a particular person (Salt v Marquess of
Northampton)

National Consumer Credit Code

Does the NCC Apply?

• The National Credit Code will apply to mortgages if the mortgage is secured under a ‘credit contract’
and the mortgagor is a natural person or strata corporation (s 7).
• A credit contract is a contract under which credit is provided (s 4), and credit is where payment is
deferred (s 3).
• It will be a credit contract to which the NCC applies if (s 5)—
Ø The debtor is a natural person or strata corporation;
Ø The purpose of the credit is predominantly for; (i) domestic, personal or household use; (ii) to
purchase, renovate or improve residential property for investment purposes; or (iii) to
refinance credit that has been provided for the purpose in (ii);
Ø A charge must be provided in exchange for the credit; and
Ø The creditor must be in the business of providing credit

• Must not be credit to which the code doesn’t apply (see s 6 NCC)

Requirements under the NCC for Mortgages

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If the NCC does apply, then the NCC sets out special requirements for the mortgage.
Ø Form: the credit contract must be in the form of a ‘written contract’ and signed by the debtor and
credit provider (s 14). A credit contract cannot be oral!
Ø Pre-contractual Disclosure: the credit provider must give the debtor a pre-contractual statement
setting out the matters in s 17 and an information statement in the required form before entering into
the contract: s 16.
Ø 30 Day Notice Period: before a credit provider may take enforcement action under a mortgage
against a debtor or guarantor, the debtor must be in default and the credit provider must serve a
default notice giving the debtor at least 30 days to remedy the default and the default must not have
been remedied: s 88
Ø Failure to Identify: a mortgage that does not describe or identify the property which is subject to the
mortgage is void: s 44(1). Similarly, a provision in a mortgage that charges all the property of the
mortgagor is void: s 44(2)
Ø Third Party Mortgages: third party mortgages are prohibited; that is, a mortgage must not secure
obligations under a credit contract unless each mortgagor is a debtor under the contract or a
guarantor under a related guarantee: s 48

Mortgage Covenants

Covenants to be implied in every mortgage (S 75 TLA)—

Ø Mortgagor will repay the principal and interest on the day appointed;
Ø Mortgagor will repair and keep in repair any improvements on the land;
Ø Mortgagee may enter the land and inspect the state of repair while the mortgage is on foot;
Ø Mortgagor will insure the property.

Mortgagee Rights on Default

1. Right to Sue on Personal Covenant to Repay

• Personal right arising under the mortgage contract to sue for the principal sum and interest
(commonly used where the mortgagee sells the mortgaged property but sale price does not cover
entire mortgage debt)

2. Right to Enter into Possession

• General Law: Title is conveyed to the mortgagee, and therefore the mortgagee has a prima facie
right to possession. If the mortgagee (bank) goes into possession, they have to account for profits etc
and put it towards reducing the debt amount.
• Torrens System: As the mortgagee has only a charge over the land, they do not have an automatic
right to possession. However, legislation gives the mortgagee the right to enter possession of the
mortgaged land on default (s 78 TLA)).

3. Power of Sale (Primary Remedy)

When does the Power of Sale Arise?

o TLA—
§ Mortgagor must be in default for the relevant period (30 days unless mortgage specifies otherwise)
before a notice can be given (s 76(1))
§ Notice must be in writing, describe the default specifically, and state that the power of sale will be
exercised if the default is not remedied (s 76(1))
§ If the mortgagor fails to remedy the default after one month of the serving of the notice or other
such period that is fixed, the mortgagee may exercise the power of sale (s 77)
o National Credit Code (if it applies)
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 § Mortgagor must be in default, and mortgagee must issue the mortgagor with notice in the required
procedure (s 88(2) NCC)
§ Different requirements if mortgagee reasonably believes mortgagor cannot remedy default (see s
88(6) NCC).
§ There must be at least 30 days after the notice has been served before proceedings can
commence (cannot be altered cf. TLA provisions) (s 88(2) NCC).
§ NCC applies in addition to the TLA (s 88(8) NCC).

Power of Sale Provisions

S 77 of the TLA is the section that gives the mortgagee the power to sell up the property to recover its loan,
interest and costs associated with sale of the property. S 77 has two limbs when the mortgagee is exercising
its power of sale, being—

• To Act in Good Faith

o Requires a subjective element of ‘honesty, fairness and a lack of fraud or collusion (Goldcel, per
Murphy J).
o Cannot contract out of the obligation to act in good faith (Nolan)

• To have regard to the interests of the mortgagor, grantor or other persons

o Whether this limb is satisfied depends on the conduct of the mortgagee and their agents (Goldcel).
Factors for consideration include—
§ Price: the mortgagee must take reasonable steps to get the best possible price available for the
property (Goldcel). There is some judicial dispute over whether this means the mortgagor has to
get the ‘best price’ (Goldcel) or ‘proper price’ (Geelong Building Society), though the ‘best price’
test appears the current position.
§ The mortgagee cannot simply accept any price that satisfies the debt (Henry Roach per Lush J)
§ Mortgagee’s Interests: mortgagee is entitled to prioritize their own interests, but must consider
the mortgagor (Henry Roach)
§ ‘Other Persons’: Mortgagee must consider third parties with interests in the property (Nolan)
§ Timing: Mortgagee is not bound to wait to sell at the ‘best time’ (e.g., when the property market is
better) and may sell anytime (Henry Roach)
§ Advertising: There’s no independent duty to advertise (Vasiliou). However, a failure to advertise
may be significant for example, if the land is unique, it should be advertised accordingly, including
highlighting its qualities (Henry Roach).
• Failure to advertise may be irrelevant where the best price was still achieved (Vasiliou).
§ Pre-sale offers: Mortgagee should give consideration to serious pre-sale offers (Henry Roach)
§ Home occupation interest: Mortgagor has no ‘home occupation interest’ as upon default the
has a right to enter into possession and the mortgagor does not have the right to remain in
possession (Nolan).
§ Order of Sale: Where property comprises several lots, there is no general rule as to whether the
mortgagee must sell the lots in the mortgagor’s preferred order (Nolan);
• Where there is no doubt that selling in the mortgagor’s preferred order would discharge the
debt, then failure to do so may be a disregard of the mortgagor’s interests (Nolan), but;
§ Where there is genuine doubt, then failure to sell in said order will not breach the duty
(Nolan).

Application of the Proceeds of Sale (s 77(3))

1. Expenses properly incurred incidental to the sale of the property

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 2. Money owing on the mortgage or charge
3. Money owing on subsequent mortgages or charges
4. The residue to the mortgagor.

Effects of an Improper Sale:

• Injunction: Can seek an injunction (Forsyth)

• Damages: If the incoming purchaser has already been registered, the mortgagor will only have their
remedy in damages (s 77(4))

TOPIC TWO: EQUITABLE INTERESTS ARISING BY OPERATION OF LAW

RESULTING TRUSTS

4. Voluntary Transfer Resulting Trust

• Where A gives legal title over property to B for no consideration.
• Equity presumes that B holds the property on trust for A.

5. Purchase Price Resulting Trust

• Where ownership at law does not reflect the respective owners’ degree of contributions to the
purchase price (PP). This can occur in two types of situations—
a. A and B both put money towards the purchase price, but the property is registered only in A’s
name; or
b. A and B contribute to the purchase price to different degrees (e.g. A contributes 75% of PP, B
contributes 25%)
• In these situations, equity presumes under a purchase price resulting trust that the parties hold
beneficial title to the property in proportion to their contributions.

As a purchase price resulting trust arises only in relation to contributions to purchase price, it is important
to consider what payments form part of the purchase price. These include (Calverley)—

Purchase Price o Actual purchase price of property

o Costs associated with purchase such as registration, stamp duty
o Assuming liability under a mortgage
Not Part of the o Mortgage repayments (only liability under a mortgage is important)
Purchase Price o Loans; home improvements; moving costs etc

If a resulting trust has been presumed, it may still be displaced by—

1. The Presumption of Advancement

• The law acknowledges that in certain relationships, a party may wish to transfer property to the other
in circumstances that would typically involve the presumption of a resulting trust. However, the law
considers the nature of the relationship to provide a reason against inferring such a RR. Accepted
categories of relationships include—
o Husband to wife (but not wife to husband);
o Parent to child (Nelson)
• E.g., If A transfers property to B for no consideration, this would typically involve a voluntary
transfer resulting trust. However, if A is B’s parent, then the presumption of advancement would
operate to prevent such a trust.

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 • This presumption can itself be rebutted by evidence of contrary intention such that a trust will
arise even where the parties are in one of the above relationships. However, this presumption is
not easily rebutted (Buffrey).

2. Evidence of Contrary Intention

• Where evidence has shown an actual intention of A to pass beneficial title to B (Calverley), assessed
at or before the time of purchase (Dodds)
• The actual intention may be express or inferred from words or conduct of A (Dodds).

6. Unconfirmed Presumption of Joint Tenancy

• In Cummins, the HC appeared to suggest, albeit with unclear reasoning, that where a husband and
wife contribute unequally to the purchase price of a matrimonial home, equity presumes that they
intended to hold as joint tenants.
• Whether this is a separate third presumption or merely a factor supporting evidence of a contrary
intention is unclear.

CONSTRUCTIVE TRUSTS

1. Common Intention Constructive Trust

Requires the following elements (Ogilvie)—

(a) An Actual Common Intention:

• Must be actual intention (whether express or implied from words or conduct - Dodds), but not
imputed
• The common intention can be formed at any time, whether before or after purchase (c.f.
resulting trusts)
(b) Detriment
• The detriment must be material but need not be financial (Ogilvie).
• Consider whether there has been loss of opportunity (i.e. have they passed up a job
opportunity due to the new property location?) or extent of labor put into
renovating/maintaining property
(c) Unconscionability
• Finally, it must be unconscionable for A to deny B the beneficial interest. Point to detriment
suffered by B, circumstances of the case demonstrating unconscionability
Note: A common intention constructive trust arises institutionally and can be formed at any time once the
three criteria are satisfied.

2. Joint Venture Constructive Trust (Baumgartner/Remedial Constructive Trust)

Requires four criteria be satisfied (Baumgartner)—

(a) Joint Venture
• There must be a joint venture or endeavor between A or B, whether commercial or domestic
(i.e., opening a bookstore with a business partner, buying a matrimonial home with spouse)
(b) Pooling of Resources
• A pooling of resources for the joint venture must occur. The resource pool includes—
o Pooling financial resources (e.g., through joint accounts)
o Contributions to Purchase Price

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 o Non-financial contributions such as building and renovating (Dodds), but not domestic
work such as cleaning or raising children. Parji has, however, suggested that domestic
duties ought to be considered.
(c) Ending of Joint Venture w/o Attributable Blame
• There must be no attributable blame or wrongful conduct for the joint venture ending
(d) Unconscionability

TOPIC THREE: CO-OWNERSHIP

Types of Co-ownership

1. Joint Tenancy
• Co-owners jointly hold the same interest (A and B jointly have 100% interest – this is different to a
50% interest each)
• Once a joint tenant deceases, their interest goes to the surviving joint tenant(s) and not their estate
(right of survivorship)
• The four unities must be present for a joint tenancy (see below)

2. Tenants in Common
• Co-owners hold distinct, separate shares in the property. These can be in any proportion (e.g., 50/50,
30/70)
• Implied to exist where words of severance (e.g., ‘to be divided between’, ‘to A and B respectively’, ‘in
equal shares’) are used in the instrument creating co-ownership
• There is no right of survivorship – upon death, the interest will form part of their estate.

Common Law
• Under common law, it is presumed that co-owners are joint tenants if the four unities are present and
there are no words of severance
• Common law position also under statute (see s 30(2) TLA; s 33(4) TLA)

Unity Description
Unity of Each joint tenant is entitled, concurrently with each-other, to possession of the whole
Possession property
Unity of The interest of each joint tenant must be the same in (a) nature (e.g. fee simple), (b) extent
Interest (e.g. ½ share), and (c) duration (e.g. two years).
Unity of Title Each joint tenant must acquire their interest under the same instrument or act (e.g. both
derive title under the same contract of sale).
Unity of Time The interest of each joint tenant must vest in possession at the same time.

Equity
• Equity will follow the position at law unless any of the following situations apply for equity to consider it
a tenancy in common (Malayan Credit)—
o Unequal Contributions to Purchase Price (see topic on resulting trusts)
o Co-owned Mortgages
o Business Partnership Property (where land is acquired by partners for their business)
o Separate Business Purposes (where land is held by persons conducting separate business
enterprises on the land e.g., A uses north side of building as marketing office space, B uses south
side as a law firm office)

Rights and Duties of Co-Owners Inter Se

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1. Right to Possession
• Each co-owner has the right to possession of the whole of the property. Failure to provide for the right
to possession by another co-owner may allow the aggrieved co-owner to seek occupation rent (a form
of compensatory claim)
• Whilst a co-owner who has chosen not to exercise their right of possession cannot seek occupation
rent from occupying owners, VCAT may order reimbursement or compensation be paid under s
233(1) PLA between co-owners for—
o Exclusion (s 233(3)(b) PLA); or
o Detriment: where it was impractical for the aggrieved co-owner to occupy the land with the
other co-owner (think situations such as domestic violence) (s 233(3)(c) PLA).

2. Improvements to the Land

• VCAT may order compensation or reimbursement under s 233(1) PLA for improvements to the land
(NB: Only able to be ordered as part of sale or division of property)
• In determining the quantum, VAT must take into account (s 233(2) PLA)—
o Amounts reasonably spent to improve the land
§ ‘Reasonably spent’ is interpreted as the lesser of (proportionate to their share in the
property) the actual cost of the improvements and the increase in value of the property
resulting from the improvements (Boulter)
o Costs reasonably incurred to maintain or insure the land.
o Payments of a disproportionate share of rates, mortgage repayments or outgoings.
o Damage caused by unreasonable use of the land (e.g. voluntary waste).

3. Rents and Profits

• If a co-owner is producing rents or profits from the land, they are liable to account to other co-owners
for amounts over and beyond their just or proportionate share (s 28A PLA)
• A claim can be brought either as; part of an application for the sale or division of the land (s 233(1)(b)
PLA); or during the life of the co-ownership (s 234 PLA).
• Exception: Co-owners need not account for profits they have gained through their own capital or
labour, where the other co-owners did not contribute (Henderson).

4. Right to Alienate and Encumber Land

• Co-owners have a right to alienate or encumber their interest in the co-owned property.
• Co-owners do not require the consent of other co-owners to alienate their interest in the property, and
further do not require consent of co-owners to encumber land (but cannot do anything that excludes the
rights of other co-owners)

Adverse Possession between Co-Owners

• Time will start to run against the passive co-owner when the active co-owner is in exclusive
possession of more than their share of the land (s 14(4) LAA)

Severance of Joint Tenancies

Unilateral Severance
• Alienation: will sever a joint tenancy where one joint tenant alienates their interest to a Third party,
another joint tenant, or themselves (s 72(3) PLA)
• Encumbering Property: in some instances, where a joint tenant encumbers their interest in property, it
may sever the joint tenancy—
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 o Easement: doesn’t sever the joint tenancy. The easement will be enforeceable against co-
owners so long as it doesn’t substantially interfere with their rights of possession
o Mortgage: A Torrens System mortgage won’t sever a joint tenancy given it is only a security
interest. However, a general law mortgage will sever a joint tenancy as it conveys title to the
mortgagee (this is basically alienation as above)
o Lease: will temporarily suspend a joint tenancy to make the lessee a joint tenant with the other
joint tenants during the lease (Unger). After expiry of lease, joint tenancy will revive.
• Severance by Merger: where a joint tenant acquires a new or further estate in the co-owned property
• Severance by Specifically Enforceable Contract (Tanwar)

Agreement to Sever
• Will sever a joint tenancy where there is a common shared agreement (whether express or implied
from words or conduct) between all joint tenants and will be effective in equity immediately upon the
execution of the agreement even if the agreement only provides for severance upon future events that
aren’t certain to occur (Pfeiffle)

Course of Dealings
• Will sever a joint tenancy where conduct from all joint tenants suggests that they are treating
themselves as having separate and distinct shares in the property (Williams) (e.g., if they physically
divided the property)

Severance other than by an Act of Joint Tenant(s)

• Bankruptcy
• Homicide (Rasmanis v Jurewitsch)
• Court Order

If one or more co-owners apply to VCAT, VCAT may order under s 225(2) of the PLA a physical division of
the land, sale of land and division of proceeds amongst co-owners or a combination of these options.
Preference is given to a sale unless it’s fairer or more just to order a division (see factors under s 229(2)).

VCAT has broad powers to make any order it thinks fit to ensure just and fair sales or divisions (s 228(1)) and
may make orders under s 232 PLA regarding the sale process, reserve price at auction, independent
valuations and that all necessary documentation is made available and properly executed.

TOPIC FOUR: INTRODUCTION TO THE ENFORCEABILITY OF PRIORITY INTERESTS

• From time to time, situations arise where there are inconsistent interests. When this occurs, it is relevant
to determine which interest has priority over the other.
• In resolving priority disputes, there have been two different approaches to what should be prioritized.
These approaches are—
o Security of Title; and
§ Places greater emphasis on the rights of the original holder of title. Even where the holder of
a later acquired interest acted bona fide and couldn’t have been made aware of the earlier
interest, security of title will prefer the original interest.
§ Based on the principle of nemo dat quod non habet (you cannot give what you do not have)
o Security of Transaction
§ Places greater emphasis on protection of bona fide purchasers who have taken reasonable
steps to ensure that they are obtaining good title. The original holder of title’s interest will be
defeated.
• Whilst the General Law favoured security of title, the Torrens System favours security of transaction
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Priority Rules for General Law Land:

Ø Prior and Subsequent Legal Interests:

o Prior legal interest prevails.
Ø Prior Legal and Subsequent Equitable Interest:
o Prior legal interest prevails.
Ø Prior Equitable and Subsequent Legal Interest:
o Equity will give priority to the subsequent legal interest, provided the interest holder is a ‘bona
fide purchaser for value without notice’.
o Equity will favour the prior equitable interest if the purchasers of the legal interest took with
notice of the prior interest.
Ø Prior and Subsequent Equitable Interests: Generally, the prior equitable interest prevails.

TOPIC FIVE: OVERVIEW OF THE TORRENS SYSTEM OF TITLE

Priority Rules for Torrens System Land

Ø Competing Registered Interests:
o Prior registered interest holder will prevail (s 34(1) TLA)
Ø Competing Registered and Unregistered Interests:
o Registered interests take priority over unregistered interests, unless an exception to
indefeasibility applies (s 42 TLA)
Ø Competing Unregistered Interests:
o Topic 8.

Torrens System Principles::

Ø Curtain Principle: Purchasers may rely on the register and need not inquire as to how the vendor
acquired title.
Ø Mirror Principle: The register should accurately reflect the state of title to land.
Ø Insurance Principle: Those who suffer lose from operation of the Torrens System should be
compensated.

TOPIC SIX: INDEFEASIBILITY OF TITLE

Indefeasibility:

• Operates to provide immunity from attack by adverse claims to the land or interest (Frazer, per Lord
Wilberforce).
• The word ‘Indefeasibility’ is not used in the TLA. Instead, indefeasibility is merely the word used to
describe the effect of five provisions of the TLA, being—
o The Sterility Provision (s 40 TLA)
§ Until an instrument is registered, it will not be effective to create, vary, extinguish or pass any
estate, interest or encumbrance in land
o The Conclusive Evidence Provision (s 41 TLA)
§ Particulars listed on a folio of the Register can be taken as conclusive evidence (i.e, if Sally
is listed as the registered proprietor on title, then Becky is entitled to rely on this as
conclusive evidence that Sally is indeed the owner.
o The Indefeasibility Provision (s 42 TLA)
§ Provides that, except in the case of fraud, the registered proprietor holds the land subject to
encumbrances listed on title, but ‘absolutely free’ from all other encumbrances.

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 § If Becky becomes registered proprietor and there was an equitable easement not registered
on title, she does not take the land subject to this.
o The Notice Provision (s 43 TLA)
§ Provides that registered interests over land aren’t affected by either actual or constructive
knowledge of a trust or unregistered interest
§ I.e., even if Becky was aware that there was an unregistered easement prior to purchasing
the property, she still won’t be subject to it.
§ Knowledge of an unregistered interest does not amount to fraud (s 43 TLA)
o The Purchaser Protection Provision (s 44 TLA)
§ Folios procured by fraud are void against the defrauded party

Priority Disputes under Torrens System Land:

3. Between Two Competing Registered Interests

• The prior registered interest will prevail (s 34(1) TLA).
• Instruments are registered in the order that they are lodged (s 34(1)). Hence, the prevailing prior
interest is the one that has been lodged first (s 34(1)).

4. Between an Unregistered Interest and a Registered Interest in Land

• Registered interests take priority over unregistered interests unless the holder of the unregistered
interest can establish an exception to indefeasibility (s 42 TLA).

Deferred v Immediate Indefeasibility:

• Historically, it was once considered that indefeasibility was ‘deferred’ until the title was registered
without fraud (‘deferred indefeasibility’): Gibbs. This meant that the registered proprietor (C) had to
be one step removed from the fraud to obtain indefeasibility.
o E.g. If B obtains title fraudulently from A, B wouldn’t have indefeasibility. However, if B passed
the property to C, who is a bona fide purchaser for value without notice, C will obtain
indefeasibility.
• The modern approach is that of immediate indefeasibility (Frazer v Walker, approved by HCA in
Breskvar). Indefeasibility will attach immediately upon registration, and only an exception to
indefeasibility will make the title defeasible.

Scope of Indefeasibility:

Leases
• Indefeasibility attaches to all lease covenants touching and concerning the land (Mercantile Credits)
• Think back to Property A to remember what ‘touches and concerns’ the land. The touch and concern
test is satisfied by an option to renew the lease, but not the option to purchase (Mercantile Credits)

Mortgages
• T he scope of indefeasibility depends on the type of mortgage, whether—
o A Traditional Mortgage: secures a specific fixed sum (e.g. $500,000.00) and contains all the
covenants within the registered mortgage itself
o All-Monies Mortgage: does not secure a fixed sum, but rather monies owing from time to time (i.e.,
in June may owe $100,000.00, by October may owe another $300,000.00. The mortgage would
cover both figures). Covenants are usually contained in an off-register loan agreement as opposed
to the registered mortgage

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Whether a indefeasibility extends to the personal covenant to repay the money depends on two factors being
satisfied—

1. The Mortgage Successfully Secures the Debt; and

Mortgage Type Successfully Secures Debt?

Traditional Yes—all covenants are contained in the registered mortgage itself, which obtains
Mortgages indefeasibility
All-Monies Disputed. The NSW position is that indefeasibility only attaches to the registered
Mortgages instrument and not the off-register loan agreement lending the money (Perpetual). This
would mean that there is still an indefeasible mortgage, just not one that secures the
loaned amount.

However, the VIC position is that off-register loan agreements whereby the money is
lent may be brought under the umbrella of indefeasibility if the registered mortgage is
appropriately worded to incorporate the off-register agreement (Solak).

2. The Covenant to Repay is Within the Scope of Indefeasibility

If the mortgage is fraudulent, is the personal covenant to repay still indefeasible?

Common Law The personal covenant to repay may be validated by registration in certain situations
Vic Position (Pyramid Building Society)
Common Law Registration of a fraudulent mortgage only works to charge the land with the debt and
NSW Position cannot make the registered proprietor personally liable. Hence if the mortgage amount
is $1m and the property is only sold for $800,000, the lender cannot retrieve the
shortfall of $200,000 from the registered proprietor. This is the preferable view to that in
VIC.
TLA Position S 87D: If the mortgagee is not party to the fraudulent mortgage and is eligible for
(implements the compensation under the assurance fund, the amount that the bank can demand for a
NSW position discharge of mortgage must not exceed the value of the estate or interest in land at the
across Aus) time before registration of the fraudulent mortgage, being the amount payable from the
assurance fund under s 110(4)(c)
- E.g., if house was worth $800,000 at the time just before the registration of
mortgage, the state will only provide compensation of $800,000 (even if the
house is now worth $1.5mil) and the bank must discharge the mortgage
S 87E: The same as s 87D but applies where the land has been sold under the
fraudulent mortgage.

TOPIC SEVEN: EXCEPTIONS TO INDEFEASIBILITY OF TITLE

FRAUD

Fraud is an exception to indefeasibility under s 42 TLA (‘the RP of the land shall, except in the case of
fraud, hold such land subject to such encumbrances as are recorded… but absolutely free from all other
encumbrances).

To establish fraud as an exception to indefeasibility, three things must be made out—

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1) Fraudulent Conduct

Fraud under s 42(1) of the TLA refers to ‘statutory fraud’, being actual dishonesty, moral turpitude, a willful
and conscious disregard or violation of the rights of another’ (Assets Co). With this as our over-arching test,
we can consider whether different categories of behavior constitute fraud.

a) Notice of Fraud
• Notice of another person’s fraud will only be itself fraudulent conduct if the registering party had actual
knowledge of the fraud or was willfully blind (i.e., their suspicions were aroused and they chose to
ignore it for fear of learning the truth) (Assets Co). Negligence (where the registering party would have
discovered fraud if they had been more careful) or no knowledge is not sufficient (Assets Co).
b) Fraudulent Misrepresentation
• If the fraudulent misrepresentation has been made prior to registration to induce the transaction, then
it is fraud (Loke Yew). The misrepresentation must have been false from the beginning—it cannot
have started off being true until the party changed their mind etc.
c) Colourable Mortgage Sales
• If a mortgagee consciously misuses their power of sale (e.g., by setting the reserve price prohibitively
high) to sell to a related party, this is fraudulent conduct (Latec)
d) Impersonation
• If somebody has impersonated the registered proprietor to induce the transaction (e.g., when signing
documents), this is a clear case of fraudulent conduct (Grgic)
e) Forgery
• Forging signatures is dishonest and meets the Assets Co test so is fraud (Grgric)
f) Want of Due Care
• Mere negligence or less than meticulous practice is not fraudulent conduct (Pyramid). Whilst maybe
immoral, there is no actual dishonesty in their behavior.
g) False Attestation
• If the person has falsely attested the signature of a impersonator through a want of due care in
verifying their identity, this is not fraudulent conduct (Grgic).
• It is also not fraudulent conduct if the falsely attesting witness didn’t comprehend the legal
consequences of false attestation (i.e., that it is fraud on the register), this won’t be fraudulent conduct
(Russo). Consider the experience and subjective knowledge of the falsely attesting witness.
h) Lodging a Document for Registration with a False Attestation
• If the lodging party knows that the document has been falsely attested and understands the legal
consequences of registration, this is fraud (De Jager)
• If the lodging party has no knowledge of the false attestation, there is no fraud (Russo).
i) Notice of a Prior Interest
• Not fraud – see s 43 TLA

2) Conduct Occurred Prior to Registration

For the fraud exception, the fraudulent conduct must occur prior to registration (Bahr, per Wilson and Toohey
JJ) (c.f. in personam claims)

3) Fraud was Operative

Finally, fraud must ‘operate on the mind’ of the person defrauded (Bank of SA)
• Consider whether the actions were carried out to harm, cheat or be dishonest to the defrauded party
(Bank of SA)

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4) Fraud must be able to be Brought Home

• Must be able to be ‘brought home’ to the person on the register (Schultz)

• This is usually only an issue where the person on the register is not the person who has committed the
fraudulent act.
• Where fraud was committed by a party who is not on the register, agency principles must be used to
bring the fraud home to the person on the register.

a) Agency Principle 1: Respondeat Superior

• An agent’s fraud can be imputed on the registered proprietor (the principal) if the agent had been
acting in the course of their actual or ostensible authority (Schultz).
• Conflicting interpretations on what falls within ‘acting in the course of their actual or ostensible
authority’—
o Broad Interpretation (Dollars & Sense): will be acting in the course of authority where the
agent’s actions were so closely connected with their authorized tasks that they could be
regarded as an improper mode of performing them
o Narrow View (Schultz): Not within the course of their authority if they are ‘on a frolic of their
own’

b) Agency Principle 2: Knowledge

• Where the agent has actual knowledge that a third party committed fraud and the agent is under a
positive duty to communicate, there is a irrebuttable presumption that the agent told the proprietor
and fraud will be brought home (Schultz; Dollars & Sense).
• Where the agent themselves has committed fraud, there is only a rebuttable presumption. It’s still
presumed that the agent told the proprietor, but you can rebut it by putting someone on the witness
stand (Schultz).

VOI Requirements

There is a requirement for mortgagees to verify the identity and authority of the mortgagor to execute a valid
mortgage (s 87A(1) TLA). If there is fraud and the mortgagee hasn’t conducted these checks, the mortgage
becomes defeasible (s 87A(3) TLA).
• The mortgagee will have taken ‘reasonable steps’ if they act in accordance with either:
o Registrar’s Requirements for Paper Transactions (Version 7) (paper conveyancing)
o The Participation Rules (Version 5) (e-conveyancing)
• The key requirements of the VOI regime include that verification must be conducted in a face-to-face
interview, and the mortgagee must produce original documents in one of the category tables (starting
with category 1), which must be sighted and retained by the mortgagee. The mortgagor must be satisfied
that the photo IDs have a reasonable likeness to the mortgagee.

Relief in Personam

Indefeasibility ‘in no way denies the right of a plaintiff to bring against the registered proprietor a claim in
personam, founded in law or in equity for such relief as a court acting in personam may grant’ (Frazer, per
Lord Wilberforce). To make out an in personam claim, there must be—

1. A ‘known cause of action’

Known Causes of Action Not Known Causes of Action

§ Breach of contract § Negligence (Pyramid) Though unclear
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 § Breach of trust (constructive or express) § Fraud (Vassos)
(Bahr) § Mere forgery (Vassos; Grigic)
§ Breach of duties as custodian of certificate of
title (Gosper, per Mahoney J)
§ Equity of Redemption (Gosper, per Kirby J)
§ Breach of statutory duties (Grgic)
§ Vitiating factors in equity

2. Conduct that was ‘unconscionable’

• Vassos suggests that some form of unconscionable conduct is required

Note: the conduct giving rise to in personam claims can arise either before or after registration (c.f. fraud)

Paramount Interests

Paramount interests are unregistered interests in a piece of land that will prevail over the registered interest.
These include (s 42(2) TLA)—
• Crown Reservations • Public Rights of Way
• Adverse Possession • Easements
• Interests of Tenants in Possession • Unpaid Taxes and/or Rates

Interests of Tenants in Possession:

• Interest is construed broadly as to encompass any ‘equitable interest to which occupation is incident’
(Downie). This includes an option to renew the lease and equity of rectification, however, does not
include the option to purchase.
• NOTE: The paramount interest of tenants in possession doesn’t automatically give priority to tenants in
possession over every registered interest. Instead, it stripts registered interests of indefeasibility and the
prevailing interest is determined by reference to priority rules for competing unregistered interests
(Perpetual).
• In mortgage scenarios, the following will occur—
o Prior Lease and Subsequent Registered Mortgage: Registered mortgage stripped of
indefeasibility (Perpetual) and determined according to priority rules for competing unregistered
interests
o Prior Registered Mortgage and Subsequent Lease: Creation or variation of a lease is not valid
against mortgagee unless mortgagee has provided consent (s 87C TLA) and mortgagee can apply
to remove the lease in the absence of consent (s 88A TLA).
o Where the lease comes into existence after the mortgage is created but before the mortgage is
registered: Where the mortgage is created (but not registered) first, the mortgage takes priority
(Balanced Securities).

Registrar’s Power to Correct Errors

See ss ss 44Q, 103(1), 103(2)(a), 103(2)(b), 106(1)(e) TLA. These sections allow the Registrar to correct
obvious errors (e.g., spelling errors) on the Register, but not substantive errors (Fraser).

Inconsistent Legislation

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Subsequent legislation inconsistent with indefeasibility provisions in the TLA may strip the RP of
indefeasibility. This may occur where legislation creates an unregistered interest that takes priority over
registered interests (see Calabro) or otherwise invalidates a registered interest (Horvath)

1. Determine whether there is an inconsistency

• The court is very reluctant to find inconsistency, and there is a high bar.
• For there to be inconsistency, the two Acts must be so repugnant to each other that they cannot stand
together (Horvath).
o This means that the allegedly inconsistent Act must operate in the same sphere as the TLA
(Calabro), that is, the vesting/divesting of title.
Often, the allegedly inconsistent act may appear to be inconsistent by affecting the process before registration
(e.g, by stating that a certain formality must be met prior to registration). However, this is not inconsistent
because this only affects the process before registration, and not the registration (vesting/divesting of title)
itself. Registration will cure any defect in process that occurred prior to registration.
Volunteers

Two conflicting positions—

• NSW Position
o Provides that volunteers do obtain indefeasible title (Bogdanovic)
• VIC Position
o Provides that volunteers do not obtain indefeasible title (Rasmussen; applied in King v Smail).
o Note the recent case of Zekry v Zekry, which appears to signal a shift in the Victorian position.

Compensation under the Assurance Fund

Eligibility:
The following people are entitled to be indemnified for loss or damage whether by deprivation of land or
otherwise by reason of (TLA s 110)—
(a) Bringing land under the Torrens System.
(b) Any amendment of the register (e.g. encumbered by a mortgage) (NB: most common).
(c) Any error/omission/misdescription of the register or the registration of any other person as proprietor
(NB: overlap between (b) and (c)).
(d) Any payment or consideration given on the faith of the register.
(e) The loss or destruction of any document lodged at the Office of Titles.
(f) Any mistake/omission/misfeasance of the registrar (or an officer).
(g) The exercise by the registrar of any power conferred on him, where the person suffering loss or
damage has not been a party or privy to the application.

Restrictions:
Persons will not be eligible for compensation (s 109(2) TLA)—
(a) For any loss, damage or deprivation occasioned by a breach of trust (NB: bring action against the
Trustee).
(b) Where the same land is included in multiple crown grants.
(c) For loss, damage or deprivation occasioned by the inclusion of land in a folio through misdescription
of boundaries or parcels of land unless the person liable for compensation cannot pay.
(d) For loss or damage arising from the registration of a plan of subdivision that appeared to be certified
by the council.
(e) For loss or damage arising out of the registration of a plan of subdivision where the registrar has
treated consent as made on behalf of a person whose consent is required.

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• Neglect:
o Compensation isn’t available where the aggrieved party, their agent, conveyancer or solicitor has
caused or substantially contributed to the loss by fraud, neglect or wilful default (s 110(3)(a) TLA).
§ ‘Substantially contribute’ means a large portion of the loss (Fairless).
§ ‘Neglect’ means a failure to take reasonable care for one’s own interests (Fairless).

Note: Under the Statute of Limitations, applications for compensation must be made within six years (s
5(1)(d) LAA)

TOPIC EIGHT: UNREGISTERED INTERESTS UNDER THE TORRENS SYSTEM

The Caveat System

Parties claiming a caveatable interest in land under an unregistered instrument may lodge a caveat with the
Registrar, forbidding registration of any instrument affecting such estate or interest, either absolutely or
conditionally (s 89(1) TLA).

Can it be Caveated?
• Only ‘caveatable interests’ can be protected, including full equitable interests, but not mere equities
(Crampton).
• Registered proprietors cannot caveat their registered interests (e.g. to stymie an improper exercise of
the mortgagee’s power of sale) unless they can show a separate and distinct interest above the
existing registered interest (Swanston).

Effect of Caveat:
The effect of a caveat is to prevent subsequent interests from being registered (is a ‘freeze’ on the Register).
Caveats will stay on the register until one of three things happens:
1. The caveator withdraws the caveat;
2. An inconsistent dealing is lodged for registration, after which a notice is issued and 30 days are given
to act (either withdraw caveat or institute proceedings). If the caveator does nothing, the caveat will
lapse
3. The caveat is removed under s 89A or s 90

Removal of Caveat:
Caveats may be removed from the Register via:
Withdrawal Caveator removes the caveat themselves (s 89(1) TLA)
Lapse If another person lodges an instrument for registration that is inconsistent with the caveat,
the caveator has 30 days to either consistent to registration of the instrument (s 90(1)(a)
TLA) or commence court proceedings to establish the validity of their own caveat (S
90(1)(b)) If the caveator doesn’t act, the caveat will lapse and the instrument will be
registered
App. to A party interested in the land may apply to the Registrar to remove a caveat (s 89A(1) TLA)
Registrar (NB: see also s 89A(2), 89A(3), 89A(5) TLA).
Court Order Parties adversely affected by a caveat may bring proceedings to remove the caveat (s 90(3)
TLA). The Court essentially treats this like an interlocutory injunction (Piroshenko) and the
caveator must prove to keep their caveat that:
o There is a serious question to be tried; and
o The balance of convenience favours sustaining the caveat.

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Once removed, a caveat cannot be renewed for the same interest (s 91(4) TLA). Further, if persons have
vexatiously or frivolously lodged caveats and cause loss to others, compensation is payable under s 118 TLA)

Priority Notices

A priority notice is a notification of intended dealings in land (s 91C TLA) and prevents the registration of any
other instruments of land for 60 days (except those that don’t require a certificate of title, such as caveats) (s
91C TLA). A priority notice can be extended for another 30 days to bring the length of the notice to 90 days.
• Consider whether a caveat or priority notice is a better fit. E.g., If there is a 100 day settlement over
property, a priority notice is not going to protect until settlement.

Competing Equitable Interests under the Torrens System

Where there are competing unregistered interests in land, the following tests are used to determine which has
priority—

Notice Test
As a starting point, the prior interest holder will have priority if the second interest holder had notice (actual or
constructive) or the prior interest (Moffet, per Brooking JA). Exceptions to this rule apply where (Moffet)—
• The prior interest holder has waived their interest
• The prior interest holder induces the second interest holder to believe that the first interest no longer
exists

If there is no notice, continue on to the Merits Test.

Merits Test
The merits test considers which interest holder has the better equitable interest according to all circumstances
of the case, including the conduct of the parties (Rice). However, there are two different expressions of the
merits test, being—

a) The Prima Facie First in Time Approach (Abigail, per Dixon J)

• The first interest will take priority unless there is postponing conduct on the part of the prior interest
holder that justifies giving priority to the second (Abigail per Dixon J).
• Postponing conduct may include the following categories—

Arming Where prior interest holder arms another party to hold themselves out as owner, enabling the
Cases third party to deal with the property as if they are the owner. Eg., by
• Giving over CoT (Abigail; Breskvar)
• Handing over executed transfer documents (Abigail)
• Failing to qualify transfer documents as by way of security only (Abigail)
• Not obtaining CoT when entitled to it (Rice)
• Giving TP receipt acknowledging purchase monies when money remains outstanding
(Heid)
• Handing over blank transfer documents and authorizing TPs to execute them upon default
(Breskvar)
Failure to Not in of itself postponing conduct, but forms one consideration in determining if there has
Caveat been postponing conduct.

A failure to caveat may be postponing conduct when combined with the following factors—
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 • Lodging a caveat would be the only way for the prior interest holder to protect themselves
(Just Holdings)
• It was practical and prudent to lodge a caveat (Fairclough; Garnock)

A failure to caveat is unlikely to be postponing conduct where—

• The other party also failed to caveat or delayed in doing so (Just Holdings)
• There was a reasonable belief that a caveat was unnecessary due to the relationship
between the parties (Jacobs)
• There was a good reason to not caveat, such as in domestic settings as to prevent
relationship breakdown (Jacobs)
• The prior interest holder had taken other steps to protect themselves, such as by holding
CoT (Just Holdings)

b) The Better Equity Test (Rice)

• Under this approach, the better equitable interest will prevail. It is only if the interests are in all
respects equal that the prior interest holder then takes priority.
• In determining which party has the better interest, consider—
o The conduct of both parties
o Circumstances of acquisition (Rice)
§ Possession of CoT favours the possessor (Rice). If one party had the right to obtain
CoT and didn’t, this weighs against them.
o Whether a caveat was lodged
o Whether the prior interest holder attempted to protect their interest in any way (Just Holdings)
o Whether the prior interest holder had in any way contributed to the creation of a subsequent
interest

Doctrinal Basis:
If it appears that postponing conduct has been made out, it is necessary to select a doctrinal basis for
postponing an interest. There is judicial dispute about which doctrinal basis best supports postponing,
whether—
• Estoppel (Heid, per Gibbs CJ)
o If prior interest holder induces an assumption that the property is unencumbered, and the second
interest holder acts on this to their detriment, the prior interest holder may be estopped from
asserting their interest (i.e. postponed)
• Reasonable Foreseeability (Heid, per Deane and Mason JJ)
o If it is reasonably foreseeable that acting in a certain way would cause a subsequent interest
holder to assume that the property was unencumbered and create a subsequent interest, the prior
interest holder’s interest will be postponed.
• Causation (Heid, per Murphy J)
o If there is a causal connection between the conduct of the prior interest holder and the creation of
the second interest.

Competition between a Prior Equity and Subsequent Equitable Interest

Equities = ‘a claim to have an equitable interest which can only be enforced by succeeding in some claim to a
Court for equitable relief’ (Double Day Newspapers, per Bryson J). e.g.—
• Equity of rectification (right to have a written agreement rectified to correct a mistake or reflect
alterations orally agreed to but not incorporated in writing)
• Equity to set aside a fraudulent transaction, though there is judicial dispute as to whether this is a
mere equity or full equitable interest

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 o Latec Investments: It is only a mere equity (NB: Kitto J held the right begins as a mere equity,
but ripens into a full equitable interest after the Court makes an order to set aside the
transaction).
o Breskvar: Treated the right as a full equitable interest.
• An equity arising out of an estoppel

A subsequent equitable interest will take priority over a prior mere equity unless there was notice of the prior
equity or failed to provide consideration (Latec)

Priority Disputes between a Mortgagor and a Purchase from a Mortgagee:

• Mortgagor and Innocent Purchaser (s 77(4) TLA): Incoming purchaser has priority. Where sale is
exercised improperly, mortgagor is only entitled to damages from the mortgagee.
• Mortgagor and Fraudulent Incoming Purchaser (Latec): Mortgagor has an equity to have the fraudulent
transaction set aside
• Mortgagor and Incoming Unregistered Purchaser: Purchaser only has an equitable interest due to
specifically enforceable contract for sale.
• Mortgagor cannot caveat to stymie the sale (Swanston), but can seek an injunction (Forsyth),
because:
o The mortgagor is still the registered proprietor of the fee simple and has a full legal interest in the
land that precedes the equitable interest of the incoming purchaser; and
o Mortgagor has an equity of redemption that is ongoing and is not extinguished by the contract for
sale

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