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Old System Priorities Prof Cameron Stewart. Types of legal estate Freehold estates Fee Simple – closest to absolute ownership - rules of primogenture.

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Presentation on theme: "Old System Priorities Prof Cameron Stewart. Types of legal estate Freehold estates Fee Simple – closest to absolute ownership - rules of primogenture."— Presentation transcript:

1 Old System Priorities Prof Cameron Stewart

2 Types of legal estate Freehold estates Fee Simple – closest to absolute ownership - rules of primogenture – escheat 1540 Statute of Wills - later recognition that can be passed by will – “simple” meant that it could pass to any heir unlike the fee tail which must pass to particular heirs

3 Freehold Absolute interest Determinable interests – the occasion of some event will cause the fee simple to revert eg “to y and his heirs so long as St Paul’s Cathedral shall stand” - a possible or latent reverter interest - words used “while”, “during”, “so long as”, “ until”

4 Freehold Conditional – a subsequent condition on the devise which states that the occurrence of some event will allow the grantor to take back the interest eg “to Y and his heirs on the condition that the property is not used to sell liquor” – only exercised by right of entry words used “on the condition”, “but if”, “provided that”

5 Fee tail Fee tail- a disposition that would last only while the heirs of that person would last – if they died out the interest would revert back to the heir of the original owner – way of keeping land in the family and restraining any disposition Tail male – male descendents specified Tail female – female descendents Special tail – the descendants of a particular wife

6 Fee Tail Made possible in De Donis Conditionalibus – lords wanted control over who would get estate – so that despite any attempt to alienate the interest the interest would past to the designated heir on death Barring the entail - Common recovery/fine = collusive court actions Now abolished Cact 19

7 Life estate Life estate – granted to a person for life – Pur autre vie – for the life of another – “to A for the life of B” or where A has a life interest (“to A for life”) and A alienates that interest during his life time In either case when the life tenant died the interest terminated

8 Future interests Already apparent that estates allow in to be granted for the future eg “to A for life and then to B in fee simple” B’s estate is a future estate – it doesn’t come into being until the death of A Reversions – a grant of an estate in possession which returns to the grantor eg X grants and life estate to Z hence X is the reversioner

9 Future interests Remainders - a grant of a future interest to some one who did not have a previous interest – eg to W for life and then to Y in fee simple – Y is the “remainderman” or “remainder”

10 Vested and Contingent Remainders the rules concerning future interests require the interest to vest or “fructify” by a certain time – if it does not then the interest will fail An interest vests when the identity of the interest holder is ascertained and when there is no condition precedent other than the normal determination of prior estates “to A for life and then to B in fee simple” - Vested To A for life remainder to B in fee simple if B attains 25 years - Not vested

11 Vested and Contingent Remainders To A for life remainder to B in fee simple if B attains 25 years - Not vested Why? B’s interest is contingent unless he has already achieved the age of 25 when the clause was written – that is the fact that he must be 25 is a contingency which must be satisfied for the property to vest in him

12 Interests in Land that are less than freehold Leases Easements Profits a Prendre Restrictive Covenants Mortgages

13 Old System Title Feoffment with livery of seisin Charter of feoffment Deeds – Lord Westbury “disgusting” Chain of title

14 17 th Century changes Tenures Abolition Act 1660 – socage tenure An Act for Prevention of Frauds and Perjuries 1677 – now in the Conveyancing Act 1919

15 The requirements for writing 23BAssurances of land to be by deed (1)No assurance of land shall be valid to pass an interest at law unless made by deed. 23CInstruments 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, ….

16 The requirements for writing 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. (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.

17 The requirements for writing 54AContracts 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…

18 The requirements for writing 23E Savings in regard to secs 23B, 23C, 23D Nothing in section 23B, 23C, or 23D shall: (a) invalidate any disposition by will, or (b) affect any interest validly created before the commencement of the Conveyancing (Amendment) Act 1930, or (c) affect the right to acquire an interest in land by virtue of taking possession, or (d) affect the operation of the law relating to part performance.

19 Property in Eq Substance Conscience Power Responsibility – lunacy, infants, married woman Trust and confidence BUT through the logic of precedent not unfettered discretion Rights recognised through doctrines of equity – misrepresentation, undue influence, duress, unconscionability, fiduciary relationships, part performance, equitable estoppel, breach of confidence Remedies – injunctions, specific performance, constructive trusts, personal orders Equity makes orders about the people not the property

20 Equitable conversion A (vendor) exchanges contracts with B (purchaser) A gets a better offer from C (he knows about B’s offer) and completes the sale to C before B knows Common law approach? Breach and damages – no property held by B The rule in Lysaght v Edwards – constructive trust

21 Trusts of land A --------------------------B --------------------C (Landowner)(feoffee to use )(cestui que use) Legal estate Beneficial estate CLEquitable

22 The rule in Walsh v Lonsdale (1882) 2 Ch D 9 A Lease for a mill for 7 years An agreement to create a deed but no deed Agreement was for rent payable quarterly with an entitlement of the landlord to request a year in advance Tenant entered into possession and paid rent for 18 months Landlord levied distress; tenant refused and sought an injunction The agreement was in writing so satisfies s 54A and s 23C BUT not s 23B

23 Walsh v Lonsdale Equity looks on as done that which ought to be done Jessel MR at 15: There are not two estates as there were formerly, one estate at common law … and an estate in equity under the agreement. There is only one Court, and the equity rules prevail in it. The tenant holds under an agreement for lease. He holds therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specific performance.

24 The Doctrine of Part Performance For the doctrine of part performance to apply, three matters need to be established. First, the acts done must be done by the party to the contract seeking to rely on the doctrine, or his or her authorised agent: McBride v Sandland (1918) 25 CLR 69 at 79. Second, it must be shown that the acts done by the plaintiff were permitted, but not necessarily required, to be done by the terms of the oral agreement: Regent v Millett (1976) 133 CLR 679 at 683

25 Case Study 4: the Doctrine of Part Performance The third matter to be established for the doctrine to apply is that the acts done must be unequivocally and in their own nature referable to a contract of the general nature of the alleged oral agreement: McBride v Sandland (1918) 25 CLR 69 at 78. In establishing this element it is generally accepted that the court looks at the acts done and then judges to see if there is an implication of an agreement of the type alleged, rather than looking at the terms of the alleged oral agreement and judging if the acts are inconsistent with such an agreement: McBride v Sandland

26 Four types of dispute Legal v legal – first in time Eq v Eq – first in time unless there is postponing conduct Earlier legal v Later Eq – if the equities are equal the law remains Earlier Eq v Later Legal – bona fide purchaser for values without notice defeats the equitable interest

27 Conflicting Legal Interests in Goods Legal v Legal When two or more legal interests in goods conflict the main principle is that a person cannot convey an interest which he or she does not have (“nemo dat quod non habet”)

28 Legal interest v legal interest When two or more legal interests in the land/personalty conflict the main principle is that a person cannot convey an interest which he or she does not have (“nemo dat quod non habet”) Partial eg where A leases to B – A then sells to C – C ‘s interest is taken subject to the lease Wholly inconsistent – A sells to B and then sells to C: C receives nothing

29 Innocence of Purchaser The innocence of the purchaser is irrelevant (to common law)! Policy of who is better able to avoid the loss? Policy of first acquirer (first in, best dressed)?

30 Equitable interest v equitable interest Moffett v Dillon [1999] 2 VR 480, at 491, it was stated by Brooking JA (Buchanan JA concurring, at 506) that the resolution of priority disputes in the context of competing equitable interests in property could be resolved by applying either of two distinct rules. The first rule is that, generally, if the holder of the second equitable interest takes with notice of the first equitable interest, he or she takes that interest subject to the first equitable interest. The second rule is that, prima facie, the equitable interest first created prevails. However, this prima facie rule can be displaced if the holder of the second equitable interest has a ‘better equity’. The onus of proof in such cases is upon the holder of the second equitable interest to displace the prima facie priority of the first equitable interest holder: Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266, at 279

31 Equitable interest v equitable interest Who has the best equity? Heid v Reliance Finance Corporation Ltd – the better equity depends on the circumstances – look to the conduct of the parties the question of negligence on the part of the prior claimant the effect of any representations made by the prior claimant which may give rise to an estoppel did the conduct of the prior claimant enable such a representation to be made?

32 Equitable interest v equitable interest Generally: the earlier equitable interest may be postponed to the later interest where: (a)the conduct of the earlier interest holder has led to the later interest holder acquiring an interest; (b)in the mistaken belief that the prior interest did not exist If the equities are equal then first in time

33 Equitable interest v equitable interest EG Able agrees to sell his land to Barb. Able gives the title deeds to barb and signs a receipt for the purchase money even though he has yet to be paid. Barb proceeds to grant an equitable mortgage over the land to Clary. How has the better interest? Look to the equities: – Able has an equitable lien over the property – Clary has an equitable mortgage

34 Equitable interest v equitable interest Both the equities are security interests – no real difference between them – However Able’s negligent conduct in giving the title deeds and signing the certificate means that it was his fault that Clary took his interest without notice- Hence Clary’s interest is superior See Rice v Rice (1853) 61 ER 646

35 Equitable v Equitable In JNJ Investments Pty Ltd v Sunnyville Pty Ltd [2006] QSC 138, a vendor of property contracted to sell property to a purchaser. On the day of settlement of this contract, the vendor completed a sale of the property to a second purchaser for a higher price. The first purchaser, upon becoming aware of what had happened, lodged a caveat to prevent registration of the second purchaser’s transfer. The second purchaser commenced proceedings to have the caveat removed. The issue before the court was whether the first purchaser had priority over the second purchaser. Mullins J, at [70], held that the first purchaser had priority because the second purchaser ‘had notice of the first [purchaser’s] equitable interest at the time of the acquisition of its interests’.

36 Equitable interest v equitable interest Exception: in the case of land held under a trust the beneficiaries will not lose their priority because of negligent or fraudulent conduct by the trustee Shropshire Union Railways and Canal Company v The Queen

37 In that case Holyoake, as trustee of shares for Shropshire, held all title documents relating to the shares. In breach of trust Holyoake borrowed from Robson and gave Robson the share certificate as security for the loan. Robson held the shares but did not have them registered into his name on the company register. The issue before the court was whether Shropshire’s earlier equitable interest as beneficiary under the trust of the shares was defeated by Robson’s later equitable mortgage over the shares. The House of Lords ruled that Shropshire’s earlier equitable interest had priority.

38 Equitable interest v equitable interest Exception doesn’t apply unless the trust is properly formed or in cases where the trustee has failed to take possession of the deeds to the trust property

39 Walker v Linom [1907] 2 Ch 104 Marriage settlement (trust) of land – grant life estate to him and if the property was determined then a life estate to the wife Trust not completed as deed were never delivered to the solicitors (who acted for both Mr and Mrs Walker) Husband later mortgaged land to Mr Search (who then later transferred to Mr Barnes). Barnes later sold the property to Linom. Mr W disappeared Search, Barnes and Linom had no notice

40 Walker v Linom [1907] 2 Ch 104 Parker J – [T]he trusteeship, so far as the deeds are concerned, is incomplete, and the person who retains them is in a position to deal with them without reference to the trustees, so that the cestuis que trust have no one on whose possession of the deeds they are entitled to rely as standing between them and the perpetration of a fraud. I hold, therefore, in the present case… that the plaintiff is in no better position than her trustees, and is postponed to the defendant

41 Mere Equities Exception: Mere equities – personal right to a remedy – proprietary in nature but less than a full equitable interest Examples: the right to have a document rectified, right to have a conveyance set aside because of the grantee’s fraud Latec Investments Ltd v Hotel Terrigal Pty Limited: Terrigal had granted a mortgage to Latec. Latec exercised the power of sale of the mortgage and sold it to a wholly owned subsidiary, Southern – Southern granted a further equitable interest to MLC which had no notice of the Terrigal interest

42 Mere Equities Terrigal argued that the sale was fraudulent – not at arm’s length – both Southern and Latec had conspired to sell at a low price What was the priority between the interest held by Terrigal and the interest held by MLC? It was held that Terrigal had a bare right to sue and have the transaction set aside – a mere equity A prior mere equity will not prevail over a later full- blown equitable interest that was taken without notice

43 Exception: tacking Exception: tacking – tabula in naufragio – if a later equitable interest holder purchased for value and without notice and is later able to acquire the legal estate then the later interest holder can tack its equity onto the legal estate and jump priority EG Mortgages – If Able grants a mortgage to Bette then an equitable mortgage to Clary and then another equitable mortgage to Donna – then the order of priority will normally be B, C, D – but if Donna can later buy the land off Bette then Donna equitable interest will be tacked to the legal estate and Clary will come in last

44 Prior legal interest v equitable interest In cases where there has been no fraud on the part of the legal estate holder the prior legal estate prevails over the later equitable estate Where the equities are equal the law prevails

45 Exception – fraud Northern Counties v Whipp This is a case of an earlier legal interest competing with a later equitable interest in land Crabtree gave a legal mortgage of old system title land to Northern Counties. Crabtree was the manager of that company who was also entrusted with a key to a safe which housed the documents of title relating to the mortgage. Crabtree removed the title documents from the safe and executed a second mortgage to Whipp. Because of the earlier legal mortgage, the only property interest that Crabtree had in relation to the land at the time of the mortgage to Whipp was an equity of redemption Whipp had an equitable mortgage

46 Northern Counties Northern Counties want to foreclose, which would destroy both Crabtree’s and Whipp’s interests Whipp argues that Northern Counties is responsible for Crabtree’s fraud. Had Northern Counties been fraudulent by reason of their agent Crabtree?

47 Northern Counties No! Fry LJ, at 494-495, speaking on behalf of the Court of Appeal, ruled that there was no fraud on the part of Northern Counties because Northern Counties ‘never combined with Crabtree to induce [Whipp] to lend her money’. His Lordship had earlier said, at 494, that fraud would arise ‘where the owner of the legal estate has assisted in or connived at the fraud which has led to the creation of a subsequent equitable interest, without notice of the prior legal interest’.

48 Northern Counties What about the fact that Northern Counties had been negligent? The Court of Appeal also observed that even though there was great carelessness on the part of Northern Counties, it was not enough to establish fraud. Northern Counties never combined with Crabtree to induce Whipp to advance the money. Northern Counties didn’t even know that Whipp was making the loan. Fry LJ, at 495, even contemplated that Northern Counties may have been grossly careless, but even this would not have been enough to rule in favour of Whipp in this case.

49 Exception – gross negligence with the title documents Legal owners of property may also be postponed to equitable interests when the legal owner has been grossly negligent with the title documents Walker v Linom – trust for shares in marriage settlement – trustees never bother to inquire where the shares are, or bother to check whether legal ownership has passed – Mr Walker created an equitable charge over the shares

50 Exception - gross negligence with the title documents With this exception mere carelessness on the part of the holder of the legal interest is not enough to constitute postponing conduct: Evans v Bickell (1801) 31 ER 908 at 1005-1006. 'Gross negligence' in the sense of a special degree of lack of care of prudence is needed for this exception to arise.

51 Prior equitable interest v legal interest The legal interest will prevail if it was acquired: 1. by a purchaser: Anyone who acquire an interest for value (lessee, fee simple owner, mortgagee) 2 for value Consideration in money – needs to be more than nominal amount but not market value 3 in good faith Bona fide – no hint of conspiracy or unclean hands:Midland Bank Trust Co Ltd v Green [1981] AC 513, at 528

52 Prior equitable interest v legal interest 4. without notice of the prior equitable interest Can be actual, constructive or imputed Actual: knowledge of the actual facts – real knowledge Constructive: knowledge that would have come into the person’s attention had they made reasonable inquiries eg case of land sold with a tenant in possession – purchaser should have checked the rights of the lessee - constructive notice Must be able to find the interest – old system title allowed to go back 30 years CAct s 164 Imputed: at law you are regarded as having been notified eg where agent is notified by no principle

53 Pilcher v Rawlins (1872) LR 7 Ch 259 Pilcher was one of a number of trustees of money He advanced money (as a trustee) to Rawlins who secured the loan by way of a mortgage over land Pilcher and Rawlins then conspired to borrow funds from another trust (Stockwell and Lamb) using the land already mortgaged as security (by removing evidence that it had been mortgaged and then by discharging the first mortgage) Stockwell and Lamb had no notice of the equitable interests of the beneficiaries As bona fide purchasers without notice they could keep the legal estate

54 Wilkes v Spooner [1911] 2 KB 473 137 Ham St, East Ham was a pork butchery Isaac Spooner the lessee covenanted only to carry on a pork butchery at the premises The lessee also leased 170 where he worked as a general butcher. He sold this business to his apprentice, Wilkes, with a covenant that Sooner would not carry on any business at 137 apart from a pork butcher Spooner later surrender the leasehold back to the landlord The landlord had no notice of the covenant that Spooner had made to Wilkes The landlord then leased the property to Spooner’s son as a general butchery Sooner’s son had actual knowledge of the covenant but the landlord status as a bona fide purchaser could be passed onto Sooner’s son

55 Wilkes v Spooner [1911] 2 KB 473 [I]n 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 the only customers for the land likely to pay the best price, have such notice.

56 (c) Cameron Stewart 2005 Registration Systems in NSW Problems with fraudulent transactions in the early colony 1800 – order of Governor King that all agreements concerning land be in writing or entered into books kept at Sydney, Parramatta and Hawkesbury 1802 – Judge Advocate’s office 1817- Gov Macquarie – Fraudulent against a bona fide purchaser for value 1825 – Registration Act – substantially amended over time and then repealed in 1984 and sections transferred into the Conveyancing Act

57 (c) Cameron Stewart 2005 Conveyancing Act and the Register of Deeds Section 184C – general register of deeds Open to public inspection – s 199 Deliver original and copy to the Registrar – registered with a number – copy kept on file Any instrument affecting land or not can be registered – not necessarily a “deed” as such

58 (c) Cameron Stewart 2005 The effect of registration? Validity of the document – some instruments must be registered to have legal force eg short form of mortgage discharge, appointment of new trustee, powers of attorney Registration for priority – s 184G – instruments affecting land, executed bona fide and for valuable consideration take priority over earlier instruments Effect – earlier legal interest will be defeated by later legal interest upon registration of later interest and so on However it only affects priority – will not perfect a fraudulent transaction, mistake or forgery

59 (c) Cameron Stewart 2005 Important factors to consider: (a) Competing instruments – must have an instrument to register and then it only concerns instruments in writing – if no instrument then the normal priority rules apply eg a short term lease without writing, competing with a legal registered interest eg a sale to a third party – the registration won’t give the later legal interest priority

60 (c) Cameron Stewart 2005 Important factors to consider: (a) Competing instruments – Another eg - equitable mortgage by deposit of title deeds created without writing not defeated by a later registered instrument Section 184 confers priority only in cases of “competition” – that is if the interests are compatible no priority is afforded

61 Scholes v Blunt In Scholes v Blunt (1917) 17 SR (NSW) 36, A conferred an easement on B by means of an unregistered instrument. A then sold the land to C ‘subject to all easements, if any, affecting the same’. C registered his instrument first. Because the instruments could stand together, s. 184G did not apply and C took the land subject to B’s easement.

62 Boyce Boyce v Beckman, in 1834 the Crown granted a parcel of land to O’Donnell. In 1841 Sparke acquired the fee simple in the land. In 1845 Sparke conveyed the land to Boyce by deed. The land was described by reference to a number of lots relating to a plan. On 1 January 1852 Sparke executed a second deed of conveyance to Turner in which the land was described as including ‘all and any other lots forming a portion of the said grant to … O’Donnell to which Sparke is entitled’. The conveyance to Turner was registered first. The issue in the case was whether this registration gave the second conveyance priority over the first.

63 The Court ruled that it did. The result depended upon finding that the two conveyances were competing. It could have been argued that there was no inconsistency in that the latter general description of the land meant that Sparke was only conveying that land to which he was entitled at the time of the second conveyance, ie. the land he acquired in 1841 less the land he conveyed to Boyce in 1845. On this basis the two conveyances executed by Sparke would not be competing instruments. However, the Court ruled otherwise

64 Innes J, at 146, said: Such words, then as ‘lands to which I am entitled’, when used by a vendor, must be held to mean ‘such lands as I possess and am entitled to, whether included in any previous conveyance by me or not, if that conveyance remains unregistered’, and cannot be held to except lands previously conveyed by him, so long as that conveyance remains unregistered. To hold otherwise would, in our opinion, be to defeat the very object of the Act. The significance of this case is that although registration does not confer title upon the purchaser on an interest in old system title land, in some cases the failure to register results in the loss of title to land. Boyce should have registered his conveyance to preserve and protect his title. The lesson of this case is to register instruments by which interests in old system land are acquired.

65 (c) Cameron Stewart 2005 Important factors to consider: Registration can make effective instruments which may not have had any legal effect under priority rules – eg A sells land to B but then sells land to C Under the nemo dat principle C would take no interest – however if C registers before B, C will be given “priority” – eg defeats B’s interest

66 (c) Cameron Stewart 2005 Important factors to consider: Bona fides – on the part of the person taking the interest – notice is enough for there to be an absence of bona fides – actual, constructive or implied Eg if a purchaser takes interest with notice that someone other than the vendor is in possession of the property and fails to make proper enquiries is said to be notified and will not gain priority in registration

67 (c) Cameron Stewart 2005 Important factors to consider: The onus of proving good faith is upon the person asserting priority based upon registration of his or her instrument: Jones v Collins (1891) 12 LR (NSW) (L) 247 at 250. The most significant example of a lack of good faith for the purposes of the legislation is a where a person takes an interest with notice of a prior interest in the land. Notice includes actual, constructive or imputed notice: s.164, Conveyancing Act 1919.

68 Marsden In Marsden v Campbell (1897) 18 LR (NSW) Eq 33, Campbell leased land to Marsden in 1888 for a fifteen year term. The lease was not registered. In 1893 Campbell conveyed the land to Byrnes, with the deed of conveyance being registered. At the time Byrnes took the conveyance he knew that Marsden had been in possession of the land for 5 years and that he was running sheep on the land. Byrnes contended that his registration gave him priority over Marsden’s lease. The Court ruled against Byrnes, stating that he could not rely on s. 184G because of a lack of good faith on his part.

69 Marsden Simpson J, at 38, said: I must hold that the defendant Byrnes knew that Marsden had some interest in the land, and that he was content to run the risk of what this interest might be. … [I]n this case Byrnes knew that an interest in the land comprised in his transfer was outstanding [to Marsden], and he made no enquiry. I must, therefore, hold that the lease to [Marsden] takes priority over the transfer to Byrnes.

70 (c) Cameron Stewart 2005 Important factors to consider: When does notice have to have occurred? Before execution of the instrument and not the registration S 164 CA – actual constructive and imputed Constructive notice if an interest is registered

71 (c) Cameron Stewart 2005 Important factors to consider: The crucial issue concerning notice relates to the question of timing. Notice received before the execution of the instrument upon which priority by registration is based precludes priority based upon registration of that instrument: Scholes v Blunt (1917) 17 SR (NSW) 36. Notice received after execution of the instrument but before its registration does not preclude priority based upon registration of that instrument: Burrows v Crimp (1887) LR (NSW) (L) 198 at 210.

72 (c) Cameron Stewart 2005 Important factors to consider: (d) Valuable consideration – must not be nominal but may be inadequate (eg much lower than market value) – S 184G(1) includes marriage Thus, in Bullen v a'Beckett (1863) 15 ER 684, a conveyance for 10 shillings was held to be for nominal consideration and thus not entitled to the benefits of the legislation.

73 (c) Cameron Stewart 2005 Important factors to consider: An interest acquired for no or nominal consideration should nevertheless be registered because such registration will preserve the interest holder's priority against interests in the land created after registration. For example, if A acquires an interest in land for nominal consideration and registers it, he or she will not be able to claim priority by registration. However, if after A's registration B, for valuable consideration, acquires an interest in the same land, B will not be able to assert priority over A by registering his or her interest. This is because B's interest will have been acquired with notice of A's interest and thus B will have failed to satisfy the legislative requirement of good faith. Any priority dispute between A and B will therefore be determined by the general law rules relating to priority disputes.

74 Fraud Unlike with the Torrens system, registration does not make the forgery operative: Re Cooper; Cooper v Vesey (1882) 20 Ch D 611. In Re Cooper, 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. The Court held in favour of the executors. The mortgage was a forgery and the mortgagee could not rely on forged documents. Registration under s. 184G did not in any way alter this fact

75 Efficacy In Fuller v Goodwin (1865) 4 SCR (NSW) 66, Stephen CJ said: Registration is, at any rate not necessary to give efficacy to the deed. It appears clearly to us, that, in favour of an innocent taker for value who registers his deed, the statute confers on the conveying party, notwithstanding his previous inconsistent conveyance, a title as against the transferee named therein; and thus enables the person secondly taking, immediately upon registration, to acquire that title.

76 Moonking Gee v Tahos Tahos sold to Gee by contract 13 Nov 1958 11 February Tahos sold land again to Wun. Sale to Wun completed 6 March 1959 12 March 1959 Gee found out and registered his contract Wun registered 11 days later

77 Moonking Gee v Tahos Gee sought specific performance of contract His registration conferred priority

78 Question Ben owned a house under Old System title in Terrigal, NSW. Ben leased the property to Robert for a period of 2 years. The agreement was oral. Ben borrowed money from Ryan to pay for some horses. He used the land as security. A mortgage was entered into but Ryan kept the mortgage in his safe at home without registering it. Ben had left his deeds in his personal safe but he had accidentally left it unlocked. His sister Nerida snuck into his house one day and took the deeds. She then entered into a contract with Luke to sell him the house. She told Luke she had Ben’s power of attorney, but this and the exchanged contact was signed by Nerida, forging Ben’s signature. Ben eventually realised that the deeds were missing. He mentioned this to Ryan. Ryan ran to the Land and Property Information Office to register his deed of mortgage. However, he saw that Luke had already registered his exchanged contract. Ben then went to the Supreme Court seeking an injunction preventing Luke from completing.

79 (a) Will Ben lose the house to Luke? Ben should not lose the house. Ben has an equitable interest as mortgagor. Ryan has a legal mortgagee due to the fact it was created by deed: s 23B. Robert is legal lessee because of the short term tenancy exception s 23D Luke has nothing nemo dat. Registration cures nothing : Re Cooper Does Luke have a claim against Ben for gross negligence?: Walker v Linom, probably not as this is not gross negligence

80 (b) If Luke was found to be the true owner would he be subject to Robert’s lease? (7 marks) If Luke was successful he would be legal but still bound by the lease, nemo dat. Even if he was equitable in nature he would still lose as he has no claim against Robert. Registration is not relevant as the lease interest is oral, so there are no competing instruments

81 (c) If Luke was found to be the true owner would he be subject to Ryan’s mortgage? Luke would not be subject to the mortgage as Luke is registered and his interest would get priority under s 184G: Moonking Gee v Tahos.

82 (c) Cameron Stewart 2005 Problems with the deed registration system Improved level of knowledge Offered greater degree of protection But Did not grant a total security of interest Purchasers took subject to unregistered interests which have not been documented Purchasers take subject to unregistered instruments which they ought to have discovered Purchasers title is still dependant on the chain of title and the risk that a prior interest may be invalidated breaking the chain of title and destroying the purchaser’s interest


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