The Torrens System of Land Title - Case Study Example

Student Name Student Number Unit Code Unit Title Original Due Date Extension Date AskUNE Reference Number Introduction This paper will examine the Torrens system and the exceptions that accrue to indefeasibility of title. These exceptions will be analyzed ,and case examples provided to offer more understanding. It will primarily and objectively confine its analysis to the threshold of property law in New South Wales State (NSW). Torrens system This is a system of land title in which a register of land holding and ownership maintained by the state guarantee an indefeasibility title to those recorded in the register. The main drive behind the formulation of the Torrens system and its adoption in New South Wales State was to combat the issue of ambiguity, complexity and price which were a feature of the previous title system. The system operates under three key principles of mirror, curtain and insurance (Rouff, 1957). The development of the Torrens system was a big leap in the property law in NSW. It brought new and effective ways of land conveyance and went miles in containing the adverse claims made on the basis of the prior title1. The principle of indefeasibility of title is the basic foundation of the Torrens system of title. It’s a departure from the old common law to one based on the principle of ‘title by registration’ (which is the indefeasibility of a registered interest), as opposed to ‘registration of title’.2 This concept is well elaborated in Judge Barwick in the Breskvar v Wall case of 1971. The system is reinforced by the introduction of then land register which is the core aspect of the Torrens system and has a unique number for every new land registration. It offers a guarantee to all registered land owners with the government offering indemnity on proprietors whose rights have been tampered with through errors by the government registrar.3 Indefeasibility of a title and its exceptions New South Wales State uses the Torrens system in conferring to a property holder the indefeasibility of a title. This aspect applies to a situation where there is the existence of a registered land owner either as a single proprietor or joint owners. Whenever a proprietor acquires the legal registration of his land, his interest in that land becomes superior to any other interest accruing to the land subject to limitation by provisions contained in the Transfer of Lands Act of 1958 section 42 . The section holds that the registered interests of the owner are independent of all encumbrances other than the following; the listed ones in the title, those claiming the land on a prior folio, where the land in question is erroneously included in the register meaning that the holder of the land incurred no cost for the said piece of property in question and in other interests, which are superior to the registered ones 4(Griggs, 294,295). The indefeasibility of a title arises as a result of the title being founded upon registration and aims at protecting the person who is recorded in the register. An exception to the above provision is in a case where the proprietor acquires the land through deceitful means. For there to be indefeasibility of a title, the overriding condition is that the indefeasible title must be put in the register in NSW. A good example of an indefeasible title is the innocent transfer of a title from a fraudulent title as opposed to the registered title of a fraudster which is defeasible.5 Those jurisdictions permitting the acquisition of title without the necessity of registration provide for an exception to the indefeasibility of registered title and, in effect, confer indefeasibility of unregistered title.6 However, the owner of the registered title has superiority of interest over unregistered interests regardless of whether the latter was created prior to the holder’s interest, subject to given legal exceptions7. Personam exception One of the exception which are outstanding over the rest is the in personam exception.8 It’s a common assertion ,as was held in the Gibbs v Messer case, that the principle of indefeasibility doesn’t bar a plaintiff from exercising the personam claim over a registered proprietor as is stipulated in the law of equity. 9 In a scenario where the registered proprietor rights any legal or equitable causes of action which are not able to be asserted against the registered owner, or that the owner who is in the process of registration continues to be enforceable, this is an exception to personam’.10 Nonetheless, even though the Torrens system was based on registration of title, it doesn’t shield a registered holder from a claim in personam by a plaintiff in a court of law. An in personam claim may result in a court order authorizing the registered proprietor to relinquish part or whole of interest held11. The concept of indefeasibility of title can’t restrict the ability of a court of law to exercise its authority in personam.12 Judicial exceptions Judicial exceptions emanate from judicial interpretation of the Torrens legislations which has had a great impact on the development of indefeasibility. For instance, fraud as a concept in law has been developed by the judiciary.13 It’s therefore, illegal for one to register an inconsistent interest having been aware of the existence of an unregistered interest from the onset. However, the judicial exception is not applicable in situations where the party has committed rights in the form of contracts, pact or trusts. An example of a case where the issue of the statue overriding the Registry was well elaborated was in Hillpalm Pty Ltd v Heavens Door Pty Ltd. The New South Wales Court of Appeal dismissed an Appeal against a verdict made by Sheahan J in the Land and environment Court (2002) NSWLEC 116 (7 June 201).14 The judge had held that the previously held condition of creating a right of way was applicable to the after that holder of the property in question despite this not having been indicated in the register (Kelly, 2003). The case highlights the importance of notice and enquiry when making a land purchase but more so lay more emphasis on the overriding statue over the register. The Torrens Legislation Act confers on the registrar of Titles the legal powers to make amendments in a register on properties ,under given circumstances paving way for the exception to indefeasibility of title via the register. A registration that’s acquired under either of these exceptions is set aside altogether or the right to sideline it, is vested to the previous proprietor who was unregistered. The same may also apply to an unregistered person making a claim on such a property as stipulated in the Act.15 There are several issues which are contained in the Torrens exception to indefeasibility. These include; fraud and forgery, prior folio, misdescription, reservation in crown grants, unfavorable possession, easements, public right of way, interests of tenants in possession of a property as well government charges and land levy.16 These exceptions are important in the property law since they assist a potentials land buyer to see beyond the face title and instead examine the land itself to ascertain whether there are other issues attached to the land. These may include; the existence of another owner apart from the one selling the land, existence of easements or “rights of way” above the land in issue ,and ensure that the transaction is legal and not fraudulent {(Transfer of Land Act s 42 (1) and (2)}.17 A registered proprietor to a property such as land enjoys the advantage of legal rights to ownership of the property under the documented encumbrances in question, except on conditions where there are acquisition and dealings exceptions.18 Such exceptions are either exercised by the judiciary or the registrar who has a right to indefeasibility exception. These exists where the estate in question is being claimed by another party under a prior folio of the register, or a piece to the land that was erroneously included in the folio register during the demarcation and description of the register and which was not paid for by the buyer.19 Fraud is another key exception to indefeasibility as entailed in the Transfer of Land Act. Section 42 provides for exceptions to fraud with section 43 outlining the implications that accrue in the context. Further outline of these implications is well detailed in section 44 of the Act. It states that if a person is fraudulently registered as the owner of a property, then the law will not be applied in providing any damages leave alone benefits in such an incidence. It goes on to say that the registration of such a property can be reversed on the basis of fraud due to immoral conduct and dishonesty in a deal prior to the registration of interest. In the Butler v Fairclough case, the definition of fraud is taken to mean the personal dishonesty or moral turpitude.20 This definition is expounded by the Privy Council during the Assets v Mere Roihi ,where Lord Lindley defined it as the act of deceiving some one in a land transaction, with an intention of taking undue advantage of the ignorance of the other party. Torrens legislation provides for a given set of requirements which demarcates the boundaries to which the concept of fraud prevails. On top of this, when one is aware of a fraudulent happening and keeps quiet, this can constitute fraud as is recklessness and failure to keen to inner details of a given interest or property.21 However, its imperative for a law practitioner to note that knowledge of an unregistered interest is not in itself alone a fraud. This was well illustrated by a ruling made in the Mill v Stockman case ,where the defendant had prior notice of equitable interest, which rendered the same enforceable.22.This is further supported by the section 43 of the TLA which by altering the common law and the doctrine of notice, proposes that when a proprietor is aware of the existence of trust or unregistered interest shall not in itself be interpreted as fraudulent.23 However, when such a party goes on to add other actions such as a promise on the interest in question, then this action can be interpreted as fraud.24 Deferred indefeasibility This proposes that the protection which is conferred by the law, is restricted to legal holders of property, and whose names are entered in the register and not fraudsters or forgers.25 This form of indefeasibility discourages the removal of a formally registered estate or interest from the register without the legal authority. Immediate indefeasibility Immediate indefeasibility means that the registration of a negated instrument is in the absence of fraud, with intent to shield the registered proprietor from unfavorable claims.26 In the Breskar v Wall, it was held that the credibility of the title is upheld by the official registration of the legal proprietor in the Register, regardless of the legitimacy of the entry in the folio.27 This in itself implies that a registration in the register confers the legality of the title, without regard to the validity of the transaction itself (Struan, 92). In conclusion, it’s imperative to note that the Torrens system has made significant contributions in addressing issues related with a key asset in the community land. It should therefor, be flexible enough to accommodate the new dynamics that have developed over the years since its inception. This as a result, calls for a practical solution to adapt the system to the modern world. Conversely, it is justified to laud the Torrens system for the gains made in ensuring that a registered proprietor is shielded from risks such as forgery/ fraud. References Cases Bahr v Nicolay (No 2) (1998) 164 CLR, 604,613 (Mason CJ and Dawson J). Retrieved from http://www.austlii.edu.au/au/journals/MULR/2008/20.html . Bogdanovic v Koteff (1988) NSW CA. Breskvar v Wall (1971) 126 CLR 376, 385. Burke v State Bank of New South Wales (1994) 37 NSWLR 53, 74–9 (Santow J). Buttler v Fairclough (1917) 23 CLR 78, 90. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447,462 (Mason J). Commonwealth Bank of Australia v Baranyay (1993) VR. Frazer v Walker (1967) 1AC 584. Garcia v National Bank of Australia Ltd (1998) 194 CLR 395, 403-9 (Gaudron, McHugh, Gummow and Hayne JJ), 441 (Callinan J). Gibbs v Messer (1891) AAC 248,255. Grgic v Australia and New Zealand Banking Groups Ltd (1994) NSW SC. Harold v Rasmussen (1995) Vic SC (Coldrey, JW and Toohey JJ). Hillpalm Pty Ltd v Heavens Door (2002) NSWCA 301 LH K Nominees Pty v Kensworthy (2002) WASC. Loke Yew v Port Swettenham Rubber Co Ltd). Mill v stockman (1967) HCA. Pieper v Edwards (1982) NSWLR 336 R M Hosking Properties Pty Ltd v Barnes (1971) SA SC. Russo v Bendigo Bank Ltd and Reichmann (1999) Vic SC (Ormiston J A, Winnie and Batt). Waimitha Sawmilling Co Ltgd (in liq) v Waione Timber Co Ltd (1923) NZLR 1137,732. Yerkey v Jones (1939) 63 CLR 649, 683 (Dixon J). Books and Articles Kelly, Gerald, ‘The Integrity of the Torrens Registry ‘ Armidale: University of New England (2003) Retrieved from http://www.gerardkelly.com.au/torrensregistry.html Griggs Lynden, ‘Possession, Indefeasibility and Human Rights’, 2008 Vol 8 No 2. Hylton, J, Gordon, et al, ‘Property Law and the Public Interest: Cases and Materials’ 2nd ed. Newark, N.J. Lexis-Nexis. James E. Hogg, ‘Australian Torrens System with Statutes’ (1905). Kelvin Low, The Nature of Torrens Indefeasibility: Understanding The Limits of Personal Equities. Melbourne: Melbourne University, (2009). Lionel Smith ‘Transfers’ in Peter Birks and Arianna Pretto (eds), Breach of Trust (2002). Lionel Smith, ‘Constructive Trusts and Constructive Trustees (1999) 58 Cambridge Law Journal 294. Mallesons S Jaques, Exceptions to Indefeasibility Other Than Fraud. Melbourne.: Melbourne University, (2009). Rouf, T. ‘An Englishman Look at the Torrens System,’ Sydney: Law Books Co.(1957). Phang Andrew and Tjio Hans, From Mythica Equities to Substantive Doctrines: Yerkey in Shadow of Notice and Unconscionability’ (1999) 14 A Journal of Contract Law 72. Retrieved from http://www.austlii.edu.au/au/journals/MULR/2008/20.html . Scott, Struan --- "Indefeasibility of Title and the Registrar ... (n.d.). Retrieved from http://www.nzlii.org/nz/journals/CanterLawRw/1999/2.html Peter Butt, ‘Indefeasibility and Sleights of Hand’ (1962) 66 Australian Law Journal 679. Retrieved from http://www.austlii.edu.au/au/journals/MULR/2008/20.html Acts and Legislations Local Government Act 1958 s. 158. Transfer of Lands Act s.42,43,44. Read More