Indefeasibility of title under the Torrens system is the guaranteed title of a registered proprietor. The law provides that the Torrens system is not a historical title or derivative title but in fact re-registers the title as new each time the title is registered. As per Barwick CJ who succinctly said in Breskvar v Wall:
"The Torrens system... is not a system of registration of title, but a system of title by registration."
Once an interest in Torrens title land has been registered, that registered title can not be revoked for reason's relating to the previous Torrens title, thus conveying to the registered owner an indefeasible title. The term "indefeasibility of title" though not expressly referred to in the Torrens legislation is conferred by paramountcy provisions defined by s42 of the Real Property Act (NSW). This section gives the registered owner of a title a statutory guarantee of ownership against almost all others not recorded in the folio and most others recorded in the folio with some statutory exceptions;
1. Fraud; giving rise to deferred indefeasibility;
2. Another proprietor claims same land from a prior folio;
3. An omission or mis-description of land (easements);
4. The right of persons to share in the land; profit a prendre;
5. The wrong description of parcels or boundaries included in the folio;
6. A tenant, in possession, with a contract, not exceeding three years; and
7. Non-statutoryexceptions such as in personam duties and personal equity.
Until the advent of the Torrens system, the main problem under the old English system was the complexities and subsequent cost associated with same. One such complex matter was the doctrine of notice and the obligation of an investigation by the buyer into proof of title.
Essentially what the Torrens system did was, upon each registration, surrender the land back to the Crown and from there the Crown would grant the land to the registered holder, thus abolishing the need for notice. This created what has become known as indefeasibility of title; any breaks in the chain of documents and claim therein became irrelevant as each registration created a new chain.
There is no mention of the terms "indefeasible" or "indefeasibility" in the Real Property Act, but instead it originated from Robert Torrens himself and subsequently case law. The Privy Council make mention of "indefeasible" in Gibbs v Messer in 1891. Gibbs v Messer also set a precedent with regards to the first of the statutory exceptions; that of fraud.
The exception of fraud derives from Gibbs v Messer in which the concept of deferred indefeasibility was expounded. It was held that because the fraudulent title document was in the name of a fictitious person; that in fact good title did not pass to the third party. However, if the non-fictitious third party had passed the title to a fourth party, then that would in fact constitute a good title, deferring the indefeasibility. This idea was further elaborated on in Frazer v Walker which differentiated the idea of deferred indefeasibility from the idea of immediate indefeasibility. The title holder forged the signature of a non-fictitious person and therefore passed a good title, even though there was a fraud. It was held that as long as the third party was an innocent bona fide purchaser and in no way party to the fraud, that this would enable immediate indefeasibility of title. In Australia this was given authority by the High Court case of Breskvar v Wallnwhich is still the authority on indefeasibility of title. The decision has been upheld in subsequent and more recent cases such as Westfield Management Limited v Perpetual Trustee Company Limited, Halloran v Minister Administering National Parks and Wildlife Act 1974, Farah Constructions Pty Ltd v Say-Dee Pty Ltd, and Black v Garnock.
For an exception of statutory fraud, there has to be an actual fraud as opposed to equitable fraud, and actual personal dishonesty ormoral turpitude by the registered proprietor, sometimes coupled with willful blindness or voluntary ignorance. There must also be the mens rea or knowledge of misleading conduct and an actual loss or detriment to a registered title holder.
The title to a whole parcel or part parcel of land that has been registered on a prior folio can take precedence over a part parcel or whole parcel registered on a later folio. This is outlined in s42(1)(a). Persuasive, not binding case law for this is National Trustees Co v Hassett in which a fence was constructed five inches to the south of the northern boundary and existed there for some years. Cousins J says at 414;
... [t]hese findings of fact are of no importance, because the land is included in plaintiff's certificate of title, which, like his Crown grant, is prior in date to that of the defendant.
Hassett is also persuasive case law regarding the statutory exception of erroneous or mis-description of land in the folio. Section 42(1)(c) provides the statutory provision to this exception. The omission or mis-description of parcels of land, part parcels of land or boundaries can render a registered title holder with a defeasible interest pursuant to this section. However section 45 and section 118 gives some protection to a Bona Fide purchaser of land.
Section 42(a1) expressly refers to easements and their mis-description or omission from the folio. Essentially, the right which exists within the easement is transferred from the servient tenement to the dominant tenement. Therefore, as Kirby P says in Dobbie v Davidson;
The general purpose of section 42(b) [repealed now 42(a1)] is to protect the rights of persons in relation to unrecorded easements from the loss of those rights from the operation of a general principal.
This means that section 42(a1) operates to protect the rights of the holder of the servient tenement having, for example, access to their land over the general principal of indefeasibility of title.
Bona fide purchaser provisions and volunteers
As mentioned above, sections 42(1)(c), 45 and 118 of the Real Property Act (NSW) provide statutory exceptions to a "Bona Fide Purchaser" of land. However, protection of indefeasibility of title is not only available to a "purchaser" of land but is available to a volunteer who paid no consideration for a gift. It was held in Bogdanovic v Koteff that the same standard exists for volunteers as to bona fide purchasers for full value, providing they meet certain criteria as to what constitutes a gift and registration of their title.
1. The donor must do all that is necessary to transfer the title and to do all that is necessary to put that transfer beyond their recall.
2. The donee must become the registered proprietor.
It should be pointed out that Bogdanovic v Koteff is a decision of the NSW Court of Appeal and research has been unable to find a High Court decision on volunteers and indefeasibility. However, in the absence of a definitive high court judgement it must be argued that the rules of equity would apply to the general principal of an indefeasible title to a volunteer.
Public rights and burdens - The right of a Minister to create roads, easements and public right of way over land.
Rights of expropriation by Government - The rights of the Government to take land for the public interest, for example, to build transport infrastructure etc.
Utility easements - The right of a prescribed authority to create an easement over land to provide utilities such as gas, water, drainage, sewerage etc.
Planning restrictions - InHillpalm v Heavens Door it was held by Meagher JA that the Environmental Planning and Assessment Act must take precedent over the Real Property Act which confers indefeasibility.
Building compliance laws - Includes matters such as illegal or unapproved building work; encroachments; and zoning non compliance.
Mining or exploration grants - Mining companies can apply to the Government to obtain a mining lease or exploration licence over a person's land. This issue is very important currently with coal seam gas mining in Queensland.
Non-statutory 'in personam' duties and personal equity
The obligations of the purchaser and registered owner of the land, in law or in equity can in some circumstances render the title defeasible. Lord Wilberforce in Frazer v Walker said;
[t]hat the principle [of indefeasibility of title] in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant.
Types of in personam exceptions
1. Prior contractual obligations upon the registered proprietor;
2. Equitable remedies (such as property held in trust).
Contractual obligations- Bahr v Nicolay is the authority case with regard to in personam claims and indefeasibility of title. A sold B their land under a contract in which B leased it back to A for three years. An option within this contract was that after the three year lease, B would give A an option to re-purchase the land. C then purchased the land from B expressly accepting the conditions of the existing contract. Upon registration, C refused to re-sell the land back to A citing indefeasibility of their title.
It was held in this case that the registered owners were subject to the contract with which the land was conveyed to them, and therefore C had to offer the option to A to re-buy the parcel of land. This has been upheld in the contemporary cases such as Farah Constructions Pty Ltd v Say-Dee Pty Ltd, TEC Desert Pty Ltd v Commissioner of State RevenueandBank of South Australia Limited v Ferguson.
Equitable remedies- Farah Constructions Pty Ltd v Say-Dee Pty Ltd is the authority case with regards to the in personam exception of personal equity on indefeasibility of title. This exception exists in circumstances where it would be unconscionable for the legal owner of the property to assert beneficial ownership. Thereare a number of precedent cases which give us a set of principles in which to work from. These are;
1. Where a person becomes a legal proprietor of land by knowingly breaching his trustee's duty. In Chan v Zacharia Dr Chan and Dr Zacharia dissolved their partnership in business; however Dr Chan knowingly renewed the lease on the property for his own benefit.
2. Knowing receipt of trust property as a result of breach of trust or trustees duties or knowing assistance in the breach. In National Commercial Banking Corporation of Australia Ltd v Batty a cheque was deposited by the respondent into the trust account of his company knowing that the cheque was made out to the name of another company.
3. Joint tenancies. For example joint ventures in business or a breakdown in a relationship where the husband and wife were joint tenants.
Guidelines to in personam exceptions to indefeasibility of title.
According to The Australian Property Law Journal, the courts in Australia have established certain guidelines when looking at in personam exceptions:
Claims in personam encompass only known legal or equitable causes of action
The remedy cannot be used to undermine the fundamental concepts of the Torrens system
The conduct giving rise to an in personam claim can arise before or after registration; and
It must involve unconscionable conduct on the part of the current registered proprietor.
Mere Unconscionability will not be enough to enforce an in personam claim. It is 'a necessary, but not sufficient, criterion', and
The expressions 'personal equity' and 'right in personam' do not supply a blank canvas on which a plaintiff can paint any picture.
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