What is non-seizure of title under the Torrens System in Australia?
Non-seizure of title under the Torrens system is the secured title of a registered owner. The law states that the Torrens system is not a historic title or derivative title but, in fact, re-registers the title as new each time the title is registered. According to Barwick CJ, who said succinctly in Breskvar v Wall:
“The Torrens system… is not a title registration system, but a title-by-registration system.”
Once an interest in Torrens title has been registered, that registered title cannot be revoked for reasons related to the previous Torrens title, thus transferring to the registered owner an unseizable title. The term ‘invalidity of title’, although not expressly mentioned in the Torrens legislation, is granted by supremacy provisions defined by s42 of the Land Property Act (NSW). This section gives the registered owner of a title a legal guarantee of ownership against almost all others not registered on the folio and most others registered on the folio with some legal exceptions;
1. Fraud; giving rise to deferred infeasibility;
2. Another owner claims the same land from a previous page;
3. An omission or misdescription of the land (easements);
4. The right of people to share the land; gain to take;
5. The incorrect description of plots or boundaries included in the folio;
6. The tenant, in possession, with a contract, not exceeding three years; Y
7. Non-statutory exceptions such as personal duties and personal assets.
Until the advent of the Torrens system, the main problem with the old English system was the complexities and subsequent costs associated with it. One of those complex issues was the doctrine of notice and the obligation for the buyer to investigate proof of title.
Essentially, what the Torrens system did was, at each registration, return the land to the Crown, and from there, the Crown would grant the land to the registered holder, thus eliminating the need for notice. This created what is known as indefeasibility of the title; any breaks in the chain of documents and claims on them became irrelevant as each record created a new chain.
The terms “unseizable” or “unseizable” are not mentioned in the Real Estate Law, but originated in Robert Torrens himself and later in jurisprudence. The Privy Council made mention of “unfailing” in Gibbs v Messer in 1891. Gibbs v Messer also set a precedent regarding the first of the statutory exceptions; that of fraud.
The fraud exception derives from Gibbs v Messer in which the concept of deferred indefeasibility was exposed. It was held that because the fraudulent document of title was in the name of a fictitious person; that in effect the good title did not pass to the third party. However, if the non-fictitious third party had passed the title to a fourth, then that would indeed constitute a good title, postponing the unseizability. This idea was further elaborated in Frazer v Walker, which differentiated the idea of delayed ineffectiveness from the idea of immediate ineffectiveness. The headline forged the signature of a non-fictional person and thus passed on a good title, even though there was a fraud. It was held that as long as the third party was an innocent purchaser in good faith and in no way a party to the fraud, this would allow immediate unseizability of the title. In Australia, this was authorized by the High Court case of Breskvar v Walln, which remains the authority on the unseizability of title. The decision was upheld in later 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 a statutory fraud exception, there has to be actual fraud as opposed to equitable fraud, and actual personal dishonesty or moral turpitude on the part of the registered owner, sometimes coupled with willful blindness or willful ignorance. There must also be mens rea or knowledge of misleading conduct and actual loss or damage to a registered holder.
The property title of an entire or partial parcel of land that has been registered in a previous folio can prevail over a partial or total parcel registered in a later folio. This is described in s42(1)(a). The non-binding, persuasive case law for this is National Trustees Co v Hassett, in which a fence was built five inches south of the northern boundary and existed there for some years. Primes J says at 414;
… [t]these findings of fact are irrelevant, because the land is included in the plaintiff’s certificate of title, which, like his Crown grant, predates the defendant’s.
Hassett is also persuasive case law regarding the legal exception of misdescription of land on the folio. Section 42(1)(c) sets forth the statutory provision for this exception. Omission or misdescription of parcels of land, partial parcels of land, or boundaries may cause a registered owner to have a voidable interest under this section. However, section 45 and section 118 provide some protection to a bona fide purchaser of land.
Article 42(a1) expressly refers to easements and their misdescription or omission from the folio. Essentially, the right that exists within the easement is transferred from the servient estate to the dominant estate. 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 unregistered easements from the loss of those rights by the operation of a general principal.
This means that section 42(a1) operates to protect the rights of the owner of the servient estate who has, for example, access to his land on the general principle of indefeasibility of the title.
Supplies and bona fide volunteers for buyers
As mentioned above, sections 42(1)(c), 45 and 118 of the Real Estate Act (NSW) provide statutory exceptions to a “Bona fide Buyer” of land. However, title protection is not only available to a “buyer” of land, but also to a volunteer who did not pay any consideration for a donation. It was held in Bogdanovic v Koteff that the same standard exists for volunteers as bona fide purchasers for full value, provided they meet certain criteria as to what constitutes a gift and registration of their title.
1. The donor must do whatever is necessary to transfer the title and do whatever is necessary to put that transfer out of revocation.
2. The donee must become the registered owner.
It should be noted that Bogdanovic v Koteff is a NSW Court of Appeal decision and research has failed to find a High Court decision on voluntary and irrevocability. However, absent a final judgment from a higher court, it must be argued that the rules of equity would apply to the general principal of a volunteer’s unseizable title.
Public Rights and Charges – The right of a Minister to create roads, easements and public right of way over land.
Expropriation rights by the 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 on land to provide utilities such as gas, water, drainage, sewer, etc.
Planning Restrictions – In Hillpalm v Heavens Door, Meagher JA held that the Environmental Assessment and Planning Act should take precedence over the Real Property Act, which confers non-seizure.
Construction Enforcement Laws: Includes issues such as illegal or unapproved construction work; invasions; and noncompliance with zoning.
Mining or exploration subsidies: Mining companies can apply to the government to obtain a mining lease or exploration license on a person’s land. This problem is very important today with coal seam gas extraction in Queensland.
Non-statutory duties ‘in personam’ and personal equity
The obligations of the purchaser and registered owner of the land, at law or in equity, may in some circumstances render the title voidable. Lord Wilberforce in Frazer v Walker said;
[t]hat the beginning [of indefeasibility of title] in no way denies the right of a plaintiff to bring against a registered owner a personal claim, in law or in equity, for relief that a court acting personally may award.
Types of personal exceptions
1. Previous contractual obligations of the registered owner;
2. Equitable resources (such as property held in trust).
Contractual Obligations: Bahr v Nicolay is the authoritative case regarding personal claims and non-seizure of title. A sold his land to B 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 the option to buy back the land. C then bought the land from B expressly accepting the conditions of the existing contract. Upon registration, C refused to resell the land to A citing the non-seizability of his title.
It was held in this case that the registered owners were bound by the contract by which the land was transferred to them and therefore C had to offer A the option to buy back the parcel of land. This has been confirmed in contemporary cases such as Farah Constructions Pty Ltd v Say-Dee Pty Ltd, TEC Desert Pty Ltd v State Revenue Commissioner and Bank of South Australia Limited v Ferguson.
Equitable remedies: Farah Constructions Pty Ltd v Say-Dee Pty Ltd is the authoritative case regarding the personal equity personal exception to non-seizability of title. This exception exists in circumstances where it would be inconceivable for the legal owner of the property to assert beneficial ownership. There are a number of previous cases that give us a set of principles from which to work. These are;
1. When a person becomes the legal owner of the land by knowingly breaching his duty as trustee. In Chan v Zacharia, Dr. Chan and Dr. Zacharia dissolved their business partnership; however, Dr. Chan knowingly renewed the lease on the property for his own benefit.
2. Know the receipt of the trust assets as a consequence of the breach of the trust or the duties of the trustee or know the assistance in the breach. In National Commercial Banking Corporation of Australia Ltd v Batty, the defendant deposited a check into his company’s trust account knowing that the check was payable to another company.
3. Seal leases. For example, joint ventures in the business or a break in a relationship where the husband and wife were co-owners.
Guidelines for personal exceptions to the non-attachability of the title.
According to The Australian Property Law Journal, courts in Australia have established certain guidelines when examining personal exceptions:
In-person claims cover 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 a personal claim may arise before or after registration; Y
It must involve improper conduct on the part of the current registered owner.
Mere lack of responsibility will not be enough to enforce a personal claim. It is ‘a necessary but not sufficient criterion’, and
The terms ‘personal equity’ and ‘right in personam’ do not provide a blank canvas on which a plaintiff can paint any picture.