Ad Property - Notes
Advanced Property Law:
Exam Notes Trimester 3, 2016
Equitable Interests and Trusts
4
Express Trusts
4
Resulting Trusts
5
Rebutting the Presumption
5
Constructive Trusts
7
Proprietary Estoppel
8
Remedies
8
Co-ownership
9
Joint Tenants
9
Tenants in Common
10
Creation
11
Severance
13
(1) Unilateral Act
14
(2) Mutual Agreement
14
(3) Course of Dealing
14
Rights and Duties of Co-owners
15
In Relation to Adverse Possession
16
Torrens System: Indefeasibility
17
Indefeasibility
17
Deferred v Immediate
18
Power of Correction
19
Claims for Compensation
20
Scope of Indefeasibility
21
With Respect to Registered Leases
21
With Respect to Registered Mortgages (VOIs)
21
Exceptions to Indefeasibility
23
Fraud
23
Definition of Fraud
24
Must be Against Someone
24
Agency
25
False Attestation
26
In Personam
27
Paramount Interests
28
Tenancy in Possession
28
Volunteers
29
Inconsistent Legislation (Not Examinable)
29
Unregistered Interests
30
Equitable Interests
30 2 of 38
Caveats
31
Lodgement/Creation
31
Removal
31
Consequences
32
Priority Notices
32
Priority Disputes
33
Registered v Registered
34
Registered v Equitable
34
Equitable v Equitable
34
(1) Notice Test
35
(2) Merits Test
35
Equitable v Mere Equity
36
Mortgages
37
Power of Sale
37
Improper Sale
37
Pre-Registration
37
Post-Registration
38
Compensation
38
3 of 38
Implied Equitable Interests: Resulting Trusts
Resulting Trusts The presumption of a resulting trust arises where a person purchases real or personal property and arranges for title to the property to be transferred to another person who provides no (or unequal, if there are many owners) consideration. ➔ The presumption is that the transferee holds the property on trust for the person providing the consideration. •
The transferee acquires legal ownership of the property, and the person providing the purchase money will retain equitable ownership of the property
•
However, this presumption can be rebutted by evidence of actual subjective intention at the time of the acquisition that the purchaser intended to make a gift to the transferee
There are two categories of the presumption of a resulting trust: Gratuitous transfers (with no clear intention that it was
Purchase money resulting trust
intended to be a gift) Two forms Equal contributions but legally in one name
Unequal contributions*
For example, A, B and C buy land together. A puts in 60%, B and C each put in 20%, and they have the vendor transfer to the three of them jointly. If the presumption of resulting trust arises, A, B and C hold their joint legal title on trust for themselves in equity as tenants in common in shares proportionate to their contributions.
* Must be unequal contribution to the purchase price (and can include incidental costs (Boumelhem)). Money payed after purchase such as mortgage repayment will not trigger a presumption of a resulting trust if the deposit paid is an equal amount (but consider constructive trusts) (Calverley v Green)
Rebutting the Presumption The presumption of a resulting trust, (that is the presumption is that the transferee holds the property on trust for the person providing the money) can be rebutted in certain ways and per the flowchart on the next page. 5 of 38
Co-ownership
Tenants in Common A tenancy in common exists where two or more people own a single interest in property, but hold distinct, alienable shares in the property. For there to be a Tenancy in Common, only 1 unity must be present:
A
B
50%
50%
1. Possession: each co-owner is entitled to possession of the whole land; Note: A tenancy in common may have all of the four unities but only needs the unity of possession. Principles: •
Unlike joint tenants, tenants in common do have a distinct, fixed share in the property
•
Their shares do not correspond do any physical division of the property
•
Shares can be equal or unequal
•
The principle of survivorship does not operate: a tenant in common can leave their interest in will
•
Tenants in common can sell, give away or devise their shares
•
On death, tenants’ corresponding shares forms part of their estate
10 of 38
Co-ownership: Severance
Severance Severance describes the means by which a joint tenancy is converted into tenancy at common. A joint tenancy is not severed by a will (as, once dead, the jus accrescendi principle operates and the interest of the deceased joint tenants extinguishes) Three ways in which severance can occur (Williams v Hensman): 1. A unilateral act by a joint tenant operating on their share 2. Mutual agreement to sever 3. A course of dealings sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common
Examples of before/after severance:
A
A and B
B
Severance Tenants in common
Joint tenants
A sells share to X A, B, C and D
X
B, C and D
TiC
Joint tenants
Severance Joint tenants
X holds a 1/4 share as a tenant in common with B, C and D who hold a 3/4 share as joint tenants between themselves
A and B
A sells life estate X (LE)
B
Severance Joint tenants
A
B
X dies Tenants in common
Life estate will sever the joint tenancy and converts it to a tenancy in common. (Wright v Gibbons)
13 of 38
Tenants in common
Torrens System: Indefeasibility
Torrens System: Indefeasibility The property triangle: two innocents and one rogue; which of the two innocents should be protected? • •
Under general law land, the original owner is protected Under Torrens land, the purchaser is protected (hence giving certainty to the transaction)
This policy consideration was made to prevent purchaser hesitation and retain the commodity that is land.
Indefeasibility An ‘indefeasible’ title is a title with statutory protection that cannot challenged or set aside on the ground of any defect in the way that it was acquired, except in cases of fraud. Transfer of Land Act 1958 (Vic): •
s 40: No instrument until registered shall be effective (to pass title)
•
s 41: Information registered on Register is taken to be conclusive evidence of the title the person named on the folio is taken to be the proprietor of the land and has indefeasibility
Paramountcy •
s 42(1): RP of land shall, except in cases of fraud, hold land free from any encumbrances, except those registered on title, except: (a) The estate or interest of a proprietor claiming the same land under a prior folio of the Register (b) Any portion of the land that by wrong description of parcels or boundaries is included in the folio or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchase
•
s 42(2): RP holds land subject to: (a) The reservations exceptions conditions and powers contained in Crown grant of land; (b) Any rights subsisting under any adverse possession of the land; (c) Any public rights of way; (d) Any easements; (e) The interest (excluding option to purchase) of tenant in possession; (f) Any unpaid land tax/rates charged which can be discovered from a certificate issued under s 387 LGA 1958 or s 58 Water Act 1989 or any other enactment specified by proclamation of GG and published in Government Gazette
Notice •
s 43: Except in cases of fraud, a person dealing with or taking transfer from RP: •
Need not inquire to ascertain the circumstances in which that prior RP was registered; or
•
Need not see the application of any purchase or consideration money; or
•
Will not be affected by notice actual or constructive of any unregistered interest, any rule of law/ equity to the contrary; and
•
The knowledge that any such unregistered interest is in existence shall not itself be fraud 17 of 38
Exceptions to Indefeasibility: Fraud
Exceptions to Indefeasibility There are a number of express exceptions to indefeasibility in s 42, TLA: • •
Fraud: s 42(1) Prior estate (mistaken): s 42(1)(a)
•
Wrong description: s 42(1)(b)
•
Terms of a Crown grant: s 42(2)(a)
•
Adverse possession: s 42(2)(b)
•
Public rights of way: s 42(2)(c)
•
Easements: s 42(2)(d)
•
Tenancy in possession: s 42(2)(e)
•
Unpaid land tax, rates, etc: s 42(2)(f)
There are also a number of non-express exceptions: • In personam •
Volunteers
•
Inconsistent legislation
➔ If registered, start by assuming that title is indefeasible, then see if exceptions apply
Fraud s 42(1): The registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever […] Outline of Fraud Answer 1. Who is acting fraudulently and whether it is fraud within the Assets test 2. Can the fraud be brought home to RP? •
Either committed by RP themselves or knew directly of the fraud OR the RP’s agent committed the fraud within the scope of agency OR RP’s agent had knowledge of the fraud of third party and had a duty to communicate this to RP
3. If there is a mortgage, are VOI requirements met? •
Note: post 24 September 2014 only
4. If it is fraud of agent, need to assess knowledge of agent •
If agent knows and is acting within scope of authority, P knows (Schultz); or
•
If agent’s acts are so connected with agent’s authorised acts, P vicariously liable (Dollars & Sense)
•
Consider whether agent knows of another’s fraud (Schultz) 23 of 38
Exceptions to Indefeasibility
Volunteers 1. Victorian position 1.1. A volunteer is subject to whatever interests the prior registered proprietor was subject to 1.2. Indefeasibility only applies to purchasers for value, and volunteers are not protected from prior equitable claims (Rasmussen v Rasmussen) 1.3. Received obiter support in Cassegrain in 2015 2. New South Wales position 2.1. Where the new registered proprietor is a volunteer, they still obtain indefeasibility of title (Bogdanovic v Koteff) 3. The High Court 3.1. Farah Constructions v Say-Dee: Obiter on volunteers favours the NSW approach that volunteers do obtain indefeasibility (2007) 3.2. Cassegrain: Obiter support for the Victorian approach (2015)
Inconsistent Legislation (Not Examinable) Where there is subsequent legislation which purports to affect certain registered interests. s 42, TLA: Statute can be overridden by a later statute only if they are inconsistent and indefeasibility will be lost. •
This is an issue of statutory interpretation
•
Specific provisions will prevail over general provisions when there is an inconsistency between the two (Calabro v Bayside CC: Local government legislation, passed post TLA, which vested public highways in local authorities overrode the general indefeasibility provisions)
•
s 49(a) of the Supreme Court Act 1986, regarding loan contracts entered into minors, is not inconsistent with s 42 TLA with respect to registration (Horvath v Commonwealth Bank) •
s 49 says nothing about registration and governs the contractual aspect, but s 42 governs the proprietary aspect. Therefore no inconsistency.
29 of 38
Priority Disputes
Registered v Registered •
s 34(1): Instruments are distributed based on date of lodgement • For example: A’s instrument is lodged at 2pm and B’s instrument is lodge at 2:01pm. A’s instrument is given priority
•
s 34(2): If there are two identical instruments signed by the same proprietor, the Registrar will register the instrument lodged by the person submitting the certificate of title
•
s 34(3): If multiple instruments are lodged for the same land, the Registrar will register instrument in order which will give effect to the intentions of all parties, as expressed in or apparent to the registrar for those instruments (Same rules apply for electronic lodgement per s 44E)
Registered v Equitable •
ss 40(1) and 43: Registered interest takes priority unless there is an exception to indefeasibility or indefeasibility is stripped
Equitable v Equitable Examples of equitable interests: •
Vendor’s lien for unpaid purchase monies
•
A purchaser of land with a specifically enforceable contract (Black v Garnock)
•
A volunteer who was validly gifted the land
•
The holder of an unregistered life estate
• •
The holder of an equitable lien (charge) (Barry v Heider) A tenant of an unregistered (equitable) lease (Downing v Lockwood)
•
A lender (mortgagee) under an unregistered (equitable) mortgage (Barry v Heider)
•
Interest of beneficiary under a trust (Bahr v Nicolay)
•
Holder of an equity of redemption: vests in a mortgagor the moment they become a mortgagor. As soon as a mortgage is taken as security over the land of the RP, the RP holds an equity of redemption, which entitles them to have their title free from all encumbrances when they discharge the mortgage, and is lost when a subsequent person becomes the RP
Remember: Any proprietary interest is caveatable but a mere equity is not!
34 of 38
Equitable Interests and Trusts
4
Express Trusts
4
Resulting Trusts
5
Rebutting the Presumption
5
Constructive Trusts
7
Proprietary Estoppel
8
Remedies
8
Co-ownership
9
Joint Tenants
9
Tenants in Common
10
Creation
11
Severance
13
(1) Unilateral Act
14
(2) Mutual Agreement
14
(3) Course of Dealing
14
Rights and Duties of Co-owners
15
In Relation to Adverse Possession
16
Torrens System: Indefeasibility
17
Indefeasibility
17
Deferred v Immediate
18
Power of Correction
19
Claims for Compensation
20
Scope of Indefeasibility
21
With Respect to Registered Leases
21
With Respect to Registered Mortgages (VOIs)
21
Exceptions to Indefeasibility
23
Fraud
23
Definition of Fraud
24
Must be Against Someone
24
Agency
25
False Attestation
26
In Personam
27
Paramount Interests
28
Tenancy in Possession
28
Volunteers
29
Inconsistent Legislation (Not Examinable)
29
Unregistered Interests
30
Equitable Interests
30 2 of 38
Caveats
31
Lodgement/Creation
31
Removal
31
Consequences
32
Priority Notices
32
Priority Disputes
33
Registered v Registered
34
Registered v Equitable
34
Equitable v Equitable
34
(1) Notice Test
35
(2) Merits Test
35
Equitable v Mere Equity
36
Mortgages
37
Power of Sale
37
Improper Sale
37
Pre-Registration
37
Post-Registration
38
Compensation
38
3 of 38
Implied Equitable Interests: Resulting Trusts
Resulting Trusts The presumption of a resulting trust arises where a person purchases real or personal property and arranges for title to the property to be transferred to another person who provides no (or unequal, if there are many owners) consideration. ➔ The presumption is that the transferee holds the property on trust for the person providing the consideration. •
The transferee acquires legal ownership of the property, and the person providing the purchase money will retain equitable ownership of the property
•
However, this presumption can be rebutted by evidence of actual subjective intention at the time of the acquisition that the purchaser intended to make a gift to the transferee
There are two categories of the presumption of a resulting trust: Gratuitous transfers (with no clear intention that it was
Purchase money resulting trust
intended to be a gift) Two forms Equal contributions but legally in one name
Unequal contributions*
For example, A, B and C buy land together. A puts in 60%, B and C each put in 20%, and they have the vendor transfer to the three of them jointly. If the presumption of resulting trust arises, A, B and C hold their joint legal title on trust for themselves in equity as tenants in common in shares proportionate to their contributions.
* Must be unequal contribution to the purchase price (and can include incidental costs (Boumelhem)). Money payed after purchase such as mortgage repayment will not trigger a presumption of a resulting trust if the deposit paid is an equal amount (but consider constructive trusts) (Calverley v Green)
Rebutting the Presumption The presumption of a resulting trust, (that is the presumption is that the transferee holds the property on trust for the person providing the money) can be rebutted in certain ways and per the flowchart on the next page. 5 of 38
Co-ownership
Tenants in Common A tenancy in common exists where two or more people own a single interest in property, but hold distinct, alienable shares in the property. For there to be a Tenancy in Common, only 1 unity must be present:
A
B
50%
50%
1. Possession: each co-owner is entitled to possession of the whole land; Note: A tenancy in common may have all of the four unities but only needs the unity of possession. Principles: •
Unlike joint tenants, tenants in common do have a distinct, fixed share in the property
•
Their shares do not correspond do any physical division of the property
•
Shares can be equal or unequal
•
The principle of survivorship does not operate: a tenant in common can leave their interest in will
•
Tenants in common can sell, give away or devise their shares
•
On death, tenants’ corresponding shares forms part of their estate
10 of 38
Co-ownership: Severance
Severance Severance describes the means by which a joint tenancy is converted into tenancy at common. A joint tenancy is not severed by a will (as, once dead, the jus accrescendi principle operates and the interest of the deceased joint tenants extinguishes) Three ways in which severance can occur (Williams v Hensman): 1. A unilateral act by a joint tenant operating on their share 2. Mutual agreement to sever 3. A course of dealings sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common
Examples of before/after severance:
A
A and B
B
Severance Tenants in common
Joint tenants
A sells share to X A, B, C and D
X
B, C and D
TiC
Joint tenants
Severance Joint tenants
X holds a 1/4 share as a tenant in common with B, C and D who hold a 3/4 share as joint tenants between themselves
A and B
A sells life estate X (LE)
B
Severance Joint tenants
A
B
X dies Tenants in common
Life estate will sever the joint tenancy and converts it to a tenancy in common. (Wright v Gibbons)
13 of 38
Tenants in common
Torrens System: Indefeasibility
Torrens System: Indefeasibility The property triangle: two innocents and one rogue; which of the two innocents should be protected? • •
Under general law land, the original owner is protected Under Torrens land, the purchaser is protected (hence giving certainty to the transaction)
This policy consideration was made to prevent purchaser hesitation and retain the commodity that is land.
Indefeasibility An ‘indefeasible’ title is a title with statutory protection that cannot challenged or set aside on the ground of any defect in the way that it was acquired, except in cases of fraud. Transfer of Land Act 1958 (Vic): •
s 40: No instrument until registered shall be effective (to pass title)
•
s 41: Information registered on Register is taken to be conclusive evidence of the title the person named on the folio is taken to be the proprietor of the land and has indefeasibility
Paramountcy •
s 42(1): RP of land shall, except in cases of fraud, hold land free from any encumbrances, except those registered on title, except: (a) The estate or interest of a proprietor claiming the same land under a prior folio of the Register (b) Any portion of the land that by wrong description of parcels or boundaries is included in the folio or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchase
•
s 42(2): RP holds land subject to: (a) The reservations exceptions conditions and powers contained in Crown grant of land; (b) Any rights subsisting under any adverse possession of the land; (c) Any public rights of way; (d) Any easements; (e) The interest (excluding option to purchase) of tenant in possession; (f) Any unpaid land tax/rates charged which can be discovered from a certificate issued under s 387 LGA 1958 or s 58 Water Act 1989 or any other enactment specified by proclamation of GG and published in Government Gazette
Notice •
s 43: Except in cases of fraud, a person dealing with or taking transfer from RP: •
Need not inquire to ascertain the circumstances in which that prior RP was registered; or
•
Need not see the application of any purchase or consideration money; or
•
Will not be affected by notice actual or constructive of any unregistered interest, any rule of law/ equity to the contrary; and
•
The knowledge that any such unregistered interest is in existence shall not itself be fraud 17 of 38
Exceptions to Indefeasibility: Fraud
Exceptions to Indefeasibility There are a number of express exceptions to indefeasibility in s 42, TLA: • •
Fraud: s 42(1) Prior estate (mistaken): s 42(1)(a)
•
Wrong description: s 42(1)(b)
•
Terms of a Crown grant: s 42(2)(a)
•
Adverse possession: s 42(2)(b)
•
Public rights of way: s 42(2)(c)
•
Easements: s 42(2)(d)
•
Tenancy in possession: s 42(2)(e)
•
Unpaid land tax, rates, etc: s 42(2)(f)
There are also a number of non-express exceptions: • In personam •
Volunteers
•
Inconsistent legislation
➔ If registered, start by assuming that title is indefeasible, then see if exceptions apply
Fraud s 42(1): The registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever […] Outline of Fraud Answer 1. Who is acting fraudulently and whether it is fraud within the Assets test 2. Can the fraud be brought home to RP? •
Either committed by RP themselves or knew directly of the fraud OR the RP’s agent committed the fraud within the scope of agency OR RP’s agent had knowledge of the fraud of third party and had a duty to communicate this to RP
3. If there is a mortgage, are VOI requirements met? •
Note: post 24 September 2014 only
4. If it is fraud of agent, need to assess knowledge of agent •
If agent knows and is acting within scope of authority, P knows (Schultz); or
•
If agent’s acts are so connected with agent’s authorised acts, P vicariously liable (Dollars & Sense)
•
Consider whether agent knows of another’s fraud (Schultz) 23 of 38
Exceptions to Indefeasibility
Volunteers 1. Victorian position 1.1. A volunteer is subject to whatever interests the prior registered proprietor was subject to 1.2. Indefeasibility only applies to purchasers for value, and volunteers are not protected from prior equitable claims (Rasmussen v Rasmussen) 1.3. Received obiter support in Cassegrain in 2015 2. New South Wales position 2.1. Where the new registered proprietor is a volunteer, they still obtain indefeasibility of title (Bogdanovic v Koteff) 3. The High Court 3.1. Farah Constructions v Say-Dee: Obiter on volunteers favours the NSW approach that volunteers do obtain indefeasibility (2007) 3.2. Cassegrain: Obiter support for the Victorian approach (2015)
Inconsistent Legislation (Not Examinable) Where there is subsequent legislation which purports to affect certain registered interests. s 42, TLA: Statute can be overridden by a later statute only if they are inconsistent and indefeasibility will be lost. •
This is an issue of statutory interpretation
•
Specific provisions will prevail over general provisions when there is an inconsistency between the two (Calabro v Bayside CC: Local government legislation, passed post TLA, which vested public highways in local authorities overrode the general indefeasibility provisions)
•
s 49(a) of the Supreme Court Act 1986, regarding loan contracts entered into minors, is not inconsistent with s 42 TLA with respect to registration (Horvath v Commonwealth Bank) •
s 49 says nothing about registration and governs the contractual aspect, but s 42 governs the proprietary aspect. Therefore no inconsistency.
29 of 38
Priority Disputes
Registered v Registered •
s 34(1): Instruments are distributed based on date of lodgement • For example: A’s instrument is lodged at 2pm and B’s instrument is lodge at 2:01pm. A’s instrument is given priority
•
s 34(2): If there are two identical instruments signed by the same proprietor, the Registrar will register the instrument lodged by the person submitting the certificate of title
•
s 34(3): If multiple instruments are lodged for the same land, the Registrar will register instrument in order which will give effect to the intentions of all parties, as expressed in or apparent to the registrar for those instruments (Same rules apply for electronic lodgement per s 44E)
Registered v Equitable •
ss 40(1) and 43: Registered interest takes priority unless there is an exception to indefeasibility or indefeasibility is stripped
Equitable v Equitable Examples of equitable interests: •
Vendor’s lien for unpaid purchase monies
•
A purchaser of land with a specifically enforceable contract (Black v Garnock)
•
A volunteer who was validly gifted the land
•
The holder of an unregistered life estate
• •
The holder of an equitable lien (charge) (Barry v Heider) A tenant of an unregistered (equitable) lease (Downing v Lockwood)
•
A lender (mortgagee) under an unregistered (equitable) mortgage (Barry v Heider)
•
Interest of beneficiary under a trust (Bahr v Nicolay)
•
Holder of an equity of redemption: vests in a mortgagor the moment they become a mortgagor. As soon as a mortgage is taken as security over the land of the RP, the RP holds an equity of redemption, which entitles them to have their title free from all encumbrances when they discharge the mortgage, and is lost when a subsequent person becomes the RP
Remember: Any proprietary interest is caveatable but a mere equity is not!
34 of 38
