TOPIC 4: STATUTORY EXCEPTIONS TO INDEFEASIBILITY ⢠The ...
TOPIC 4: STATUTORY EXCEPTIONS TO INDEFEASIBILITY •
The following examples of statutory exceptions to indefeasibility are recognised in Victoria: – Fraud – Prior folio or certificate of title – Erroneous description of land – Paramount interests
Fraud is a false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury. The TLA defines particular circumstances where the indefeasibility of the registered proprietor may be defeated. There are exceptions to this principle set out in TLA. Those exceptions include fraud, leases, wrong description of boundaries, adverse possession claims (s 42 and 44 TLA). Exceptions To Indefeasibility •
Indefeasible title means that at the time of registration, the registered proprietor of an interest in land receives unassailable rights to the land in respect of which they are registered
•
Exceptions to indefeasibility are recognised in most states by statute or under other circumstances
•
Legislation in all Torrens states defines circumstances where the indefeasibility of a registered proprietor must be set aside
•
If a statutory exception is established, the title of the registered proprietor will automatically be defeasible
•
The following examples of statutory exceptions to indefeasibility are recognised in VIC:
•
o
Fraud
o
Prior folio or certificate of title
o
Erroneous description of land
o
Paramount interests
A registered proprietor who obtains registration through fraud does not gain the benefits of indefeasibility
Fraud (In General) Making a material misrepresentation or failing to disclose a material fact in order to induce another to give up something of value
Fraud must be proved showing the alleged fraudster's actions involved five separate elements: 1. a false statement of a material fact/ failure to disclose material fact; 2. knowledge on the part of the alleged fraudster that the statement is untrue; 3. intent on the part of the fraudster to deceive the alleged victim; 4. justifiable reliance by the alleged victim on the statement; and 5. injury to the alleged victim as a result Fraud in Provisions of TLA •
In terms of s 42(1) of the TLA a registered proprietor acquires indefeasibility of title except in the case of fraud (by the registered proprietor)
•
Pursuant to s 42 a person who acquires a registered interest though (actual) fraud will be liable to have his title be rectified by the Registrar
•
In case of fraud, a person dealing with register is required to ascertain the circumstances under and the consideration for which the proprietor (or previous proprietor) was registered (s 43)
•
Knowledge of the existence of a trust or unregistered interest is not imputed as fraud (s 43)
•
A folio procured by fraud by the registered proprietor shall be void as against a person defrauded and no party or privy to the fraud shall no take any benefit (s 44(1))
•
A title will be rendered defeasible in circumstances where a party/his agent has committed the fraud or been privy to it (s 44(1))
•
Registered proprietors that acquired their rights in good faith and for value are not subject to an action of ejectment or for recovery of damages or deprivation of an estate or interest on the ground that they have derived title from a person registered as a proprietor through fraud or error (s 44(2))
Meaning in TLA •
Fraud is not actually defined in the provisions of the TLA (Vic)
•
It is clear from s 43 that actual notice of an unregistered interest does not constitute fraud
•
There is no further statutory guidance as to the meaning of fraud
•
Fraud has to be and has been defined by the courts
Where to look for:
-
Fraud relates/limited to fraud by current registered proprietor/his agents (fraudster)
-
Fraud is perpetrated against a prior registered proprietor or a holder of an unregistered interest (victim)
-
Fraud may be committed by a third party
•
Under the general law system of title, fraud has a legal and equitable manifestation.
•
Common law fraud requires proof of deceit whereas equitable fraud can be committed wherever it is clear that an unfair consequence may arise or a breach of a sort of obligation which is enforced by courts of equity (Nocton v Lord Ashburton)
• •
Equitable fraud: actual intention to cheat need not to be proved If the fraud can be brought home to the present registered proprietor/agents his title is immediately indefeasible
a) Present proprietor has become registered in the face of an unregistered interest, and claims to rely on registered interest to defeat the unregistered interest •
Since knowledge of unregistered interest does not constitute fraud it cannot be fraud to register a document knowing that it will destroy the unregistered right
•
Something more than knowledge is required before the registered proprietor is guilty of Torrens fraud: o
Sale of trust land to proprietor knowing it is trust land is not fraud if it is sold in breach of trust
o
Knowing that it is sold fraudulently in breach of trust may constitute fraud
b) Where fraud is perpetrated against the Registrar-General o Lodgement of documents knowing that formalities have not been complied with EXAMPLES OF FRAUD •
Forgery
•
Lodgement of an instrument for registration wilfully blind or with a wilful and reckless failure to enquire as to a forgery;
•
Involvement in a fraudulent scheme designed unfairly to deprive another of his title
•
Breach of a fiduciary duty
•
In some cases breach of a contractual term to which the registered proprietor has expressly agreed to
•
If the registered proprietor lodges a dealing which he or she knows has not complied with the necessary formalities, the conduct of the registered proprietor may constitute fraud against the Registrar;
•
Knowledge of the existence of a prior interest in the property combined with fraudulent misrepresentation made by the registered proprietor is sufficient to constitute actual fraud
FRAUD EXAM ANSWER TEMPLATE 1. Provide a definition of indefeasibility and a definition of fraud. 2. State what conduct (which has alleged to have occurred) may constitute fraud and discuss whether it meets the test which define fraud. 3. Was the alleged fraudulent conduct directly attributed to the registered proprietor either as an owner/mortgagee whose title is now sought to be impeached. If so, the fraud exception is established and that person’s title is declared indefeasible. 4. If not, can fraud be brought to the registered proprietor. This can occur through the registered proprietor’s actual knowledge of the fraud committed by the previous registered proprietor or can be brought home to the registered proprietor through his/her constructive knowledge. 5. If not, it was fraud committed by the registered proprietor’s agent.
CASE LAW Loke Yew v Port Swettenham Rubber Co •
The PS Rubber Co purchased a large area of land from the registered proprietor, Eusope. Although not registered, Loke Yew was owner of part of the land earlier sold to him. Eusope only agreed to sell the whole of the land to the rubber company when he was given an assurance by the company that it would not disturb Loke Yew’s possession. Upon becoming the
registered proprietor the rubber company asserted that it was entitled to the whole of the land claiming indefeasible title. Loke Yew sought relief •
Loke Yew argued that the title of the rubber company gained by registration was defeasible by virtue of the fraud exception and that the register should be changed to reflect his interest.
•
HELD that formal transfer was obtained by deliberate fraud
•
The Rubber Company had not mere knowledge of Loke Yew’s prior unregistered right. The statement by Glass that the right of Loke Yew would be protected, had been falsely and fraudulently made to induce Eusope to sign the transfer
•
There was a deliberate plan to deprive Loke Yew of land
The following examples of statutory exceptions to indefeasibility are recognised in Victoria: – Fraud – Prior folio or certificate of title – Erroneous description of land – Paramount interests
Fraud is a false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury. The TLA defines particular circumstances where the indefeasibility of the registered proprietor may be defeated. There are exceptions to this principle set out in TLA. Those exceptions include fraud, leases, wrong description of boundaries, adverse possession claims (s 42 and 44 TLA). Exceptions To Indefeasibility •
Indefeasible title means that at the time of registration, the registered proprietor of an interest in land receives unassailable rights to the land in respect of which they are registered
•
Exceptions to indefeasibility are recognised in most states by statute or under other circumstances
•
Legislation in all Torrens states defines circumstances where the indefeasibility of a registered proprietor must be set aside
•
If a statutory exception is established, the title of the registered proprietor will automatically be defeasible
•
The following examples of statutory exceptions to indefeasibility are recognised in VIC:
•
o
Fraud
o
Prior folio or certificate of title
o
Erroneous description of land
o
Paramount interests
A registered proprietor who obtains registration through fraud does not gain the benefits of indefeasibility
Fraud (In General) Making a material misrepresentation or failing to disclose a material fact in order to induce another to give up something of value
Fraud must be proved showing the alleged fraudster's actions involved five separate elements: 1. a false statement of a material fact/ failure to disclose material fact; 2. knowledge on the part of the alleged fraudster that the statement is untrue; 3. intent on the part of the fraudster to deceive the alleged victim; 4. justifiable reliance by the alleged victim on the statement; and 5. injury to the alleged victim as a result Fraud in Provisions of TLA •
In terms of s 42(1) of the TLA a registered proprietor acquires indefeasibility of title except in the case of fraud (by the registered proprietor)
•
Pursuant to s 42 a person who acquires a registered interest though (actual) fraud will be liable to have his title be rectified by the Registrar
•
In case of fraud, a person dealing with register is required to ascertain the circumstances under and the consideration for which the proprietor (or previous proprietor) was registered (s 43)
•
Knowledge of the existence of a trust or unregistered interest is not imputed as fraud (s 43)
•
A folio procured by fraud by the registered proprietor shall be void as against a person defrauded and no party or privy to the fraud shall no take any benefit (s 44(1))
•
A title will be rendered defeasible in circumstances where a party/his agent has committed the fraud or been privy to it (s 44(1))
•
Registered proprietors that acquired their rights in good faith and for value are not subject to an action of ejectment or for recovery of damages or deprivation of an estate or interest on the ground that they have derived title from a person registered as a proprietor through fraud or error (s 44(2))
Meaning in TLA •
Fraud is not actually defined in the provisions of the TLA (Vic)
•
It is clear from s 43 that actual notice of an unregistered interest does not constitute fraud
•
There is no further statutory guidance as to the meaning of fraud
•
Fraud has to be and has been defined by the courts
Where to look for:
-
Fraud relates/limited to fraud by current registered proprietor/his agents (fraudster)
-
Fraud is perpetrated against a prior registered proprietor or a holder of an unregistered interest (victim)
-
Fraud may be committed by a third party
•
Under the general law system of title, fraud has a legal and equitable manifestation.
•
Common law fraud requires proof of deceit whereas equitable fraud can be committed wherever it is clear that an unfair consequence may arise or a breach of a sort of obligation which is enforced by courts of equity (Nocton v Lord Ashburton)
• •
Equitable fraud: actual intention to cheat need not to be proved If the fraud can be brought home to the present registered proprietor/agents his title is immediately indefeasible
a) Present proprietor has become registered in the face of an unregistered interest, and claims to rely on registered interest to defeat the unregistered interest •
Since knowledge of unregistered interest does not constitute fraud it cannot be fraud to register a document knowing that it will destroy the unregistered right
•
Something more than knowledge is required before the registered proprietor is guilty of Torrens fraud: o
Sale of trust land to proprietor knowing it is trust land is not fraud if it is sold in breach of trust
o
Knowing that it is sold fraudulently in breach of trust may constitute fraud
b) Where fraud is perpetrated against the Registrar-General o Lodgement of documents knowing that formalities have not been complied with EXAMPLES OF FRAUD •
Forgery
•
Lodgement of an instrument for registration wilfully blind or with a wilful and reckless failure to enquire as to a forgery;
•
Involvement in a fraudulent scheme designed unfairly to deprive another of his title
•
Breach of a fiduciary duty
•
In some cases breach of a contractual term to which the registered proprietor has expressly agreed to
•
If the registered proprietor lodges a dealing which he or she knows has not complied with the necessary formalities, the conduct of the registered proprietor may constitute fraud against the Registrar;
•
Knowledge of the existence of a prior interest in the property combined with fraudulent misrepresentation made by the registered proprietor is sufficient to constitute actual fraud
FRAUD EXAM ANSWER TEMPLATE 1. Provide a definition of indefeasibility and a definition of fraud. 2. State what conduct (which has alleged to have occurred) may constitute fraud and discuss whether it meets the test which define fraud. 3. Was the alleged fraudulent conduct directly attributed to the registered proprietor either as an owner/mortgagee whose title is now sought to be impeached. If so, the fraud exception is established and that person’s title is declared indefeasible. 4. If not, can fraud be brought to the registered proprietor. This can occur through the registered proprietor’s actual knowledge of the fraud committed by the previous registered proprietor or can be brought home to the registered proprietor through his/her constructive knowledge. 5. If not, it was fraud committed by the registered proprietor’s agent.
CASE LAW Loke Yew v Port Swettenham Rubber Co •
The PS Rubber Co purchased a large area of land from the registered proprietor, Eusope. Although not registered, Loke Yew was owner of part of the land earlier sold to him. Eusope only agreed to sell the whole of the land to the rubber company when he was given an assurance by the company that it would not disturb Loke Yew’s possession. Upon becoming the
registered proprietor the rubber company asserted that it was entitled to the whole of the land claiming indefeasible title. Loke Yew sought relief •
Loke Yew argued that the title of the rubber company gained by registration was defeasible by virtue of the fraud exception and that the register should be changed to reflect his interest.
•
HELD that formal transfer was obtained by deliberate fraud
•
The Rubber Company had not mere knowledge of Loke Yew’s prior unregistered right. The statement by Glass that the right of Loke Yew would be protected, had been falsely and fraudulently made to induce Eusope to sign the transfer
•
There was a deliberate plan to deprive Loke Yew of land
