#7155 - Exceptions Policy - Property B

• Criticism of Gosper: if the forger had stolen the certificate for registration of the variatiom, there would have been no argument for a personal equity, despite it being used without authority. The fact that the mortgagee already had possession of the CT should not (in absence of fraud or knowledge of fraud on its part) give rise to a personal equity. Any toher result undermines confidence in the Torrens register (Butt, ‘Indefeasibility and Sleights of Hand, p 597).

• Though the Privy Council (Frazer) and High Court (Bahr; Barwick CJ in Breskvar) have stated there is no inconsistency between the indefeasibility provisions and the enforcement of personal equities against the registered owner in personam, concern has been raised that the personal equities exception should not be allowed to develop as a collateral means of attacking the indefeasibility of a registered title. There is no formal inconsistency between immediate indefeasibility and the personal equities exception, but there is substantive inconsistency to the extent that enforcement of the personal equity against the RP undermines the purchaser’s security of transaction, where the result is to deprive the purchaser of the benefit of the registered title (Sackville and Neave p 534-5).

[5.113] A registered proprietor will be subject to the interest of a tenant (but life tenants have been held to be a ‘tenant’ – Perpetual Trustees v Smith). This is justified by the expense and inconvenience of requiring registration of all leases outweighing the advantages, given a purchaser bound by a lease is subject to it for a short time only. The purchaser can also be expected to discover the tenant’s occupation and ascertain the existence of a lease prior to purchase.

In other jurisdictions, the provisions apply to short term tenants. However, in Victoria, there is no limitation as to the duration of the tenancy. This means that the procedures provided for registration of leases are rarely followed. Arguably the Victorian protection is too broad, especially in relation to unregistered leases.

In ASIC v Money for Living, s 42(2)(e) was held to protect the interest of life tenants who entered a sale and lease-back arrangement under which they transferred their home in return for a guarantee income for life and a life-long right to occupy the home.

A reluctance to require registration of short-term leases is understandable, but it is more difficult to justify protecting long-term leases, thereby exposing bona fide purchasers to the risk of being bound by long-term leasehold estates of which they are not fully aware at settlement. The position in Victoria is exacerbated by the holding in Downie v Lockwood that a tenant’s equity of rectification of the original lease constitutes an unseverable part of the tenant’s interest in the land and is therefore binding on a registered transferee from the landlord under 42(2)(e). The provision is widely construed and will protect the interest of a purchaser given possession before settlement (Robertson v Keith).

Policy arguments: should volunteers be bound by the same equities as the donor who gave them the interest, or should they get indefeasibility?

• In favour of NOT having indefeasibility for vols

  • Fairness: someone who pays for an interest should prevail over someone who has not

  • Idea that fraud is so hard to make out, so if fraud is so hard to make out what can save the day is another exception such as volunteers (eg if fraud was a transfer without consideration)

  • Having no exception would encourage fraudsters to transfer it away to innocent family members (however they could avoid this by asking a bit of consideration)

• In favour of having indefeasibility for vols

  • Makes things simple: if you are registered, whether you paid or not, indefeasible

  • Volunteer might rely on their registration and order their affairs accordingly, so may be unfair to take it away

Curtain and mirror principles: what is on the register should be the whole truth

• There are comments from HCA regarding the purpose of the caveat

• Context: purcahsers of land endeavouring to obtain priority as against a judgment creditor of the vendor when the sheriff’s office in execution of the judgment debt procured registration two hours before settlement; the purchasers were unable to procure registration when they lodged their...