Indefeasibility

184 Quality of registered interests

(1) A registered proprietor of an interest in a lot holds the interest subject to registered interests affecting the lot but free from all other interests.(2) In particular, the registered proprietor—(a) is not affected by actual or constructive notice of an unregistered interest affecting the lot; and(b) is liable to a proceeding for possession of the lot or an interest in the lot only if the proceeding is brought by the registered proprietor of an interest affecting the lot.(3) However, subsections (1) and (2) do not apply—(a) to an interest mentioned in section 185; or(b) if there has been fraud by the registered proprietor, whether or not there has been fraud by a person from or through whom the registered proprietor has derived the registered interest.

Concept of indefeasibility

Not a system of “registration of title but a system of title by registration” per Barwick CJ in Breskvar v Wall (1971) 126 CLR 376, per Windeyer J The registered proprietor has the legal property in the land, subject only to equities and such interests as the Act expressly preserves

GW Hinde has said that three of the fundamental principles of the Torrens system are:o (a) that it should not be necessary to investigate the history of the registered proprietor’s title;o (b) that everything which can be registered should give, in the absence of fraud, an indefeasible title

(unable to be defeated);o (c) that an interest in land which is registered under the system should either be secure, or else

monetary compensation for that interest should be paid. Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22:

o the effect of the registration of a subsequent dealing bringing about the registration of proprietorship of an estate or interest in land is to extinguish all prior unregistered estates or interests which, but for that registration, would have conflicted with the proprietor's estate or interest or encumbered that estate or interest, unless the prior unregistered estate or interest falls within the exceptions to indefeasibility of title mentioned in s 68. In other words, a person seeking to preserve an unregistered interest not falling within those exceptions must register that interest in advance of the registration of a subsequent inconsistent dealing or prevent such registration by caveat or otherwise, and thereby enable registration of the unregistered interest. Once that interest is defeated by registration of a subsequent inconsistent dealing bringing about the registration of a new proprietor, the first interest is extinguished for all purposes and cannot be asserted against any later proprietor.10The first interest does not become an inchoate interest capable of being asserted against a later proprietor or an interest which remains in suspension so that it is capable of subsequent revival against such a proprietor.

Registration confers the legal estate, even if the instrument registered was defective or void: Breskvar v Wall

No legal estate until interest registered: s181 LTA Equitable interests are recognised to the extent that they are not prohibited by the Torrens system: Butler v

Fairclough, Barry v Heider The rights of the registered proprietor are not based on the shorthand in the register (this could be

misleading), but are defined by all relevant registered instruments and their complete terms: Bursill Enterprises P/L v Berger Bros Trading Co P/L

Purchaser has a duty to investigate and interpret any subsisting interest recorded in shorthand on the register: Bursill Enterprises v Berger Bros

What rights are protected by indefeasibility?o Those that delimit or qualify the estate/ interest: PT Ltd v Maradona

o Covenants, eg. In a lease, to renew (part of incidents of estate granted), but not an option to renew (not incident of leasehold estate): Mercantile Credits Ltd v Shell Co of Australia

o Personal covenant to sue attached to a mortgage, because it delimits the extent of the mortgage interest (the amount secured): Hilton v Gray

Be careful^ - not the case in NSW – personal covenant is not indefeasible and thus when forged is void: Grgic v ANZ Banking Group

Or NZ – personal covenant only valid to the extent necessary to enforce the amount secured on the land: Duncan v MacDonald

NSW – can look at personal covenant to see the amount secured by the charge, but can’t enforce personal obligation to pay (not an interest in land: Bryson J in Chandra v Perpetual Trustees

Mortgagor’s covenant to pay the debt does not touch and concern the land – the charge itself is unaffected by the personal covenant : Gumland Property Holdings P/L v Duffy Bros Fruit Market P/L (HCA)

o Mortgage could fail to secure any debt by referring to “all moneys” or loans under collateral agreements which are not enforceable – in this case the mortgage is indefeasible, but there is no amount charged on the land: PT Ltd v Maradona, Queensland Premier Mines P/L v French

Registration (and not the antecedents) confers immediate indefeasibility – it is not open to vitiating factors and is indefeasible regardless of whether the instrument was void: Frazer v Walker, Breskvar v Wall – this applies in Queensland: Elroa Nominees v Registrar of Titles

If the registered proprietor/ interest is held by a fictitious person, there may be an exception to indefeasibility – but be careful: Gibbs v Messer, Frazer v Walker

Successive effect: Wilkes v Spooner A volunteer without notice is entitled to indefeasibility: s180 LTA, Bogdanovic v Koteff

Queensland freehold land register and registration procedure

There is a registrar of titles (s 6) who maintains a land registry (s 7). The Registrar must keep a register (s 27) and “must record” particulars necessary to identify every lot “brought under this Act” and every “interest registered in the register” etc (s 28). He must register “instruments” (s 30). An instrument must be in appropriate form (s 10).

An instrument to “transfer or create an interest” must be executed by the transferor or person creating it and the transferee or an authorised legal practitioner (s 11). A mortgagee of an interest “must take reasonable steps to ensure” that the mortgagor is “identical” with the registered proprietor (s 11A). Note the possibility of an “electronic conveyancing document”: s 14A etc.

An instrument does not transfer or create an interest in a lot at law until it is registered (s 181). On registration of an instrument the interest is transferred or created, is registered, and vests in the person identified in the instrument as entitled to the interest (s 182). A person to whom an interest is to be transferred or in whom it has been created has a right to have an instrument registered (s 183).

The registrar registers an instrument in the freehold land registry by “recording” in the register “the particulars necessary to identify the instrument” (s 173). An instrument is registered “when the particulars are recorded in the freehold land register” (once lodged for registration) (s 174). A registered instrument forms part of the register from when it is lodged (s 175). A registered instrument operates a deed (doesn't require consideration to support it, must be signed, sealed and delivered. Signing and sealing are easy to demonstrate, but be careful about delivery - doesn't necessarily involve physical transfer of the instrument - can be delivered and in operation even though it hasn't changed possession)(s 176). Instruments affecting a lot must be registered in the order in which they are lodged (s 177).

Definition of Instrument—s 4 Second Schedule o (a) a deed of grant or certificate of titleo (b) a will, grant of representation, or exemplification of a will, that may be used to deal with

a loto (c) a deed that relates to or may be used to deal with a loto (d) power of attorney that may be used to deal with a loto (e) request, application or other document that deals with a lot and may be registered

under this Acto (f) a map or plan of survey that may be lodgedo (g) another document that may be deposited.

A person may search the register (s 35). An indefeasible title for a lot is created on the recording of the

particulars of the lot in the freehold land registry (s 37). The registrar may “issue a certificate of title containing the indefeasible title for a lot (the certificate of title) if asked in writing by the registered owner” (s 42(1)).

Interest in land: Re Brook’s Caveat 2014 QSC 76o [30] What is meant by an “interest” in s 122(1)(a)? Schedule 1 of the Acts Interpretation Act provides:

“interest, in relation to land or other property, means –(a) a legal or equitable estate in the land or other property; or(b) a right, power or privilege over, or in relation to, the land or other property.”[31] The second limb of that definition, with its reference to an interest that is “over, or in relation to” the land does not fit cleanly with s 122(1)(a)’s reference to an interest that is “in” the lot. However, the description an “interest in a lot”, appearing in s 122(1)(a), is consistent with the description an “interest, in relation to land” appearing in the introductory words of the definition of interest and it is thus reasonably arguable that it attracts the application of both limbs thereafter appearing in the definition of “interest”. It is therefore reasonably arguable that a person with a right, power or privilege over or in relation to land has an “interest in a lot” within the meaning of s 122(1)(a).

Registrable interests:o Fee simple alienated by the State: s47 LTAo Transfer of lot or interest in a lot: s60(1) LTAo Interest as a trustee: 109-110 LTAo Plan of subdivision: s49A LTAo Lease of a lot or part of a lot: s64 LTAo Mortgage: s72 LTAo Easement: s82 LTAo Title of adverse possessor: s99 LTAo Profit a prendre: s97E LTAo Writ of execution: s116 LTAo Building management statement: s54A and 54o Statutory covenant in favour of a government: s97A LTAo Life interest, where deemed appropriate: s55 LTAo Community Management Statement: s115K

Interests not capable of registration:o Beneficial interest under a trust: s109 and 110 LTAo Interest in remainder whether vested or contingent: LTA s55 with PLA s30(2)o Restrictive covenant – no direct prohibition, but not the practice of the registrar to accept: s97A LTA

Registrar must register an instrument which prima facie complies with requirements, but can refuse to register if illegal or ‘tainted with illegality’: s30 LTA, Beames v Leader

Can also register standard terms documents which are to be incorporated by reference into registered instruments: s169 LTA

Anyone can search the freehold land register: s35 LTA Indefeasible title for a lot is the “current particulars”, including title reference, names of registered

proprietors and their interests, lot on plan description, and easements/ mortgages/ leases/ other encumbrances: s36 LTA

Certificate of title is conclusive evidence of indefeasible title except for exceptions to indefeasibility and differences with register: s46 LTA

Instruments are registered in the order in which they are lodged: s177 LTA Registrar can withdraw and relodge instruments to give effect to their intention: s159 LTA

Priority

Section 178 – priority of registered (legal) interests is according to time of registration Unregistered interests:

o Could be registrable, but for whatever reason have not been registered; oro Could be incapable of registration; and

In both cases, could be recognised as an equitable interest in the land: Barry v Heidero or it could be a legal interest if it is a short term lease.

Caveatso Will prevent the registration of an instrument which would adversely affect the interest contained

therein: s124 LTAo Provide notice to anyone searching the register and constructive notice to anyone who ought to

search the register: Butler v Fairclougho do not enlarge the rights of the caveator or convert their interest into a registered/ registrable one:

Butler v Fairclough Caveatable interests:

o Interest of purchaser under unconditional contract for sale and purchase of land: Re Oil Tool Sales P/L; Classified Pre-Mixed Concrete P/L

o Interest of purchaser under option to purchase land: Laybutt v Amoco Australia P/Lo A mortgagee’s interest in the land: Re Dixon’s Caveato Security interest of creditor given charge over land: Composite Buyers v Soongo Right to a profit a prendre: Connolly v Nooneo Purchaser’s lien for return of a deposit/ instalments where contract terminated without fault by

purchaser: Ex parte Lord Interest not capable of caveat:

o Right to possession of building site for building works – no interest in land: P T Stevens Earthmoving P/L’s Cavea

o Interest of partner in partnership land – no specific property interest, but right to proportionate share of surplus after realisation of assets and payment of debts: Chettle v Brown

o Co-owner’s interest where statutory trustee for sale has been appointed – they only have a personal right to a share in the proceeds of sale: Re Trepas P/L

Prior legal interest, subsequent legal claim

First instrument which is registered takes priority: s178 LTA Registered proprietor takes free of all interests unless excepted: s184-185 LTA

Prior legal interest, subsequent equitable claim

A prior legal interest could be postponed to a later equitable claim where there is fraud or gross negligence on the part of the prior legal interest holder - this will likely come under the in personam exception: Barry v Heider

It could also be postponed where there is an estoppel: Riches v Hogben

Prior equitable interest, subsequent legal claim

Person acquiring legal estate takes free of all interests: s184 Unless subject to an exception: s185 Notice is not enough to give rise to an exception: Friedmann v Barrett

Prior equitable interest, subsequent equitable claim

Where there is notice:o the prior interest takes priority – Lapin v Abigail – even where the prior interest is a mere equity and

the later interest is an equitable proprietary interest: Moffett v Dillono But the above doesn’t apply where the holder of the prior equity induces a belief in the later party

that the earlier equity no longer exists: Moffett v Dillon Where there is no notice:

o Where the equities are equal, the first in time prevails: Rice v Riceo Equities will not be equal where one is a mere equity and another is an equitable proprietary

interest: Latec Finance v Hotel Terrigal, Double Bay Newspapers v AW Holdingso But otherwise, weigh up all the circumstances to find the better equity: Heid v Reliance Finance

Corpo “It will always be necessary to characterise the conduct of the holder of the earlier interest in order

to determine whether, in all the circumstances that conduct is such that in fairness and in justice, the earlier interest should be postponed to the later interest…Fairness and justice demand that we be rimarily concerned with acts of a certain kind – those acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the non-existence of the earlier interest”: per Mason and Deane JJ in Heid v Reliance Finance Co (1983) 154 CLR 326 at 341

Postponing conduct:o execution of a dealing which does not reflect the true transaction: Breskvar v Wall (1971) 126 CLR

376 – borrowers executed blank transfer as “security” for loan, thereby arming someone with the means of representing to a bona fide third party that a transaction had taken place;

o failure to lodge a caveat to protect an unregistered second mortgage: Butler v Fairclough (1917) 23 CLR 78 cp J & H Just (Holdings) v Bank of NSW (1971) 125 CLR 546 – first mortgagee takes possession of certificate of title thus preventing registration of subsequent interest. Failure to lodge caveat is not fatal, but combined with other factors can postpone – Double Bay Newspapers

o Delay – Latec Investments v Hotel Terrigalo Any conduct which allows the holder of the second equity to take on faith of a clear register: J & H

Just Holdings v Bank of NSW, Butler v Fairclough Can look for both bad conduct (postponing) and good conduct (protecting) from both parties to weigh up

which interest should be given priority – look at levels of control of risk: AG(CQ) P/L v A&T Promotions P/L Conduct after the acquisition of the equitable interest is still relevant: Clark v Raymor Where the equities are equal, the law prevails: Pilcher v Rawlins (bona fide 3rd party case) You should probably caveat after a contract for sale is entered into to protect yourself from being able to not

register your interest: the position now with caveats after Black v Garnock [2007] HCA 31 – incoming purchaser did not caveat; subject to subsequently registered writ of execution based on a judgment debt.

“Without notice”? What do you know when the consideration is paid? That is the relevant time – X buys land but knows that Y is in possession as a tenant – Hunt v Luck [1902] 1 Ch 428. Consider the recent decision in Perpetual Trustee Company v Smith [2010] FCAFC 91 – retirees had sold and then leased back their homes to a company which then mortgaged the land to Perpetual which took with knowledge of the tenancies – “It was not necessary for the retirees to caveat their interests in order to alert any future purchaser or mortgagee to their interest in the property. The fact of their occupation was constructive notice of their interest which would thus prevail even against a bona fide purchaser of the legal interest; Barnhart v

Greenshields [1853] EngR 1060; (1853) 9 Moo PCC 18, 14 ER 2004; Hunt v Luck [1902] 1 Ch 428. Irrespective of whether Perpetual’s interest is regarded as legal or equitable the result is the same. In the absence of an obligation to caveat and in the light of their actual possession, there was no postponing conduct on the part of the retirees. As such the merits did not lie with Perpetual and therefore, in a competition between the two equitable interests the prior interest of the retirees would prevail; Rice v Rice [1853] EngR 1102; (1854) 2 Drew 73, 61 ER 646; Lapin v Abigail [1930] HCA 6; (1930) 44 CLR 166 at 204 per Dixon J, quoted with approval by Barwick CJ in J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546 at 555. The protection afforded by s 42(2)(e) strips the registered mortgagee of the indefeasibility that would otherwise protect it. In the competition between Perpetual and the tenants in possession the interests of the tenants must take priority over those of Perpetual”. (This case not applicable to registered interests in QLD as no similar provision in LTA, but does apply to competition between equitable interests)

Exceptions to indefeasibility

Fraud

184 Quality of registered interests

(1) A registered proprietor of an interest in a lot holds the interest subject to registered interests affecting the lot but free from all other interests.

(2) In particular, the registered proprietor—

(a) is not affected by actual or constructive notice of an unregistered interest affecting the lot; and

(b) is liable to a proceeding for possession of the lot or an interest in the lot only if the proceeding is brought by the registered proprietor of an interest affecting the lot.

(3) However, subsections (1) and (2) do not apply—

(a) to an interest mentioned in section 185; or

(b) if there has been fraud by the registered proprietor, whether or not there has been fraud by a person from or through whom the registered proprietor has derived the registered interest.

11A Original mortgagee to confirm identity of mortgagor(1) This section applies to—(a) the mortgaging of a lot or an interest in a lot; and(b) an amendment of a mortgage mentioned in paragraph (a).(2) Before the instrument of mortgage or amendment of mortgage is lodged for registration, the mortgagee under the instrument (the original mortgagee) must take reasonable steps to ensure the person who is the mortgagor under the instrument is identical with the person who is, or who is about to become, the registered proprietor of the lot or the interest in a lot.(2A) For subsection (2), a person is the mortgagor under an instrument of mortgage or amendment of mortgage if the person executes the instrument as mortgagor, including, if the instrument is an electronic conveyancing document, through a subscriber digitally signing the instrument under the Electronic Conveyancing National Law (Queensland).

(2B) Also, for subsection (2), a person is the mortgagor under an instrument of mortgage or amendment of mortgage if the instrument is an electronic conveyancing document and the person signs, as mortgagor, a document that under the participation rules under the Electronic Conveyancing National Law (Queensland)—(a) is required as a supporting document for the instrument of mortgage or amendment of mortgage; and(b) is required to be kept by the original mortgagee.(3) Without limiting subsection (2), the original mortgagee takes reasonable steps under the subsection if the original mortgagee complies with practices included in the manual of land title practice under section 9A(2)(c) for the verification of identification of mortgagors.(4) The original mortgagee must, for 7 years after the instrument is registered, and whether or not there is registered a transfer of the interest constituted by the mortgage—(a) keep, in the approved form, a written record of the steps taken under subsection (2); or(b) keep originals or copies of the documents and other evidence provided to or otherwise obtained by the original mortgagee in complying with subsection (2).Maximum penalty—20 penalty units.(5) The registrar may, whether before or after the registration of the instrument, and whether or not there has been registered a transfer of the interest constituted by the mortgage, ask the original mortgagee—(a) to advise the registrar about the steps taken by the original mortgagee under subsection (2); and(b) to produce for the registrar's inspection the written record mentioned in subsection (4)(a) or the originals or copies mentioned in subsection (4)(b).(6) The original mortgagee must comply with a request under subsection (5) unless the original mortgagee has a reasonable excuse.Maximum penalty—20 penalty units.(7) This section applies to an instrument of mortgage only if it is executed after the commencement of this section.LAND TITLE ACT 1994 - SECT 185185 Exceptions to s 184(1A) A registered proprietor of a lot (the relevant mortgagee) who is recorded in the freehold land register as a mortgagee of the lot or an interest in the lot does not obtain the benefit of section 184 for the relevant mortgagee's interest as mortgagee if—(a) the relevant mortgagee—(i) in relation to the instrument of mortgage or amendment of mortgage, failed to comply with section 11A(2); or(ii) in relation to a transfer of the instrument of mortgage, failed to comply with section 11B(2); and(b) the person who was the mortgagor under the instrument of mortgage or amendment of mortgage was not the person who was, or who was about to become, the registered proprietor of the lot or the interest in a lot for which the instrument was registered.(5) If an issue arises in a proceeding as to whether a person registered as a mortgagee does not obtain the benefit of section 184 because of subsection (1A), proof that the person complied with section 11A(2) or 11B(2) rests on the person.

Fraud requires:o Actual dishonesty/ moral turpitudeo Must be fraud by the registered proprietor: s184(3)(b) LTA

If a fraudulent inducement to enter into a transaction, must be operative on the mind of the defrauded person and have actually induced the transaction (causation): Bank of SA v Ferguson

there must be a causal link between fraud & the defrauded party’s loss of an interest in the land: Young v Hoger

Unclear whether fraudulent intent must exist prior to registration (Wilson and Toohey JJ in Bahr v Nicolay) or can arise out of a fraudulent repudiation after registration (Mason CJ and Dawson J in Bahr v Nicolay, Slorach v Mountain View Farm, Simon v McCulloch)

Fraudulent conduct

“actual fraud, dishonesty of some sort, not what is called constructive or equitable fraud”: Assets Co v Mere Roihi [1905] AC 176:

It means dishonesty - a wilful and conscious disregard and violation of the rights of other persons : Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101

moral turpitude ; … a designed cheating of a registered proprietor out of his rights: Kitto J in Latec Investments v Hotel Terrigal (1965) 113 CLR 265

A ‘less than meticulous practice as to the identification of persons purporting to deal with land does not constitute a course of conduct so reckless as to be tantamount to fraud’: Grgic v ANZ Banking group - but note s11A of LTA now

A person who presents for registration a document which is forged or has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon: Assets Co Ltd v Mere Roihi

If you present a document for registration that you know is a forgery, that is fraud: Young v Hoger Wilful ignorance and reckless indifference can amount to actual dishonesty – but must be actual dishonesty,

not just want of care (ie if there was a suspicion and they shut their eyes, would be dishonest but if merely a careless but genuine belief, not dishonest) Young v Hoger, Pyramid Building Society v Scorpion Hotel

Employees of mortgagee aware that signature not duly attested, but not aware that it was forged – this was fraud in Australian Guarantee Corporation Ltd v De Jager, because it deprived an ‘honest belief that it was a genuine document’

Banks employee included additional land in already executed document and proceeded to register the false document – this was fraud in National Australia Bank v Maher

Where a misrepresentation made to the Registrar, no need to prove that the fraud was practised against deprived person, just that it was made with the intent of disadvantaging the deprived person or inducing the registrar to treat the interest differently: Davis v Williams

Law clerk falsely witnessed a signature without understanding the significance or that it was a forgery – not fraud, because she was not dishonest (this case is questionable – better view that no fraud because she didn’t put it on the path to registration): Russo v Bendigo Bank

o Contrast this where false certification by acting manager on a document bound for registration – this was fraud: National Commercial Banking Corporation of Australia v Hedley

Executing document under a POA inconsistent with the authorisation in that POA is fraud: Williams v Turner Mere incompetence is not fraud: Hilton v Gray Mere notice of an unregistered interest (and equitable fraud) does not amount to statutory fraud: Friedman

v Barrett, s184(2) LTA Title could be defeasible to unregistered interest if the transfer was induced by a fraudulent

misrepresentation: Loke Yew v Port Swettenham Rubber Co Ltd

Fraud by a registered proprietor

Registered proprietor must have actual knowledge of the fraud; constructive notice not enough: “the fraud which must be proved in order to invalidate the title of a registered purchaser for value…must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he clams does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shown that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him”: Assets Co Ltd v Mere Roihi

Fraud by an agent must be undertaken within the scope of authority of the agency in order to impute it to the principal: Schultz v Corwill Properties P/L

It is relevant whether fraud was undertaken for benefit of principal or agent: National Bank v Maher, Russo v Bendigo Bank

For actions of employees which are not authorised by the employer, the test is: “..whether the connection between the employee’s duties and the wrongful act is sufficiently close to regard the wrongful act as within the scope of the employment.” - Davis v Williams (2003) 11 BPR 21,313

Credit Connect v Carney [2010] NSWSC 910 per Schmidt J

"Fraud" has a distinct meaning in this legislation and is often referred to as “statutory fraud” to differentiate it. Statutory fraud is wider than the common law concept of fraud because it is not confined to deceit or fraudulent misrepresentation and narrower than equitable fraud because dishonesty in the sense of moral turpitude is an essential element. Bearing in mind that it is impossible to summarise the whole law in this area, the authors of the Conveyancing Practice suggested that the following points should be made about fraud in this section:

(a) fraud means actual fraud, not constructive or equitable fraud: Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604 at 614, 78 ALR 1, [1988] HCA 16; Assets Co Ltd v Mere Roihi [1905] AC 176 at 210, Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 236 ALR 209 at 169, [2007] HCA 22; Butler v Fairclough (1917) 23 CLR 78, [1917] VLR 175, [1917] HCA 9; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [1965] HCA 17; (1965) 113 CLR 265, [1966] ALR 775, (1965) 39 ALJR 110;

(b) the fraud must be brought home to the person whose registered title is impeached or to his agents: Bahr v Nicolay (No 2) (1988) 164 CLR 604, 78 ALR 1, [1988] HCA 16; Assets Co Ltd v Mere Roihi [1905] AC 176;

(c) fraud by person from whom the registered proprietor claims does not affect him unless knowledge of it is brought home to him or his agents: Assets Co case, above;

(d) the mere fact that the registered proprietor might have found out fraud had he been more vigilant is irrelevant (unless the person's suspicions were aroused and he deliberately abstained from making further inquiries): Assets Co case, above;

(e) ordinarily merely having notice of an unregistered interest does not constitute fraud: Oertel v Hordern (1902) 2 SR (NSW) Eq 37, cf Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491 and see also Munro v Stuart (1924) 41 SR (NSW) 203n and Carvita Holdings Pty Ltd v Mitsubishi Bank of Australia Ltd (1993) 6 BPR 13,327;

(f) the fraud must be practised against the plaintiff and not, for instance, on his or her tenants: Munro v Stuart (1924) 41 SR (NSW) 203 at 205; normally the fraud must have operated on the mind of the person said to be defrauded and to have induced detrimental action by that person: Bank of South Australia Ltd v Ferguson [1998] HCA 12; (1998) 192 CLR 248 at 258; [1998] HCA 12; 151 ALR 729 at 734; (g) wilful blindness or indifference to the truth does not constitute fraud: Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133.

The Registrar General submits that the fraud in this case is what is said to be the fraud of an agent of Credit Connect, namely, Mr Singh, the justice of peace, who witnessed Mrs Smit’s signature. In signing as a witness he certified as follows: “I certify that the person(s) signing opposite, with whom I am personally acquainted or as to whose identity I am otherwise satisfied, signed this instrument in my presence.” On the evidence before me such statement was plainly false. Permitting a dealing to go forward for registration with a false certificate of attestation amounts to fraud within the meaning of the section: National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477; Australian Guarantee Corp Ltd v de Jager [1984] VicRp 40; [1984] VR 483 and see Westpac Banking Corp v Sansom (1994) 6 BPR 13,790; Beatty v ANZ Banking Group Ltd [1995] VicRp 57; [1995] 2 VR 301, and Pyramid Building Society v Scorpion Hotels Pty Ltd (1996) 136 ALR 166. The position can in some circumstances be otherwise where the person tendering the document for registration was unaware of the problem with the document: Grgic v ANZ Banking Group Ltd [1994] ACL Rep 355 NSW 10, (1994) 33 NSWLR 202; HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368. The law in this area was thoroughly reviewed by the Court of Appeal in Davis v Williams [2003] NSWCA 371.

Remedies for fraud

S 187 LTA(1) If there has been fraud by the registered proprietor or section 185(1)(c), (d), (e), (f) or (g) or (1A) applies, the Supreme Court may make the order it considers just. (2) Without limiting subsection (1), the Supreme Court may, by order, direct the registrar— (a) to cancel or correct the indefeasible title or other particulars in the freehold land register; or (b) to cancel, correct, execute or register an instrument; or (c) to create a new indefeasible title; or

(d) to issue a new instrument; or (e) to do anything else.

Note also section 188, which provides that persons who have been deprived of an interest due to the fraud of ‘another person’, they are to be compensated by the state (which is what Mr Ggic Snr gets).

In personam exception

185 Exceptions to s 184

(1) A registered proprietor of a lot does not obtain the benefit of section 184 for the following interests in relation to the lot—

(a) an equity arising from the act of the registered proprietor;

The acknowledgement of the exception is not contrary to the policy of the Torrens act: Frazer v Walker, Bahr v Nicolay

Rights in personam encompass only known legal or equitable causes of action: Grgic v ANZ Banking Group, Farah Constructions v Say-Dee

Personal equity exception could arise where:o There is an undertaking by the registered proprietor to take subject to an interest: Bahr v Nicolay,

Valbirn v Powprop, Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd at para 114: acknowledgement “connotes the case where a person not only recognises a right exists, but also undertakes to respect that right.”

o There is a breach of statutory duty by the registered proprietor: suggested in Grgic v ANZ Banking Group

o There is a breach of duty, e.g. dealing with the certificate of title o The right for a contract to be rectified for common mistake: Oh Hiam v Tham Kongo The right of a later equitable interest holder (i.e. equitable mortgagee) arising by gross negligence of

the registered proprietor to protect their interest: Barry v Heidero Rights arising from court orders where the registered proprietor has submitted to the court’s

jurisdiction: White v Tomaselo Rights arising under a constructive trust for knowing receipt of trust property (first limb of Barnes v

Addy), where there is some dishonesty/ unconscionability by the registered proprietor: Farah Constructions v Say-Dee (applied in Bli Bli #1 v Kimlin Investments, Coulton v Coulton) – NOT Tara Shire Council v Garner

o Rights arising from constructive trust for knowing assistance in breach of trust – must be fraudulent (Consul Development v DPC Estates) and accessory must have requisite knowledge, constructive notice not enough: Farah Constructions v Say-Dee

When will a party undertake to be bound by an unregistered interest?o Bahr v Nicolay – party was bound when it accepted a contractual clause to acknowledge the

existence of a collateral agreement, and also undertook to recognise that agreement in a lettero Valbirn v Powprop – party was bound when it accepted in a contract for sale a clause which said it

had perused the terms of the relevant lease and agreed to the conditions of that lease, and take subject to existing tenancies

o Bourseguin v Stannard Bros - the clause in question merely stipulated that the purchasers be “satisfied” with the terms of the leases, and its purpose was to clear the seller of the obligation to

provide vacant possession. Therefore, the intermediate party had good title, but there was obiter that the silence of the final party’s solicitor amounted to fraud.

Interests protected:o "something more than a mere ancillary right" (Re Eastdoro Pty Ltd (No. 2) [1990] 1 Qd.R.

424, 428)o Fee simple – Gospero Option to purchase – Bahr v Nicolayo Unregistered long lease – Bourseguino Mortgage – Barry v Heider (1914) 19 CLR 197o Option to renew lease – Valbirno Could be an equitable proprietary interest or a personal equity: Bahr v Nicolay per Wilson and

Toohey JJ – the exception just means that a person can apply to a court of equity to get relief: Mercantile Mutual Life Insurance v Gosper

A requirement for an extra element of unconscionability?o Probably not: majority in White v Tomaselo Definitely in a case regarding trust property: Farah Constructions v Say-Deeo In most cases will have to prove some element of unconscionability as part of the cause of action

Remedies:o Barwick CJ in Breskvar v Wall (at 384-385): "... Proceedings may of course be brought against the

registered proprietor by persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration …”

Interest of a lessee under a short lease

185 Exceptions to s 184

(1) A registered proprietor of a lot does not obtain the benefit of section 184 for the following interests in relation to the lot—

(b) the interest of a lessee under a short lease;

(2) The interest of the lessee under subsection (1)(b) does not include—

(a) a right to acquire the fee simple or other reversionary interest on or after ending of the short lease; or

(b) a right to renew or extend the term of the short lease beyond 3 years from the beginning of the original term.

Mercantile Credit Limited v Shell Co of Australia Limited (1976) 136 CLR 326 Gibbs J 345- 346: “the right of renewal is so intimately connected with the term granted to the lessee, which it qualifies and defines, that it should be regarded as part of the estate or interest which the lessee obtains under the lease, and on registration is entitled to the same priority as the term itself.”

So an unregistered short lease and its options that fall within 3 years will be protected, and beyond that the options won’t be protected - s 185(2)(b); Friedman v Barrett (this case based on the prior act which didn’t protect rights of renewal)

an earlier registered mortgagee is not bound by a later short lease unless there is specific consent obtained for the lease: s 66.

By s203(a) of the LTA 1994 a short lease entered into before the commencement of the 94 Act will be an exception to indefeasibility, notwithstanding that the mortgagee’s consent has not been obtained.

Unregistered leases (more than 3 yrs) not invalid (s 71) although outside s 185(1)(b) short lease is a “legal” lease: Deventer Pty Ltd v BP Australia Ltd Unregistered leases (3 yrs/less) with options – if option exercised before new interest created, acts as a new

lease (and therefore could be protected: Re de Jersey In Registered leases, options are also protected: Re Eastdoro Pty Ltd (No 2)

Omitted easements

185 Exceptions to s 184(1) A registered proprietor of a lot does not obtain the benefit of section 184 for the following interests in relation to the lot—(c) the interest of a person entitled to the benefit of an easement if its particulars have been omitted from, or misdescribed in, the freehold land register;(3) For subsection (1)(c), the particulars of an easement (the easement particulars) are taken to have been omitted from the freehold land register only if—(a) the easement was in existence when the lot burdened by it was first registered, but the easement particulars have never been recorded in the freehold land register against the lot; or(b) the easement particulars have previously been recorded in the freehold land register, but the current particulars in the freehold land register about the lot do not include the easement particulars, other than because the easement has been extinguished in relation to the lot; or(c) the instrument providing for the easement was lodged for registration but, because of an error of the registrar, has never been registered.(4) Subsection (3) applies whether or not the lot has at any time been transferred or otherwise dealt with.

185(3)(a) If the easement was in existence and then omitted when land first registered:o Any easement which is ‘not there’ will fall within exception, no need to prove error of registrar: Dobbie

v Davidson (1991) 23 NSWLR 625o Applies to easements created by deed (Beck v Auerbach), prescription (Connellan Nominees v Camerer,

must be created before 1975 s198A PLA), implied grant (Wheeldon v Burrows) or necessity (Dobbie v Davidson)

185(3)(b) If the easement was previously recorded but now omitted, it falls within the exception, even if owner of servient tenement had no knowledge of the easement: James v Registrar-General (nsw), Rock v Todeschino (qld)

185(3)(c) If easement never registered by error of the registrar, it falls within exception so long as it was in registrable form and this wasn’t due to the fault of the parties: Christopher v Kells

An agreement to create an easement is enforceable in personam against current registered proprietor, but not in rem against successors in title, if it is not registered: Stuy v BC Ronalds

Unregistered easements created after the servient tenement first registered are not omitted easements If easement falls within the omitted easement exception of s 185(1)(c), then remedy would be restoration of

easement (registrar’s correction of the register under s15) NOT compensation: ss 188A(3), 189(1)(j) & (1B)

Adverse possession

185 Exceptions to s 184

(1) A registered proprietor of a lot does not obtain the benefit of section 184 for the following interests in relation to the lot—

(a) an equity arising from the act of the registered proprietor;

(b) the interest of a lessee under a short lease;

(c) the interest of a person entitled to the benefit of an easement if its particulars have been omitted from, or misdescribed in, the freehold land register;

(d) the interest of a person who, on application, would be entitled to be registered as owner of the lot because the person is an adverse possessor;

Pt 6, Div 5 LTA provides for the means by which an adverse possessor could be recognised and acquire title. There are three requirements:

1. Common law adverse possession must be established2. Per Limitation of Actions Act 1974, there must have been at least 12 years of AP3. Statutory procedure under LTA must be followed. An application must be made in respect for the whole of the lot s 99(1), although the registrar may only

register ownership over part of the lot if that is deemed appropriate: s 98. No adverse possession claims can be made regarding encroachments, that situation is dealt with specifically

under different sections: ss 182 – 194. Claims cannot be made against the Crown: Limitation of Actions Act 1974 s 6(4); LTA s 98(1)(c). Extension of limitation period: 6 years from cessation of disability: LAA s 29(1). Disabilities include: infant, person of unsound mind, Extension available for a maximum of 30 years from the date of accrual of the right of action: LAA s 29(2)(b) ie can’t extend limitation period beyond 30 years

Adverse Possession – Possessory Title Includes land under pastoral leasehold Eckford v Stanbroke Does not include against crown – s 6 (4) Limitations of Actions Act

Requirements

1. Possession that is Adverse to the True Owner (“Open, peaceful, adverse”) – Mulchay v Curramore

a. Physical control Buckinghamshire v Morani. Physical exclusion of others (fencing and gates), only access via dispossessor’s land,

maintenance of squatted land. Sum of facts.ii. Treating land as owner would Pye v Graham

iii. “No trespassing signs” Powell v Macfarlaneiv. Use as communal tennis court not sufficient Riley v Pentilla

b. Intention to exclude othersi. Fencing and limitation of access Buckinghamshire v Moran

ii. Contrary to approval of true owner Shaw v Garbuttiii. Must be open about ownership Woodward v Wesley

2. Possession for Period Barring Actiona. 12 years s 13 Statute of Limitations 1974

b. If claim based on several possessors all arising from original adverse possession then good claim Mulcahy v Curramore

Errors on the register

185 Exceptions to s 184

(1) A registered proprietor of a lot does not obtain the benefit of section 184 for the following interests in relation to the lot—

(e) the interest of another registered proprietor making a valid claim under an earlier existing indefeasible title for all or part of the lot;

(f) the interest of another registered owner if there are 2 indefeasible titles for the same interest in the lot and the inconsistency has arisen through failure on transfer to cancel, wholly or partly, the indefeasible title of the first registered owner;

(g) the interest of another registered proprietor if the lot described in the indefeasible title wrongly includes land in which the other registered proprietor has an interest;

(e) Is where there are two incompatible registered interests on the same lot of land. It can apply to competition between registered fee simple interests as well as between a fee simple against a lesser interest such as a lease.

o Provided the earlier title is valid, it prevails to the extent of the inconsistency: Registrar of Titles v Esperance Land Co

o The earlier title is the earliest title at the time when the error first occurred The only real assumption that can be made for (f) is that the later interest holder gets priority Re (g), this is about wrong description of boundaries, not wrong description of title holders Hamilton v

Iredale (1903) 3 SR (NSW) 535. o The true owner’s title will prevail: Marsden v McAlistero Extrinsic evidence is permitted to prove the true boundaries of the land: Overland v Lenehan

If both (g) and (e) could apply, then (g) will prevail: National Trustees v Hassett [1907] VLR 404. An erroneous or misleading shorthand description of an instrument on the register probably wouldn’t be a

compensable error – the instrument itself is included in the register – ss175, 181 LTA LTA s 186: Action to correct wrong inclusion of a lot if s185(1)(g) applies; a broader power than s15 as the

requirement for not prejudicing another interest isn’t there.

186 Action to correct wrong inclusion of a lot(1) If the registrar is satisfied that section 185(1)(g) applies to an indefeasible title, the registrar may correct the indefeasible title.(2) A person affected by the correction may apply to the Supreme Court for an order that the correction be amended or set aside.(3) The application must be made within 1 month after the person receives written notice of the correction.15 Registrar may correct registers(1) The registrar may correct any register kept by the registrar if the registrar is satisfied that—(a) the register is incorrect; and(b) the correction will not prejudice the rights of the holder of an interest recorded in the register.(2) Without limiting subsection (1), the registrar may correct a register under the subsection if—(a) the register is incorrect because the registrar has incorrectly recorded a particular or registered an instrument; or(b) the registrar has held an inquiry under division 4, and has decided that the register is incorrect, including for example, because there has been fraud affecting the register.(3) The registrar may correct a register kept by the registrar, whether or not the correction will prejudice the

rights of the holder of an interest recorded in the register, if—(a) the register to be corrected is the freehold land register, and the correction is to show, in relation to a lot, an easement the particulars of which have been omitted from, or misdescribed in, the register; or(b) the Supreme Court has ordered the correction under section 26.(4) Section 185(3), (4) and (6) applies for subsection (3)(a) in the same way it applies for section 185(1)(c).(5) The registrar's power to correct a register includes power to correct a particular in the register or an instrument forming part of the register.(6) If a register is corrected, the registrar must record in the register—(a) the state of the register before the correction; and(b) the time, date and circumstances of the correction.(7) A register corrected by the registrar under this section has the same effect as if the relevant error had not been made.(8) For subsection (1)(b), the rights of the holder of an interest recorded in the register are not prejudiced if the holder acquired or has dealt with the interest with actual or constructive knowledge that the register was incorrect and how it was incorrect.

LTA s15: power to correct register not unqualified: Medical Benefits Fund v Fisher LTA s15(1) In order to correct, must be:

o An error on the registero Correction which will not prejudice rights of interest holder currently in the register

Error on the register does not need to be apparent on the face of the register: Equitiloan Securities v Registrar of Titles & Yelangi Preschool & Kindergarten Association

Cancelling a registration on mere allegation of fraud (without being satisfied of fraud) exceeds the power conferred by s15(1) as it prejudices the interest of the registered party: Equitiloan v Yelangi

No rule in QLD that the person who takes the benefit of the error may not be prejudiced: Dowsett J in Equitiloan v Yelangi

It would prejudice an interest to correct the register such that that pre-existing interest loses its priority: Cantrick v Thompson

Re-registration of an interest which the current registered proprietor takes subject to because of an exception to indefeasibility will not prejudice their rights: James v Registrar-General

Overriding statutes

Not an exception in s185, works by rules of statutory interpretation Refer to 3 references in statutory interpretation (Kirby J in Hillpalm v Heavens Door)

o Special prevails over general: Miller v Minister of Mineso Later statute prevails over earlier statute: e.g. Later enacted Drainage Acts allowed unregistrable

drainage charges to be a first charge on the land in South Eastern Drainage Board v Savings Bank of South Australia (1939) 62 CLR 603

o Public interest: not that the strength of the indefeasibility principle can be considered a public good, despite it protecting private rights: Kirby J in Hillpalm v Heavens Door

Quach v Marrickville Council (No 2)(1990)22 NSWLR 55 Young J: “Overriding statutes are ‘the weakest point in the Torrens system’: 61. ‘They detract from the ‘mirror principle’ of the Torrens system as they are effective without recording in the title register and therefore impose significant burdens on purchasers’.

Note s 29(2) LTA: The registrar may also record in the freehold land register anything that the registrar considers should be recorded to ensure that the register is an accurate, comprehensive and useable record of freehold land in the State; and

34 (1) The registrar may keep separately from the freehold land register information that the registrar considers necessary or desirable for the effective or efficient operation of the register.

‘there is a very strong presumption that the State legislature did not intend to contradict itself, but intended that both Acts should operate’: Butler v Attorney General (Vic) (1961) 106 CLR 268 at 276

A determination that a statutory provision overrides the Torrens statute is not lightly reached: Hillpalm v Heavens Door

Usually the two statutes will be read to stand together:o E.g. where a transaction void for an overriding statutory provision, registration still gives immediate

indefeasibility: Hovarth v Commonwealth Bank of Australia 1999 1 VR 632o Where a transaction ultra vires because of statutory provision, registration still gives indefeasible

title: City of Canada Bay Council v F&D Bonaccorso Pty Ltd [2007] NSWCA 351. The inconsistency would only be relevant and prevalent in its consequence if it works an implied repeal pro

tanto of the relevant provision of the Act in question: City of Canada Bay Council There must be a clear and specific intention by parliament that registration should not confer indefeasibility

– that the provision should override: City of Canada Bay, Koompahtoo Local Aboriginal Land Council v KLALC Property Investment

Distinguish between where transaction void, and where registration by virtue of the provision is void: Koompahtoo

Easements

a right annexed to land to utilise land of different ownership in a particular manner (not taking from the soil), or to prevent the owner of the other land from utilising the land in a particular manner’ (Halsbury’s Laws of Aust, v14)

Easements can be positive, which give the landowner a right to do certain acts on his neighbour’s land (e.g. right of way), or negative easement, which give a landowner the right to prevent his neighbor engaging in certain acts on his own land (e.g. easement for light or air – the law is cautious of creating new negative easements): Phipps v Pears 1965 UK

Not a lease – no exclusive possession Not a licence – cannot exist in gross, must have dominant and servient tenement and cannot be just a

general right to occupy Could have an easement for fencing which obliges the servient tenement to pay for the upkeep of a fence:

Jones v Price Elements of easement (Re Ellenborough Park, Riley v Penttilla)

1. Must be a dominant tenement (DT - benefit) and servient tenement (ST- burden) 2. Easement must accommodate (benefit) DT3. The DT and ST must not be owned and possessed by the same person (some LTA exceptions for

development); and 4. The easement right must be capable of forming the subject matter of the grant

Must be a dominant and servient tenement: Re Ridgeway and Smith’s Contracto Don’t need to be identified, just identifiable: Re Ellenborough Parko Easement cannot exist in gross: Concord Municipal Council v Coleso Easement must be ‘appurtenant’ to the dominant tenement – i.e. the easement must benefit some

land. If no land, then a mere licence: Rangeley v Midland Railway Coo Exception – public utility easement, s89 LTA

Must accommodate the dominant tenemento A question of fact: Re Ellenborough Parko Not sufficient, but relevant, that it increases the value of the dominant tenement: Ellenborougho Not a contractual benefit to a person; it must benefit the land itself: City Developments v Registrar

General of the Northern Territoryo There must be a real connection between the purpose of the easement and the ordinary use and

enjoyment of the dominant tenement: Ackroyd v Smith, Clos Farming Estates v Easton

o Commercial uses of the servient tenement are relevant considerations, but not conclusive that the dominant tenement is being accommodated: Clos Farming; Hill v Tupper; Moody v Steggles

o Blocks do not have to be adjacent, but should be close together: Todrick v Western National Omnibus

o Easements last through subdivision processes, if it benefits the subdivided lots also, but not if it was only intended to benefit the land in its pre-subdivided form: Gallagher v Rainbow

Dominant tenement and servient tenement owners must be differento At common law, it can’t be a right of way because that person is simply using their own land: Roe v

Siddonso So if the dominant and servient tenements are conveyed to the same person, the easement is

extinguished: James v Planto But in QLD, this rule has been modified:

Property Law Act14 Conveyances by a person to the person etc. (3) After the commencement of this Act a person may convey or lease land to or vest land in the person but may not convey to or vest in the person an estate in fee simple absolute in such land.

Land Title Act86 Easement benefiting and burdening same registered owner's lotsAn instrument of easement may be registered even if—(a) the lot benefited and the lot burdened by the easement have, or are to have, the same registered owner; or(b) the owner of the lot benefited by the easement holds an interest in the lot burdened by the easement.87 Same person becoming registered owner of benefited and burdened lotsIf the same person becomes the registered owner of the lot benefited and the lot burdened by an easement, the easement is extinguished only if—(a) the registered owner asks the registrar to extinguish the easement; or(b) the registrar creates a single indefeasible title for the lots.88 Owner of benefited land acquiring interest in burdened landAn easement is not extinguished merely because the owner of the lot benefited by the easement acquires an interest, or a greater interest, in the lot burdened by the easement.

Easement must be capable of forming the subject matter of a granto Common law and public policy controls what sort of subject matter an easement could be for: Clos

Farming Estates v Eastono Recognised subject matters:

Right of way (obviously) Light or air: Commonwealth v Registrar of Titles for Victoria Drainage: Rance v Elvin Ius Spatiandi Et Manendi (legal right of way, and to enjoyment, granted to the public but

only for the purposes of recreation or education. For example, parks or public squares, right to wander): Riley v Penttila

Right to create noise over another lot: Auckran v The Pakuranga Hunt Club1. Must be sufficiently well-defined/ definite to form the subject matter of a grant – cannot be infinite, vague

or unregulated: Re Ellenborough Park2. Must not purport to give the grantee a right of joint occupation or a right of exclusive possession or use –

cannot be inconsistent with ownership: Re Ellenborough Park Right to enjoyment as a leisure ground not inconsistent: Ellenborough

Right to park an unlimited number of vehicles for an unlimited time for a garage business was inconsistent: Copeland v Greenhalf 1952

Easement for storing coal in a shed was appropriate: Wright v Macadam 1949 Easement for storing goods in a cellar was inconsistent: Grigsby v Melville 1972 Validity of storage or parking easements will turn on the specific facts of each case and the

effect on the servient tenement: Clos Farming Estates v Easton There is a move away from the prohibition on parking easements – right to store watercraft

in a small part of the lot was valid: White v Betalli Easement for parking of a transitory nature was valid: Owners of East Fremantle Shopping

Centre West Strata Plan v Action Supermarkets Exclusive use of a garage was permissible where a small part of servient tenement and

access otherwise impossible: Weigall v Tomano Look at factors for determining whether an easement is permissible: Weigall v Toman

Proportionality between servient tenement as a whole and part over which the exclusive right is given

The extent of the exclusivity claimed Whether the easement arose by prescription or express grant Practicalities

o Proportionality If the right claimed is only over a small part of the servient tenement, then it could be more

OK than if it was over a large part: White v Betalli, London and Blenheim Estates Ltd v Ladbroke Retail Parks

This test rejected in Moncrieff v Jamiesono Extent of exclusivity claimed

Narrow view – if exclusivity claimed, then no rights associated with ownership left: Harada v Registrar of Titles

Farming arrangements left owners with a ‘shadow of ownership and possession with only the right to receive and pay rates bills’: Clos Farming

This test has been questioned – a test of possession could be preferred to a test of inconsistency with ownership: Moncrieff v Jamieson

o Whether arose by prescription or express grant This view has been criticised, but an easement more likely to fail for exclusivity if it arises by

prescription: Weigall v Tomano Practicalities

Consider needs of access, other amenities, and reciprocal rights: Weigall v Toman3. Right must be of utility and benefit the premises to which it is attached: Re Ellenborough Park

Creation of easements

Express grant

PROPERTY LAW ACT 1974 - SECT 1111 Instruments required to be in writing(1) Subject to this Act with respect to the creation of interests in land by parol—(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent lawfully authorised in writing, or by will, or by operation of law; and(b) a declaration of trust respecting any land must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will; and(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be manifested and proved by some writing signed by the person disposing of the same, or by the

person's agent lawfully authorised in writing, or by will.(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.

LAND TITLE ACT 1994 - SECT 8282 Creation of easement by registration(1) An easement over a lot or part of a lot may only be created by registering an instrument of easement.(2) An easement over a registered lease of a lot may only be created by registering an instrument of easement.(3) The instrument must state—(a) the nature of the easement and its terms; and(b) the land to be benefited, and the land to be burdened, by the easement; and(c) for a high-density development easement—the purposes under division 4AA for which the easement is created.(4) For subsection (3)(a), the terms of a high-density development easement are set out in division 4AA.(5) A public utility easement for water storage may be created only for water storage—(a) for a weir—on land upstream of the weir and within or outside the storage area at full supply level; or(b) for a dam—on land upstream of the barrier of the dam and outside the storage area at full supply level.(6) The instrument creating the easement must show the part of the land over which water may be stored.83 Registration of easement(1) An instrument of easement may be registered only if—(a) for an easement, other than a high-density development easement, over a part of a lot—a plan of survey designating the easement is registered; and(b) it is signed by—(i) the registered owner of the lot or lessee of the registered lease to be burdened; and(ii) if the easement benefits another lot—the registered owner of the lot; and(iii) if the easement benefits a registered lease—the lessee; and(iv) if the easement benefits non-freehold land—the lessee or other person entitled to the land; and(v) if the easement is a public utility easement—the public utility provider.(2) If, under the Sustainable Planning Act 2009, the creation of an easement giving access to a lot from a constructed road is the reconfiguring of a lot, the plan of survey must be approved by—(a) if the lot is in a priority development area—MEDQ; or(aa) if the lot is in a State development area and the reconfiguration is regulated by an approved development scheme—the Coordinator-General; or(b) otherwise—the relevant local government.(3) Subsection (2)(a) does not apply to a plan of survey if the plan is not a plan for which assessment for compliance is required under the Economic Development Act 2012, section 104.(4) Subsection (2)(b) does not apply to a plan of survey if the plan does not require compliance assessment under a regulation under the Sustainable Planning Act 2009, section 397.

Express reservation

PROPERTY LAW ACT 1974 - SECT 99 Reservation of easements etc. in conveyances of land(1) In a conveyance of land a reservation of any easement, right, liberty, or privilege not exceeding in duration the estate conveyed in the land, shall operate without any execution of the conveyance by the grantee of the land out of which the reservation is made, or any regrant by the grantee, so as to create the easement, right, liberty or privilege, and so as to vest the same in possession in the person (whether or not the person be the

grantor) for whose benefit the reservation was made.(2) This section applies only to reservations made after the commencement of this Act.

Compulsory acquisition

o Acquisition of Land Act 1967 ss 5,6 eg public utility

5 Purposes for which land may be taken(1) Land may be taken under and subject to this Act—(a) where the constructing authority is the Crown, for any purpose set out in schedule 1; or(b) where the constructing authority is a local government—(i) for any purpose set out in schedule 1 which the local government may lawfully carry out; or(ii) for any purpose, including any function of local government, which the local government is authorised or required by a provision of an Act other than this Act to carry out; or(c) in the case of a constructing authority other than the Crown or a local government—(i) for any purpose set out in schedule 1 which that constructing authority may lawfully carry out; or(ii) for any purpose which that constructing authority is authorised or required, by a provision of an Act other than this Act, to carry out.(2) The power to take, under and subject to this Act, land for a purpose (the primary purpose) includes power to take from time to time as required land either for the primary purpose or for any purpose incidental to the carrying out of the primary purpose.(3) A part heading in schedule 1—(a) is not, for this section, a purpose set out in schedule 1; and(b) indicates only the type of activity or other thing to which a purpose mentioned in the part ordinarily relates; and(c) does not limit the matters to which a purpose mentioned in the part may relate.6 EasementsWhen for any purpose it is not necessary that the constructing authority should take the whole estate in any land, but it is sufficient for such purpose to take an easement, the constructing authority may take such easement only and for that purpose the provisions of this Act shall apply as if the easement were land.Upon application in that behalf, payment of the prescribed fees, and the production to the land registry of the gazette copy of the gazette resumption notice, whereby an easement is taken affecting land under the Land Title Act 1994, the registrar of titles shall register such easement as prescribed by that Act, notwithstanding that such easement is not being annexed to or used and enjoyed together with any other land.(3) The taking of an easement over land does not extinguish any interest in the land existing immediately before the easement is taken.

o Note no just terms

Operation of lawo Implied grant: Wheeldon v Burrows

Where a right over land was used by the previous owner of two blocks over one of the blocks at time of sale or lease, and they sell/lease the dominant tenement to someone else, and the easement is necessary for reasonable use and enjoyment of dominant tenement, then an easement arises out of principle of non-derogation from grant

This type of easement is neither registered or registrable until it is granted in instruments capable of registration: Australian Hi-Fi Publications v Gehl

Mere knowledge of a Wheeldon v Burrows type easement is not enough to give rise to the in personam exception without unconscionable conduct: McGrath v Campbell

o Necessity Will be implied and will arise as rights of way where a block of land is landlocked and it is

necessary to do so otherwise the land cannot be used at all: Pryce & Irving v McGuinness May not be enforceable against subsequent registered proprietor: Australian Hi Fi

Publications v Gehl

Rights of reciprocal support:

Property Law Act179 Right to support of land and buildingsFor the benefit of all interests in other land which may be adversely affected by any breach of this section, there shall be attached to any land an obligation not to do anything on or below it that will withdraw support from any other land or from any building, structure or erection that has been placed on or below it.

o Prescription Where someone uses an easement continuously and openly for 20 years an easement can

arise: Delohery v Permanent Trustee However, these can’t arise after 1975, so use needs to be since 1955

PROPERTY LAW ACT 1974 - SECT 198A198A Prescriptive right of way not acquired by user(1) User after the commencement of this Act of a way over land shall not of itself be sufficient evidence of an easement of way or a right of way having been acquired by prescription or by the fiction of a lost grant.(2) If at any time it is established that an easement of way or right of way over land existed at the commencement of this Act, the existence and continuance of the easement or right shall not be affected by subsection (1).(3) For the purpose of establishing the existence at the commencement of this Act of an easement of way or right of way over land user after such commencement of a way over that land shall be disregarded.

See also:

PROPERTY LAW ACT 1974 - SECT 180180 Imposition of statutory rights of user in respect of land(1) Where it is reasonably necessary in the interests of effective use in any reasonable manner of any land (the dominant land) that such land, or the owner for the time being of such land, should in respect of any other land (the servient land) have a statutory right of user in respect of that other land, the court may, on the application of the owner of the dominant land but subject to this section, impose upon the servient land, or upon the owner for the time being of such land, an obligation of user or an obligation to permit such user in accordance with that order.(2) A statutory right of user imposed under subsection (1) may take the form of an easement, licence or otherwise, and may be declared to be exercisable—(a) by such persons, their servants and agents, in such number, and in such manner and subject to such conditions; and(b) on 1 or more occasions; or(c) until a date certain; or(d) in perpetuity or for some fixed period;as may be specified in the order.(3) An order of the kind referred to in subsection (1) shall not be made unless the court is satisfied that—(a) it is consistent with the public interest that the dominant land should be used in the manner proposed; and(b) the owner of the servient land can be adequately recompensed in money for any loss or disadvantage which the owner may suffer from the imposition of the obligation; and(c) either—(i) the owner of the servient land has refused to agree to accept the imposition of such obligation and the owner's refusal is in all the circumstances unreasonable; or(ii) no person can be found who possesses the necessary capacity to agree to accept the imposition of such obligation.(4) An order under this section (including an order under this subsection)—(a) shall, except in special circumstances, include provision for payment by the applicant to such person or persons as may be specified in the order of such amount by way of compensation or consideration as in the circumstances appears to the court to be just; and(b) may include such other terms and conditions as may be just; and(c) shall, unless the court otherwise orders, be registered as provided in this section; and(d) may on the application of the owner of the servient tenement or of the dominant tenement be

modified or extinguished by order of the court where it is satisfied that—(i) the statutory right of user, or some aspect of it, is no longer reasonably necessary in the interests of effective use of the dominant land; or(ii) some material change in the circumstances has taken place since the order imposing the statutory right of user was made; and(e) shall when registered as provided in this section be binding on all persons, whether of full age or capacity or not, then entitled or afterwards becoming entitled to the servient land or the dominant land, whether or not such persons are parties to proceedings or have been served with notice or not.(5) The court may—(a) direct a survey to be made of any land and a plan of survey to be prepared; and(b) order any person to execute any instrument or instruments in registrable or other form necessary for giving effect to an order made under this section; and(c) order any person to produce to any person specified in the order any title deed or other instrument or document relating to any land; and(d) give directions for the conduct of proceedings; and(e) make orders in respect of the costs of any of the preceding matters and of proceedings generally.(6) In any proceedings under this section the court shall not, except in special circumstances, make an order for costs against the servient owner.(7) In this section—owner includes any person interested whether presently, contingently or otherwise in land.statutory right of user includes any right of, or in the nature of, a right of way over, or of access to, or of entry upon land, and any right to carry and place any utility upon, over, across, through, under or into land.utility includes any electricity, gas, power, telephone, water, drainage, sewerage and other service pipes or lines, together with all facilities and structures reasonably incidental to the utility.(8) This section does not bind the Crown.

To interpret an easement, construe broadly against grantor: Cavacourt Pty Ltd v Durian Holdings Pty Ltd (1998) 9 BPR 16, 836.

o In Bulstrode v Lambert, the right to pass and repass was held to include the right to stop to load and unload

However the grantee isn’t entitled to more than is granted. Hoy v Allerton [2002] Q ConvR 54-559 An examination of the facts & circumstances existing at the time of the grant can be used as an aid to

interpret the meaning of the grant. Hoy v Allerton But it is the better view that you cannot use any extrinsic evidence at all – principle of indefeasibility and

looking at the register is paramount: Westfield Management v Perpetual Trustee Company Easement could be extinguished by registered surrender and release: LTA s 90 requires registration of

instrument of surrender; consent of registered mortgagees & lessees of DT Easement can be amended under LTA s 91 LTA ss 87-88: easement not necessarily extinguished even if same person owns both DT & ST, or DT holder

acquires an interest in ST Easement could be extinguished by court order – e.g. SC may modify or extinguish easement upon

application under PLA s 181(1) if:o Easement is deemed obsolete due to change in user or other circumstanceso No practical & substantial or contrary to public interest + monetary compensation is adequateo DT holder’s agreement, abandonment or waivero No substantial injury to DT holder

LTA s 92: PLA s 181 applies to registered easements

PROPERTY LAW ACT 1974 - SECT 181181 Power to modify or extinguish easements and restrictive covenants(1) Where land is subject to an easement or to a restriction arising under covenant or otherwise as to the user of the land, the court may from time to time, on the application of any person interested in the land, by order modify or wholly or partially extinguish the easement or restriction upon being satisfied—(a) that because of change in the user of any land having the benefit of the easement or restriction, or

in the character of the neighbourhood or other circumstances of the case which the court may deem material, the easement or restriction ought to be deemed obsolete; or(b) that the continued existence of the easement or restriction would impede some reasonable user of the land subject to the easement or restriction, or that the easement or restriction, in impeding that user, either—(i) does not secure to persons entitled to the benefit of it any practical benefits of substantial value, utility, or advantage to them; or(ii) is contrary to the public interest;and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the extinguishment or modification; or(c) that the persons of full age and capacity for the time being or from time to time entitled to the easement or to the benefit of the restriction, whether in respect of estates in fee simple or any lesser estates or interests in the land to which the easement or the benefit of the restriction is annexed, have agreed to the easement or restriction being modified or wholly or partially extinguished, or by their acts or omissions may reasonably be considered to have abandoned the easement wholly or in part or waived the benefit of the restriction wholly or in part; or(d) that the proposed modification or extinguishment will not substantially injure the persons entitled to the easement, or to the benefit of the restriction.(2) In determining whether a case is one falling within subsection (1)(a) or (b), and in determining whether (in such case or otherwise) an easement or restriction ought to be extinguished or modified, the court shall take into account the town plan and any declared or ascertainable pattern of the local government for the grant or refusal of consent, permission or approval to use any land or to erect or use any building or other structure in the relevant area, as well as the period at which and context in which the easement or restriction was created or imposed, and any other material circumstance.(3) The power conferred by subsection (1) to extinguish or modify an easement or restriction includes a power to add such further provisions restricting the user or the building on the land as appear to the court to be reasonable in view of the relaxation of the existing provisions, and as may be accepted by the applicant, and the court may accordingly refuse to modify an easement or restriction without such addition.(4) An order extinguishing or modifying an easement or restriction under subsection (1) may direct the applicant to pay to any person entitled to the benefit of the easement or restriction such sum by way of consideration as the court may think it just to award under one, but not both, of the following heads, that is to say, either—(a) a sum to make up for any loss or disadvantage suffered by that person in consequence of the extinguishment or modification; or(b) a sum to make up for any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it.(5) Where any proceedings by action or otherwise are instituted to enforce an easement or restriction, or to enforce any rights arising out of a breach of any restriction, any person against whom the proceedings are instituted may in such proceedings apply to the court for an order under this section, and such application shall, unless the court otherwise orders, operate to stay such proceedings until determination of the application made under this section.(6) The court may in any proceedings under this section on the application of any person interested make an order declaring whether or not in any particular case any land is or would in any given event be affected by an easement or restriction, and the nature and extent of it, and whether the same is or would in any given event be enforceable, and if so by whom.(7) Notice of any application made under this section shall, if the court so directs, be given to the local government in whose area the land is situated, and to such other persons and in such manner, whether by advertisement or otherwise, as the court, either generally or in a particular instance, may order.(8) An order under this section shall, when registered, entered or endorsed, be binding on all persons, whether of full age or capacity or not, then entitled or afterwards becoming entitled to the easement, or interested in enforcing the restriction and whether such persons are parties to the proceedings or have been served with notice or not.(9) The court may—(a) direct a survey to be made of any land and a plan of survey to be prepared; and(b) order any person to execute any instrument or instruments in registrable or other form necessary for giving effect to an order made under this section; and(c) order any person to produce to any person specified in the order any title deed or other instrument or document relating to any land; and(d) give such directions for the conduct of proceedings; and(e) make orders in respect of the costs of any of the preceding matters and of proceedings generally.

Could remedy infringement of easement by abatement (not encouraged by the courts (Burton v Winters), because onus on justifying the abatement is the person who performs the abatement) or court action like injunction, equitable Damages

Covenants

Property Law Act13 Persons taking who are not parties(1) In respect of an assurance or other instrument executed after the commencement of this Act, a person may take—(a) an immediate or other interest in land; or(b) the benefit of any condition, right of entry, covenant or agreement over or respecting land;even though the person may not have executed the assurance or other instrument, or may not be named as a party to the assurance or other instrument, or may not have been identified or in existence at the date of execution of the assurance or other instrument.(2) Such person may sue, and shall be entitled to all rights and remedies in respect of the assurance or other instrument, as if the person had been named as a party to and had executed the assurance or other instrument.53 Benefit and burden of covenants relating to land(1) A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and the covenantee's successors in title and the persons deriving title under the covenantee or the covenantee's successors in title, and shall have effect as if such successors and other persons were expressed.(2) A covenant relating to any land of a covenantor or capable of being bound by the covenantor, shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of the covenantor, the covenantor's successors in title and the persons deriving title under the covenantor or the covenantor's successors in title, and, shall have effect as if such successors and other persons were expressed.(2A) Subsection (2) extends to a covenant to do some act relating to the land, even though the subject matter may not be in existence when the covenant is made.(3) For the purposes of this section in connection with covenants restrictive of the user of land—successors in title shall be deemed to include the owners and occupiers for the time being of such land.(4) This section applies only to covenants made after the commencement of this Act, but shall take effect subject, in the case of registered land, to the Land Title Act 1994.

55 Contracts for the benefit of third parties(1) A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise.(2) Prior to acceptance the promisor and promisee may, without the consent of the beneficiary, vary or discharge the terms of the promise and any duty arising from it.(3) Upon acceptance—(a) the beneficiary shall be entitled in the beneficiary's own name to such remedies and relief as may be just and convenient for the enforcement of the duty of the promisor, and relief by way of specific performance, injunction or otherwise shall not be refused solely on the ground that, as against the promisor, the beneficiary may be a volunteer; and(b) the beneficiary shall be bound by the promise and subject to a duty enforceable against the beneficiary in the beneficiary's own name to do or refrain from doing such act or acts (if any) as may by the terms of the promise be required of the beneficiary; and(c) the promisor shall be entitled to such remedies and relief as may be just and convenient for the enforcement of the duty of the beneficiary; and(d) the terms of the promise and the duty of the promisor or the beneficiary may be varied or discharged with the consent of the promisor and the beneficiary.(4) Subject to subsection (1), any matter which would in proceedings not brought in reliance on this section render a promise void, voidable or unenforceable, whether wholly or in part, or which in proceedings (not brought in reliance on this section) to enforce a promissory duty arising from a promise is available by way of defence shall, in like manner and to the like extent, render void, voidable or unenforceable or be available by way of defence in proceedings for the enforcement of a duty to which this section gives effect.(5) In so far as a duty to which this section gives effect may be capable of creating and creates an interest in land, such interest shall, subject to section 12, be capable of being created and of subsisting in land under any Act but subject to that Act.(6) In this section—acceptance means an assent by words or conduct communicated by or on behalf of the beneficiary to the promisor, or to some person authorised on the promisor's behalf, in the manner (if any), and within the time, specified in the promise or, if no time is specified, within a reasonable time of the promise coming to the notice of the beneficiary.beneficiary means a person other than the promisor or promisee, and includes a person who, at the time of

acceptance is identified and in existence, although that person may not have been identified or in existence at the time when the promise was given.promise means a promise—(a) which is or appears to be intended to be legally binding; and(b) which creates or appears to be intended to create a duty enforceable by a beneficiary;and includes a promise whether made by deed, or in writing, or, subject to this Act, orally, or partly in writing and partly orally.promisee means a person to whom a promise is made or given.promisor means a person by whom a promise is made or given.(7) Nothing in this section affects any right or remedy which exists or is available apart from this section.(8) This section applies only to promises made after the commencement of this Act.

Will subsequent owners of the covenantee’s land be able to enforce the benefit of the covenant? Three requirements at Common law

a) The covenant must touch and concern land The land of the covenantee – irrelevant what the covenant is in relation to the covenantor’s

land: Spencer’s Case must either affect the land as regards the mode of occupation or it must be such, per se, and

not merely from collateral circumstances affecting the value of the land Rogers v Hosegood e.g. conversion of land from flood meadows to agricultural land by way of a river widening

scheme touched and concerned the land: Smith and Snipes Hall Farm v River Douglas Catchment Board

.e.g. covenant to build no more than one house on land and use for private residence affected value and so touched and concerned the land: Rogers v Hosegood

Options and rights of pre-emption do not touch and concern the land: University of East London Higher Education Corporation v Barking Dagenham

Where covenant is to do something on covenantor’s land, must be sufficiently close (no need to be adjoining) to affect benefited land in intended way: Clem Smith Nominees v Farrelly, Re Ballard’s Conveyance

b) The benefit must be intended to run with land This is implied by s53 PLA In UK, also enforceable by lessees etc under successive proprietor : Federated Homes v Mill

Lodge Properties, but this has been left open in Australia: Forestview Nominees v Perpetual Trustees

c) owner of benefitted land must have had legal estate in land Also can be enforced by people deriving under the covenantee, e.g. a lessor: Smith and

Snipes HallIf these conditions are satisfied, then the benefit runs with the land (and may be enforced) unless there is something to rebut this presumption: Rogers v Hosegood

If only an equitable interest is held, then the benefit of the Covenant may be enforceable by successors in title to land under equitable principles

1. Where the restrictive covenant is expressly annexed to land;

Touch and concern the land of the covenantee C’ee must own land benefited by C when C entered into Intention that the benefit run with the land (implied by s53 PLA) Land benefited must be sufficiently identified by the terms of the C

2. Part of a scheme of development. Needs to have 3 elements satisfied Elliston v Reacher

1. same vendor to person seeking enforcement of covenant and defendant2. Similar or the same covenants with all lot owners3. planned scheme (developed on the basis of a particular concept/theme/planned

Burden A burden of a covenant does not run at common law: Austerberry v Oldham Corp.

In Equity – at first it followed the law BUT THEN Tulk v Moxhay 41 E.R.1143 (1848) Requirements

1. Covenant must be made for the protection of the covenantee’s land – convenantee must own the land to be benefitted at the time: Lond County Council v Allen

2. burden must be intended to run ie not personal obligation: implied by a53 of PLA3. must be negative covenant: Rhone v Stephens4. needs access to equitable remedies

Equity has established a doctrine of a scheme of development, allowing enforcement of restrictive covenants between owners of lots in the development.

See requirements in Elliston v Reacher [1908] 2 Ch 374 But.. MMWW: “there is real doubt as to whether a scheme of development would be enforceable in

Queensland against a subsequent purchaser.” 17:330, p 795 Extinguishment and Modification of Covenants

Express or implied agreement Common ownership Express and implied release Court order under s181 PLA

Mortgages

An old system mortgage involves a transfer of title of land to the mortgagee, which could be redeemed at any time until foreclosure

Under Torrens, the mortgage operates as a statutory charge over the mortgaged land: section 74 of the LTA. It may be possible to create an equitable mortgage by deposit of the certificate of title: section 75 LTA –

equity regards that as done which ought to be done and will treat the parties as if they had a legal mortgage (except for priority issues, obviously, under Torrens): Walsh v Lonsdale, Taylor v Wheeler

A registered mortgagee is a registered proprietor of a lot and is entitled to the benefits of indefeasibility: Tessman v Costello

The benefits of indefeasibility will flow to whatever the mortgage secures – be careful of ‘all moneys’ mortgages with forged collateral loan documents – they will not secure anything: Provident Capital v Printy

Because a Torrens mortgage is only a charge, not all principles of old system mortgages apply, but the equity of redemption and right to foreclosure etc still applies: Re ANZ Banking Group

A mortgage will contain both a security interest in relation to the land and a personal covenant granted by the mortgagor to repay the amount secured. This means that if, say, the land is sold by the mortgagee after default and does not produce sufficient to discharge the debt, then it would be possible for the lender to bankrupt the mortgagor under the personal covenant.

A registered mortgagee has the powers and liabilities of a mortgagee under Property Law Act, Part 7: section 78(1) LTA.

If there is default, the mortgagee may:o take possession of the property: section 78(2)(a)o enter into possession by receiving rents and profits (78(2)(b)

o proceed in court to obtain possession, foreclose the right to redeem, or obtain an order for sale of the mortgaged lot: section 78(2)(c).

If a transfer by a registered mortgagee after the exercise of a power of sale is registered, “registration of the instrument vests in the transferee the mortgagor’s interest that is transferred, free from liability under the mortgage and any other mortgage registered after it” – s79 LTA

A mortgagee will invariably have its own express terms and conditions of mortgage – all major bank lenders have a common memorandum which sets out the terms and conditions registered and incorporated by reference into any mortgage they grant.

There are a large number of implied obligations (no effect if contrary intention expressed s78(3)) in every mortgage including:

o payment of principal and interest: s78(1)(a)o maintenance of building and improvement, and permission to the mortgagee to enter and inspect:

s78(1)(b) Note section 83 of the PLA that the mortgagee has power to:

o sell by any means it chooses (s 83(1)(a))o to insure (s 83(1)(b)o to appoint a receiver of the income of the property (s 83(1)(c)o To cut and sell timber whilst in possession: s83(1)(d)o To easements or other rights over the mortgaged property: s83(1)(e)

The power of sale is contained in s84 PLA:

84 Regulation of exercise of power of sale(1) A mortgagee shall not exercise the power of sale conferred by this Act or otherwise unless and until—(a) default has been made in payment of the principal money or interest or any part of it secured by the instrument of mortgage, and notice requiring payment of the amount the failure to pay which constituted the default under such instrument of mortgage has been served on the mortgagor and such default has continued for a space of 30 days from service of the notice; or(b) default has been made in the observance or fulfilment of some provision contained in the instrument of mortgage or implied by this or any other Act and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed and performed, and notice requiring the default to be remedied has been served on the mortgagor, and such default has continued for the space of 30 days from service of the notice.

Notice period cannot be shortened: Hall v Hall Notice period must be 30 clear days – exclude date of service and date of end of period: Acts Interpretation

Act s38(1) Notice period calculated from date of service, not date of the notice: Barker v Illingworth If default remedied, cannot rely on that default to sell – need to wait for a new default, serve notice again

and wait: Hunter v Hunter Notice must require a remedy for the default – e.g. if it is payment required, must specify the amount:

Stephenson Developments v Finance Corp of Australia Must require a remedy such that mortgagor has reasonable idea of what they are supposed to do: Clarke v

Japan Machines Small errors in the notice don’t matter – a notice will only be rendered invalid if the debtor would be misled

by it: Campbell v Commercial Bank, Clarke v Japan Machines If the mortgagor seeks an injunction to restrain the mortgagee from exercising the power of sale, they may

have to pay in the amount owing into court (but not if the power of sale has not actually matured, or if the mortgage itself is void): Inglis v Commonwealth Trading Bank of Australia

Surplus from the proceeds of sale will go to other mortgagees, then to the mortgagor: s88 PLA

The creditor must sell at market value, but not under any obligation to sell at a particular time: The China and South Sea Bank v Tan Soon Gin

PROPERTY LAW ACT 1974 - SECT 8585 Duty of mortgagee or receiver as to sale price(1) It is the duty of a mortgagee, including as attorney for the mortgagor, or a receiver acting under a power delegated to the receiver by a mortgagee, in the exercise of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value.(1A) Also, if the mortgage is a prescribed mortgage, the duty imposed by subsection (1) includes that a mortgagee or receiver must, unless the mortgagee or receiver has a reasonable excuse—(a) adequately advertise the sale; and(b) obtain reliable evidence of the property's value; and(c) maintain the property, including by undertaking any reasonable repairs; and(d) sell the property by auction, unless it is appropriate to sell it in another way; and(e) do anything else prescribed under a regulation.Maximum penalty—(a) if the contravention of duty relates only to paragraph (e)—20 penalty units; or(b) otherwise—200 penalty units.(2) Within 28 days from completion of the sale, the mortgagee shall give to the mortgagor notice in the approved form.(3) The title of the purchaser is not impeachable on the ground that the mortgagee or receiver has committed a breach of any duty imposed by this section, but a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.(5) An agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee or receiver from the duty imposed by this section. (10) In this section—prescribed mortgage means a mortgage of a kind prescribed under a regulation.

A ‘prescribed mortgage’ is essentially a mortgage over the mortgagor’s principal place of residence: s4(1) Property Law Regulation 2003

But the mortgagee must not wantonly sacrifice the interests of the mortgagor (duty owed in equity). Section 85 PLA (a Queensland innovation) provides for an express statutory duty on the mortgagee – the mortgagee must “take reasonable care to ensure that the property is sold at market value”

Factors to take into account/ steps of the mortgagor under s85 set out in Reynolds v Alumina-Lite Products [2009] QSC 379 per Martin J:

a. The duty of the mortgagee is not merely to take care to ensure that the sale is carried out by competent agents. It is to take reasonable care to ensure that the property is sold at the market value; it cannot escape liability by a breach of that duty by delegation to another. … A reasonable man, selling his own property by auction, and wishing to obtain the market value, would not allow the auctioneers a free hand to advertise in whatever manner they thought fit; he would make reasonable endeavours to ensure that the advertising proposed was adequate (CAGA v Nixon)

b. The agent acts in accordance with the instructions of the mortgagee and has no independent discretion to exercise except insofar as the mortgagee may choose to leave arrangements for the sale in the hands of the agent. The mortgagee should have the responsibility for the taking of reasonable care to ensure that the market value is obtained, including the responsibility for adequate advertising of the sale. He should satisfy himself that the property has been advertised in accordance with his instructions (CAGA v Nixon)

c. The duty, to be performed in the exercise of a power of sale, extends to the steps to be taken to attract potential buyers for the property, the negotiations for sale, and the settling of the terms of sale. Ordinarily a vendor of property engages others whose professional or business skills equip them to perform these tasks and who, by taking the appropriate steps, ensure a sale of the property at market value.” (CAGA v Nixon)

d. Where a mortgagee sale is to be by auction, advertisement would seem to be obligatory. (Pendlebury v CML Assurance Society)

e. The advertisement should contain material details concerning the property and should clearly identify its location and the agent to contact in relation to the sale. (Pendlebury)

f. Where the property is situated outside the capital city, advertisement in local and state-wide newspapers will usually be appropriate. (McKeon v Maloney) It may also be prudent to advertise the property more than once on a state-wide basis. (Pendlebury, ANZ Banking Group v Bangadilly Pastoral Co)

g. The advertising should be conducted a reasonable period before the auction or sale (as the case may be). (McKeon v Maloney)

h. An error or omission in pre-sale advertising will not, by itself, establish that the property was sold for a price less than the price obtainable if no such error or omission had occurred. (Tyler v Custom Credit)

i. In some circumstances, it may be necessary for it to be established by expert evidence that the error or omission in the pre-sale advertising was likely to depress the price obtained on an auction. (Stone v Farrow Mortgage Services)

j. It is usually prudent for a mortgagee to obtain a written valuation of the property before sale, and to be wary of selling the property at a price substantially below that valuation. That said, failure to obtain a valuation will not automatically constitute a breach of s.85. (Stockl v Rigura)

k. In assessing whether market value is achieved, a Court may take into account genuine offers to buy. (Stockl v Rigura)

l. Where the Court can be satisfied that the property has been properly advertised and that the sale (whether by auction, tender or private treaty) has been properly conducted, then the Court is entitled to take what is actually elicited from the market in response to that sale process as the best evidence of market value at the time. In particular, the Court is entitled to prefer that market response over opinions of registered valuers as to market value. (Stockl v Rigura)

m. Whatever deficiencies there might have been in the sale process, if the property is actually sold at its market value, then s.85 gives no remedy. (Apple Fields v Damesh Holdings 721 but see Benzlaw v Medi-Aid at [142]. If it is shown that the duty has been breached, then the measure of damages is the difference between the sale price and the true value; such that if there is no difference then there is no remedy: Stone v Farrow Mortgage Services at 466.

In Stockl v Rigura Pty Ltd, per Palmer J: has the mortgagee taken proper steps to advertise and sell the property? If the clear answer to that question is “yes”, the court may regard the resultant sale as the

best evidence of the current market value of the property so that no regard need be paid to other valuation evidence.

However, if the answer to the first question is doubtful, valuation evidence as to current market value may assist to resolve the doubt.”

In Australia, we apply a “good faith” test to the mortgagee’s actions in selling. In the UK for some time there seemed to be an idea that “negligence” might play some part but that has now been discountenanced.

Upton v Tasmanian Perpetual Trustees: It is apparent from the passage cited from Kennedy v De Trafford [1897] AC 180 above that the equitable duty is expressed to have regard to the ‘interests of the mortgagor’, as an incident of good faith. The mortgagee was not to wilfully or recklessly deal with the property ‘in such a manner that the interests of the mortgagor are sacrificed’. Brennan J observed in CAGA v Nixon 152 CLR at 525 that, stated in that way, the duty acknowledges the mortgagee’s interest as the primary interest which the power of sale is conferred to protect. It does not require the mortgagee to act in protection of the interests of the mortgagor, unless the mortgagee’s failure to do so would be fraudulent or would amount to a wilful or reckless sacrificing of those interests.

Clogs on the equity of redemption

A clog on the equity of redemption will exist where: o There is extinguishment of the right to redeemo There is unconscionable postponement of the right to redeemo There is a collateral advantage which operates as a penalty

Unconscionability is inherent in any behaviour which extinguishes the right to redeem – it is not a superadded element of the clog: Sun North Investments v Dale

A clog will not be allowed in “a fair bargain between men of business without any trace or suspicion of

oppression, surprise or circumvention” Samuel v Jarrah Timber & Wood Paving and has been held

to apply where the parties are legally represented: Lewis v Frank Love Ltd It is unnecessary to demonstrate fraud, accident, mistake, surprise or other unconscionable conduct on the

part of the person against whom the relief is sought to demonstrate a clog: Stern v McArthur A collateral advantage will only be prohibited where it is unconscionable, but anything which fetters the

right to redeem will be prohibited automatically: Kreglinger v New Patagonia Meat and Cold Storage Company

An option to purchase can be a clog on the equity of redemption: Samuel v Jarrah Timber & Wood Paving Corp

A collateral agreement which extinguishes the right to redemption must be considered to be part of the same transaction - Whether a mortgage and an option to purchase are really independent transactions will be assessed as a matter of substance rather than merely form, and the court will look to the underlying nature of the transactions in determining whether they were really part and parcel of the one transaction which cut down the right to redeem rather than independent transactions involving a collateral undertaking outside and clear of the mortgage. The court may have regard to parole evidence in determining this question of fact: Sun North Investments v Dale, Kreglinger

Where there is a penalty, consider relief against forfeiture – equity will not allow an unconscionable use of power to deprive of an asset: Tanwar v Cauchi – will usually grant relief where there is fraud, accident, mistake, surprise, or other unconscionable conduct

Courts will grant relief against forfeiture where there would otherwise be an unjustified and an unconscionable windfall: Stern v Macarthur

An option to purchase in a mortgage could be a penalty: Kreglinger

A stipulation prima facie imposes a penalty on the first party if, as a matter of substance, it is collateral to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation: Andrews v ANZ Banking Group

o Accelerated payment upon default a penalty?o Wanner v Caruana:

Interest at 10% reducible to 9% p.a. if prompt payment – ok because not penalty

Repayment over 6 years but acceleration upon default (principal plus future interest) – void as penalty because not genuine pre-estimate of mortgagee’s loss

o Relief against accelerated payment in PLA ss93-95

Whether a stipulation is a penalty is to be determined objectively (Philips Hong Kong Ltd v The Attorney-General of Hong Kong) and by reference to the time the contract was made, not the time of breach (Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd)

The law of penalties operates where “a contract stipulates that on breach the contract-breaker will pay an agreed sum which exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused by the breach”: Ringrow Pty Ltd v BP Australia Pty Ltd

Two tests for penalty: Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd:o “(a) It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in

amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach...

o (b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid...”

Possession and finding

Ownership is a bundle of rights - The general right of ownership embraces subsidiary rights, such as exclusive enjoyment, to destroy, to alienate, or to alter, and of course the right to maintain and to resume and recover possession from other persons’, Knapp v Knapp

Possession gives a rebuttable presumption of ownership: Russell v Wilson Possession not merely evidence of title, but confers title of its own – this is title good against all but the true

owner: Russell v Wilson; Costello v Chief Constable of Derbyshire Constabulary Possession is:

o Physical control – Young v Hitchens – physical control not estabishedo Manifest intention to possess – The Tubantia – sufficient intention to possess; Button v Cooper –

sufficient intention to possess Title to personalty is absolute (not granted by Crown): Knapp v Knapp The objective of priority rules is to reunite the personalty with the true owner: Tamworth Industries v

Attorney General To abandon property, must intend to relinquish property in that chattel, and ceases to have rights; but to

lose property, you retain that intention to control the property and therefore remain the true owner: Re Jigrose

Mere inactivity is not abandonment: Moorhouse v Angus Robertson Abandoned property becomes abandoned as soon as there is intention to abandon and then becomes

public, upon finding becomes private again: Re Jigrose If the finder evinces possession (Armory v Delamirie), they acquire a right to keep it against everyone but:

o The true ownero Someone claiming through the true ownero Someone with a prior subsisting right existing at the time of the finding (Parkerv British Airways

Board) The finder of a chattel acquires limited rights if they acquire it dishonestly or in the process of trespassing:

Parker Finder has better claim than subsequent possessor: Armory v Delamirie Employer will have good claim to whatever their employee finds (DPP v Hart) if:

o The employee finds the chattel in the course of their employment whilst performing their duty – employment must be the cause of the finding: Byrne v Hoare

Rights and obligations of a finder: Parker v British Airways Boardo ‘1. The finder of a chattel acquires no rights over it unless (a) it has been

abandoned or lost and (b) he takes it into his care and control. 2. The finder of a chattel acquires very limited rights over it if he takes it into his care and control with dishonest intent or in the course of trespassing. 3. Subject to the foregoing and to point 4 below, a finder of a 330 chattel, whilst not

acquiring any absolute property or ownership in the chattel, acquires a right to keep it against all but the true owner or those in a position to claim through the true owner or one who can assert a prior right to keep the chattel which was subsisting at the time when the finder took the chattel into his care and control. 4. Unless otherwise agreed, any servant or agent who finds a chattel in the course of his employment or agency and not wholly incidental or collaterally there to and he takes it into his care and control does so on behalf of his employer or principal who acquires a finder’s rights to the exclusion of those of the actual finder. 5. A person having a finder’s rights has an obligation to take such measures as in all the circumstances are reasonable to acquaint the true owner of the finding and present whereabouts of the chattel and to care for it meanwhile.’

Finder vs occupier - “An occupier of a building has rights superior to those of a finder over chattels upon or in, but not attached to, that building if, but only if, before the chattel is found, he has manifested an intention to exercise control over the building and the things which may be upon it or in it.”: Parker v British Airways Board

To assess the sufficient degree of manifest intention to control building/ things, examples:o Look at whether on or in the land (Parker) – boat embedded in clay several feet below surface

belonged to occupier (Elwes v Brigg Gas Co); gold rings embedded in mud at bottom of swimming pool belonged to landowner: South Staffordshire v Sharman; metal brooch found embedded in park ground – occupier prevailed: Waverley BC v Fletcher

o If a fixture, then landowner has rights: Parker v British Airways Boardo Look at whether object found in public area – bag of money found on public shop floor area,

shopowner didn’t know it was there, finder prevailed (Bridges v Hawkesworth); gold bracelet found in executive lounge (limited but still public area) – finder prevailed: Parker v British Airways Board

o Box of cash found under floor – occupier prevailed: Tamworth Industries v Attorney Generalo National Crime Authority v Flack: NCA found $ in a cupboard (inside a wall?) during a search

warrant on Flack’s house; Flack was unaware of the $ – Flack had a better claim as the sole tenant/occupier of the house – intention to exclude others from land was also intention to exclude others from chattels

o Hannah v Peel: Hannah found a brooch on window sill in a house owned but never occupied by Peel – finder prevailed over occupier

o Corporation of London v Appleyard: bank notes found in wall safe built into wall building – land occupier prevailed over finder

Bailment

Transfer of possession (of bailed goods) on certain terms without transfer of ownership (Hobbs v Petersham Transport Co Pty Ltd at 238)

‘The voluntary taking into custody of goods which are the property of another’, Morris v CW Martin & Sons Ltd [1966] 1 QB 716

o ‘The taking of possession of a tangible chattel by a person other than the owner. It is the separation of ownership and possession which is critical’, AGC Ltd v Ross [1983] 2 VR 319 at 329-30

A rejected gift with retained possession could be a bailment: Papathanasopoulus v Vacopoulus [2007]

NSWSC 501 Bailment must be of a tangible asset: Federal Commissioner of Taxation v United Aircraft Corp 

Elements: Hobbs v Petersham Transport Co Pty Ltd 1) the delivery of the exclusive right of possession by the bailor; (2) the voluntary assumption of possession by the bailee;2

(3) an assumption of the responsibility by the bailee to keep the goods safe;3 and (4) the obligation to return the thing bailed. South Australian Insurance Co v Randell Chapman Bros v Verco: look at each situation on own merits to see whether there is a bailment Leaving goods in a locker: Greenwood v Council of the Municipality of Waverley (1928) 28 SR (NSW) 219 Car Parking: Council of the City of Sydney v West (1965) 114 CLR 481.

[The following are examples of bailments where there is a transfer of possession and an obligation to return the items in their original or altered form:

(1) a car that is left at a repairer for repair and return;1  Hollier v Rambler Motors (AMC) Ltd  (2) an overcoat that is left with the concierge at a hotel;2 Ultzen v Nichols  and (3) the relationship between taxi-cab owner and driver.3 Commissioner of Taxation (Cth) v De Luxe Red and Yellow

Cabs Co-op (Trading) Society Ltd 

The following examples are not bailments: (1) parking a car on parking ground where the driver retains the keys;4 Ashby v Tolhurst . Compare Sydney City

Council (Ticket Case) v West  (a car was parked in a council parking station with issue of a ticket with a condition that the council had possession of the car and this was held to constitute a bailment)). See also Walton Stores v Sydney City Council  (a car was parked in a council parking station and a ticket was issued with a condition that the car could not be released without presentation of the ticket. The court held that this constituted a bailment and the council was liable for the wrongful and negligent delivery of a car to a thief who had presented a duplicate ticket.)

(2) leaving a caravan at a caravan site;5 Halbauer v Brighton Corporation  (3) a sale of goods;6 South Australian Insurance Co v Randell  (4) an employer delivering chattels to an employee to deal with in the course of the employee’s

employment;7  Associated Portland Cement Manufacturers (1910) Ltd v Ashton (5) a time or voyage charter that is a contract for the rendering of services by the owner but not a

hiring out or parting with possession of the vessel to the charterer.8 Carlton International Plc v Crayford Freight Services Ltd

6 types of bailment from Coggs v Bernard 92 ER 107 at 109 per Holt CJ (plus one)

o Gratuitous deposit for safekeeping o Deposit for safekeeping for rewardo Gratuitous loan o Delivery for use by the bailee for reward (i.e. hire)o Delivery of goods for reward to do something with them (e.g. carriage/repair)o Delivery of goods without reward to do something with them (e.g. carriage/repair) o Goods delivered as security for loan (pawn)

Bailor Duties:o Authority to bail o Not interfere with the possession of the bailee in breach of bailment termso Communicate to the borrower defects in the article lent of which he is aware, and if either

deliberately or by gross negligence he does not discharge this duty, he is liable for injury resulting to the borrower: Coughlin v Gillison [1899] 1 QB 145 at 149. (this applies to all bailments, including gratuitous bailments)

o When goods are hired for use by the hirer – to ensure goods bailed are in reasonable condition, and reasonably fit for the stated purpose of use (common law duty) Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633. (fitness for purpose only implied in commercial bailments – bailment for reward)

Fitness for purpose is an implied promise included in a bailment for reward: Gemmell Power Farming Co Ltd v Nies (1935) 35 SR (NSW) 469 at 475.

Only arises in commercial bailments: Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633, Restricted duty in gratuitous bailments is to warn of defects which are not apparent making it not fit for

purpose: Cottee v Franklins Self-Serve Pty Ltd [1997] 1 Qd R 469

Bailee’s duties:

1. To take care of the bailed goods a. Traditional view: gratuitous bailee doesn’t breach duty to take care unless there is gross negligence –

more benefit bailee receives, the higher standard of care: Coggs v Bernard b. Current view: duty to take reasonable care owed in all circumstances BUT what constitutes a breach of

the duty will depend on nature of particular circumstances/nature of bailment: Pitt Son & Badgery Ltd v Proulefco; McComb v Martin Box Marine Holdings Pty Ltd (1992) 8 SR (WA) 193

c. Onus: the bailor has to prove existence of bailment and damage suffered, then the bailee must disprove the breach or causation: Pitt Son & Badgery

i. Jackson v Cochrane (1989) 2 QdR 231. Caravan on consignment was taken by fraudulent persons purporting to act on behalf of

the owner, caravan was taken in circumstances where there was inadequate communication with the bailor and never recovered = failure to exercise reasonable care of its custody

ii. Pitt and Son and Badgery Ltd v Proulefco (1984) 153 CLR 644 1. ‘The failure to provide fencing, reasonably adequate to keep out intruders, in my

opinion amounted to a breach of the appellant's duty to take reasonable care for the wool.’ at 647 per Gibbs CJ (High Court)

2. ‘The appellant has failed to show that it took reasonable precautions to keep the wool safe, and the damage that resulted from its breach of duty was not too remote’. (at 649)

iii. Terry Hogan Prestige Cars v Opera Investments Pty Ltd [2006] NSWCA 1391. Car owner argued negligence due to lack of bollards outside glass windows of showroom

and the dealer not locking keys in a safe, cf evidence of alarms, CCTVs, PIN coded locked doors etc, NSW Court of Appeal held the dealer was not negligent on the facts but court also observed that ‘there was a bailment for the benefit of the bailee as well as the bailor, so that the standard of care is higher than for an involuntary or gratuitous bailment.’ at [21]

iv. I & J Frozen Foods (Aust) Pty Ltd v Ali Baba Lebanese Cuisine Pty Ltd [2009] NSWDC 185 1. Theft of frozen seafood and chicken from freezer storage facility. [35]-[40] lists

individually the breaches of duty of care that individually and in combination establish the breach, applies Pitt Son & Badgery Ltd v Pruelfco

2. Duty not to convert or misuse goods

Bailee’s duty: not to misuse or convert goods Duty not to misuse:

o bailee’s duty not to use the goods beyond the normal range of uses, and not contrary to bailor’s express or implied instructions

Duty to not convert:o Conversion: to appropriate another’s property for one’s own use

If bailee’s act is inconsistent with bailor’s proprietary interests in the bailed goods

Bailee’s duty to not convert the goods to cash, not to use for own benefit etc3. Bailee’s duty to redeliver

Duty to return goods in specie or to re-deliver Identity of goods must be preserved - Chapman Bros. v Verco Bros. & Co. (1933) 49 CLR 306 When does the duty to return/re-deliver arise?

Depends on the nature and terms of the bailment including:a) if the bailment is a bailment at will, on demand by the bailor;b) if the term of the bailment has expired, at the expiration of the term;c) if the purpose of the bailment has been satisfied, at the time of satisfaction; or

d) if the bailment has been terminated, at the time of termination. Non-delivery (failure to return/redeliver) Misdelivery (delivery to the wrong person) Jackson v Cochrane; Sydney City Council v West “Misdelivery stands on a different plane from mere failure to take reasonable care in the custody of the

vehicle… In cases of conversion by misdelivery notions of care are… irrelevant… Expressed simply, a bailee is liable

for loss or damage resulting from his dealing with the goods bailed in a manner not authorised by the bailor.” (McPherson J at 25 & 26)

Vicarious liability of bailee – a bailee for reward is liable for the negligence or conversion of their sub-bailees: Morris v CW Martin & Sons Ltd [1965] 2 All ER 725 at 730

Bailee for reward is liable when article is lost owing to the negligence of an employee who has actual custody of the article.

Makower, McBeath & CO Pty Ltd v Dalgety & Co Ltd [1921] VLR 365 Bailment and limitation of liability clauses ‘The bailee may attempt to limit his or her liability by including a special condition in the contract of bailment

to that effect. To be effective the words of the condition must be clear and unambiguous as any ambiguities will be construed against the bailee. Unless the words are clearly directed at the bailee’s negligence, they will not protect him or her.’

Halsburys Laws of Australia Exclusion clauses to be construed against the excluding party in contract: TNT v May Baker Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22 ‘Any act which is inconsistent with or repugnant to the bailment, constitutes a repudiation of it. If the

bailment is created by contract, the extent to which the common law applies depends upon the construction of the contract.’ per Young CJ in Eq. at [60]

Reasoning in Anderson was subsequently applied in Hill v Reglon Pty Ltd [2007] NSWCA 295 – a repudiation of a bailment is ‘an act inconsistent with or repugnant to the bailment’ at [41]

Effective repudiation brings the bailment to an end, and the right to immediate possession reverts to the bailor in the case of a term bailment.

Hirer had not lost its right to immediate possession of the car at the time of the theft, and hence could sue the dealer. ‘An act necessary to terminate a bailment must be a very serious one…which is virtually a disclaimer of the contract of bailment. A deviation from the terms of the bailment, short of repugnancy or disclaimer of the bailment, does (not) amount to the bailee losing …all right to possession’ per Young CJ in Equity

Overlap between trespass, detinue and conversion: actual possession, or right to immediate possession? Case study in conversion: Penfold Wines Ltd v Elliott (1946) 74 CLR 204

Security interests in chattels

In Re Cosslett (Contractors) Ltd  [1998] Ch 495, per Millett LJ at 508, where the following appears:

“There are only four kinds of consensual security known to English law: (i) pledge; (ii) contractual lien; (iii) equitable

charge and (iv) mortgage. A pledge and a contractual lien both depend on the delivery of possession to the creditor. The

difference between them is that in the case of a pledge the owner delivers possession to the creditor as security, whereas

in the case of a lien the creditor retains possession of goods previously delivered to him for some other purpose. Neither a

mortgage nor a charge depends on the delivery of possession. The difference between them is that a mortgage involves a

transfer of legal or equitable ownership to the creditor, whereas an equitable charge does not.”

Personal property security answer plan

Debtor – owes money or obligation; grantor – party who gives security interest; secured party – creditor who obtains a security interest; collateral – personal property subject to a security interest (can also give rise to a proceeds-security interest which attaches automatically to proceeds); financing statement – PPSA registration form; security agreement – agreement or act creating security interest between debtor and secured party – section 18.

1. Is there an in substance security transaction?

What is an “interest”? “Before a right or an interest can be admitted into the category of property, or a of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability”: National Provincial Bank v Ainsworth.

Examples: JS Brooksbank [2009] NZCA 122 – wool supplied to carpet manufacturer by mistake; should not have been supplied until funds cleared for payment; no intention to create in substance security.

Distinguish between security interest and sale - THC Holding Pty Ltd v CMA Recycling Pty Ltd:THC's interest in the 1,367 MT was the interest of a purchaser under a contract in respect of which payment had been made and, as I have found, property passed. While CMA retained possession of the scrap metal, it cannot be said that THC's interest in the 1,367 MT as owner "in substance" secured payment or performance of any obligation of CMA. The only "obligation" that CMA had was that of a bailee to deliver the goods to THC, or at its direction. I accept THC's submission that it cannot be said that the interest of an owner/bailor in the owner's bailed goods is an interest that "in substance" secures the bailee's obligation to deliver the goods to the owner or make them available for collection.

PERSONAL PROPERTY SECURITIES ACT 2009 - SECT 12Meaning of security interest             (1)  A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).Note:          For the application of this Act to interests, see section 8.             (2)  For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation:                     (a)  a fixed charge;                     (b)  a floating charge;                     (c)  a chattel mortgage;                     (d)  a conditional sale agreement (including an agreement to sell subject to retention of title);                     (e)  a hire purchase agreement;                      (f)  a pledge;                     (g)  a trust receipt;                     (h)  a consignment (whether or not a commercial consignment);                      (i)  a lease of goods (whether or not a PPS lease);                      (j)  an assignment;                     (k)  a transfer of title;                      (l)  a flawed asset arrangement.             (3)  A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation:                     (a)  the interest of a transferee under a transfer of an account or chattel paper;                     (b)  the interest of a consignor who delivers goods to a consignee under a commercial consignment;                     (c)  the interest of a lessor or bailor of goods under a PPS lease.          (3A)  A person who owes payment or performance of an obligation to another person may take a security interest in the other person's right to require the payment or the performance of the obligation.             (4)  Without limiting subsection (3A):                     (a)  an account debtor, in relation to an account or chattel paper, may take a security interest in the account or chattel paper; and

                     (b)  an ADI may take a security interest in an ADI account that is kept with the ADI.             (5)  A security interest does not include:                     (a)  a licence; or                     (b)  an interest of a kind prescribed by the regulations for the purposes of this section.             (6)  A security interest is not created only by an agreement or undertaking to do either of the following:                     (a)  to postpone or subordinate a person's right to payment or performance of all or any part of a debtor's obligation to another person's right to payment or performance of all or any part of another of the debtor's obligations;                     (b)  to postpone or subordinate all or any part of a secured party's rights under a security agreement to all or any part of another secured party's rights under another security agreement with the same grantor.

2(a) and (b) – fixed and floating charges

Common law charge

- Generally, an equitable charge is a security over property which has been created by an inter vivos act, consensual or otherwise, by the owner of the property. In a contractual setting, the question is whether the contractual parties have expressly or impliedly evinced an intention to appropriate property for the discharge of a debt or other obligation and to give the creditor a present right to have the property made available: National Provincial & Union Bank of England Ltd v Charnley [1924] 1 KB 431 at 449 - 450 per Atkin LJ; Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 595 - 596 per Buckley LJ. An equitable charge gives a right of realisation of the property by judicial process in case of non-payment: Hewett v Court [1983] HCA 7; (1983) 149 CLR 639 at 643; Chief Commissioner of Stamp Duties v Buckle [1998] HCA 4; (1998) 192 CLR 226 at 246 - 247.

- Carey v Palmer: Always look closely at intention of the parties to see whether there is clear intention to give proprietary interest over future property or just a personal obligation to account for future sales

- It floats over the property available to satisfy the charge until the charge crystallises when the bank pays the money

- A receiver will be appointed over the property when it crystallises- Until that time you have an implied licence to deal with and dispose of the property as you like, because you

are still the legal owner – and the purchaser takes free of any interest - Norman v FCT case 109 CLR 1 start at 35 Windeyer: historically the common law didn’t like future property,

but now there is inventory and receivables which fluctuates so you can’t have a fixed charge over them – get a floating charge – “ If we turn from attempted gifts of future property to purported dispositions of it for value, the picture changes completely. The common law objection remains. But in equity a would-be present assignment of something to be acquired in the future is, when made for value, construed as an agreement to assign the thing when it is acquired. A court of equity will ensure that the would-be assignor performs this agreement, his conscience being bound by the consideration. The purported assignee thus gets an equitable interest in the property immediately the legal ownership of it is acquired by the assignor, assuming it to have been sufficiently described to be then identifiable. The prospective interest of the assignee is in the meantime protected by equity. These principles, which now govern assignments for value of property to be acquired in the future, have been developed and established by a line of well-known cases, of which Holroyd v. Marshall (1862) 10 HLC 191 (11 ER 999); Collyer v Isaacs (1881) 19 Ch D 342; Tailby v Official Receiver (1888) 13 App Cas 523; and In re Lind; Industrials Finance Syndicate Ltd. v. Lind (1915) 2 Ch 345 are the most important. "And so", to use Maitland's words, "lawyers easily slipped into the way of saying that inequity one could make an assignment of goods hereafter to be acquired though one could not do so at law. This was a compendious way of putting the matter and was not likely to deceive any equity lawyer": Maitland, Equity, 2nd ed. (1936) p. 150. The contrast that those cases make between potential property, such as the wool which will grow on my sheep, or the crops which will grow on my land, and future property, which only by a possibility will come to me, is significant in connexion with sales of goods. A purported present sale of future goods operates at law as an agreement to sell the goods. And if when the seller acquires them he delivers them, or in some other way appropriates them to the

buyer, the property in them thereupon passes. This is the general rule. If, however, the goods were potentially the goods of the seller at the date of the contract, then the property will pass as soon as they come into existence - "are extant", in the words of the first of the cases mentioned above.”

- Fixed interest in a future asset - A creditor can create for good consideration an equitable charge over book debts which will attach to them as soon as they come into existence: Tailby v Official Receiver

PPSA

- All interests are “fixed” interests with a licence to deal with the collateral according to the terms of the security agreement: Sparrow (1997) 143 DLR (4th) 385 (Sup Court Canada).

- Under the PPSA, the time of the security transaction, not the time of acquisition of the property, is the relevant time: Royal Bank of Canada v Radius Credit Union Ltd

- There is a conceptual difficulty in having a “fixed” interest in “future assets”. As Gonthier J noted in the Supreme Court of Canada in Royal Bank of Canada v Sparrow Electric Corp [1997] 1 SCR 411 at [62] - [63] (in dissent but not on this point): “The concept of attachment to tangible and ascertainable property, of course, is impossible to achieve in the case of assignment of inventory, where that collateral is changing constantly. In short, the traditional concept of the charge seems to be at odds with the notion of having a proprietary right over collateral such as after-acquired inventory which, by definition, is not yet in existence at the time the security agreement is executed. In my view, however, a fixed charge over all present and future inventory represents a proprietary interest in a dynamic collective of present and future assets. To this extent, … this form of security challenges our traditional concept of a fixed charge: to the same extent … our conception of the form of charge must change to meet the modern realities of commercial law …”.

2(c) and (f) – chattel mortgage or pledge

A chattel mortgage (often called a “bill of sale”) involved the actual transfer of the legal title to the chattel to the mortgagee so that there might be a foreclosure in the event of a failure to repay.

A pledge is a form of bailment (“pawn”) – the pledgee has the ability to sell the pledged chattel if the pledge is not redeemed. A pledge does not involve any transfer of the title to the chattel, unlike a chattel mortgage: Palgo Holdings v Gowans [2005] HCA 25.

Ex Parte Official Receiver. In Re Morritt  (1886) 18 QBD 222, per Cotton LJ at 232, where the following appears:

“In order to solve the question which I am now considering, it is necessary to consider the exact rights of sale which a

mortgagee of personal chattels possesses. A pledge of personal chattels as a rule is and must be accompanied by

delivery of possession. It is out of the possession given him under the contract that the pledgee's rights spring. A contract

of pledge carries with it the implication that the security may be made available to satisfy the obligation, and enables the

pledgee in possession (though he has not the general property in the thing pledged, but a special property only) to sell on

default in payment and after notice to the pledgor, although the pledgor may redeem at any moment up to sale. A

mortgage of personal chattels involves in its essence, not the delivery of possession, but a conveyance of title as a

security for the debt. A mortgage of personal chattels may, however, be accompanied with a transfer of possession; and

mortgages of personal chattels in cases where possession is retained by the mortgagor may, and commonly do, provide

that on default the mortgagee may take that possession which is until default withheld from him. There is very little, if

any, authority on the point. But I am of opinion that a mortgagee of personal chattels which are in his possession is not in

a worse position than a pledgee, and that, where there is no express power of sale given by the mortgage, he has, after

default in payment, and after he has given the mortgagor a reasonable time to pay the money due, a power to sell and

give a good title to the purchaser, though, of course, the mortgagor has, at any time before sale, a right on payment of

the money due, including expenses, to prevent the sale and redeem the chattels.”

2(h) or 3(b) – consignment in substance or commercial consignment (if commercial consignment, doesn’t matter whether to secure obligation or not)

Re Arcabi Pty Ltd; ex parte Theobald and Herbert:

The term 'consignment' is not defined in the Australian PPSA. However in Canada in the decision of Re Stephanian's Persian Carpets Ltd (1980) 34 CBR (NS) 35 Saunders J put the position as follows:

In its simplest terms, a consignment is the sending of goods to another. An arrangement whereby an owner sends goods to another on the understanding that such other will sell the goods to a third party and remit the proceeds to the owner after deducting his compensation for effecting the sale is an example of a consignment agreement.

32 In Access Cash International v Elliot Lake Inc & North Shore Corp for Business Development (2000) Carswell Ont 2824 Molloy J listed 15 indicia to characterise a consignment. These were:

(a) the merchant is the agent of the supplier;(b) title to the goods remains in the supplier;(c) title passes directly from the supplier to the ultimate purchaser and does not pass through the merchant;(d) the merchant has no obligation to pay for the goods until they are sold to a third party;(e) the supplier has the right to demand the return of the goods at any time;(f) the merchant has the right to return unsold goods to the supplier;(g) the merchant is required to segregate the supplier's goods from his own;(h) the merchant is required to maintain separate records;(i) the merchant is required to hold sale proceeds on trust for the supplier;(j) the goods are shown as an asset in the books and records of the supplier and are not shown in the books and records of the merchant as an asset; and(k) the supplier has the right to stipulate a fixed or floor price.

- If the consignment serves a separate mutual advantage, then it will be less likely to be security: Re Arcabi, Stephanian’s

- Important considerations for security are where the obligation to pay lies and where title lies – what happens if nothing happens? Re Arcabi

- 52 Under element (c) a 'commercial consignment' requires that the consignor and consignee both deal in goods of that kind in the ordinary course of business. The effect of this limitation is that consignments by consumers of their property to a commercial consignee are not caught by the PPSA. A similar limitation exists in both the Canadian and New Zealand Acts. The intention of this requirement appears to be to limit the automatic application of the statute to situations in which consignment is used as a means of financing the acquisition of trading stock.

2(i) or 3(c) – bailment or lease amounting to in substance security or PPS lease (if a PPS lease, doesn’t matter whether to secure obligation or not)

Bailment

[BAILMENT] True lease versus “finance” lease – automatic vesting of ownership upon completion of term; obligation to purchase; length of term and value of lease payments – is cost amortised over term of lease? Price of option to purchase (nominal?); onus to repair; nature of contractual remedies – accelerated payment etc (is there an equitable issue here – a penalty? Andrews v ANZ Bank) – see article by Nicholas Mirzai (2011) 22 JBFLP 3.

Re Arcabi Pty Ltd; ex parte Theobald and Herbert:

Two types of bailment may comprise a security interest under the PPSA. First, an 'in substance' security interest under s 12(1) of the PPSA but only if the bailment secures payment or performance of an obligation. Second, if certain conditions are met the bailment is deemed to be a 'PPS lease' under s 13 and so is a security interest under s 12(3)(c).

20 There are several factors accepted by overseas courts as indicia of when bailment arrangements secure payment or performance of an obligation. These include:

(a) the bailment provides that the ownership of the goods will vest in the bailee on expiry of the bailment agreement;

(b) the bailee has an obligation to purchase the goods or an option to purchase the goods or extend the term of the arrangement at a 'bargain' price such that it would be reasonable to expect the bailee to exercise the option;

(c) the term of the arrangement is for a major part of the economic life of the goods; and

(d) the minimum payments under the bailment amount to substantially all the capital cost of the goods.

23 The next question is whether the bailments were PPS leases (deemed security). The interest of a bailor of goods under a PPS lease is a 'security interest' for the purposes of the PPSA: see s 12(3)(c). The effect of s 13(1), (2) and (3) of the PPSA is that if the bailment:

(a) is for a term of more than one year or is for an indefinite term or for a term of up to one year that is automatically renewable or renewable at the option of one of the parties;

(b) the bailor is regularly engaged in the business of bailing goods; and (no concept of PPS lease in NZ or Canada)

(c) the bailee provides value for possession of the underlying collateral;

the bailment will be deemed to be a PPS lease.

- Rabobank New Zealand v Mcanulty: horse syndicate bailed horse to farm, but wasn’t in the business of bailing goods – was in the business of profiting from the horse. Implication is that the bailor should be in the business of profiting from the bailment

Operating vs finance leases

The key question is not so much is a proprietary or possessory interest stricto sensu being created but rather what is the ultimate economic effect of the contractual arrangement entered into between the parties? Hamblen J analysed the relevant features of the arrangement in Celestial Aviation as follows.

First, the leases involved the transfer of possession of the aircraft during the term of 8 years. During that time, all the costs and risks remained with the lessee. The aircraft had a useful economic life of between 20 years and 30 years. Thus, the leases were only for a proportion of the economic life of the aircraft, with the residual value lying in the lessor. There was no transfer of ownership contemplated, and the lessee’s continuing right to possess was premised on no default having occurred. Upon default, it seemed that redelivery was to occur immediately. Finally, time was of the essence, and the monthly rent was payable in advance. A deposit of tenth months rent had been paid.

As Hamblen J noted:

In such circumstances [as occurred in On Demand Information plc v Michael Gerson (Finance) plc] the lessor’s continuing interest in the chattel is essentially an economic one. Its interest is in payment of the rent rather than the return of the chattel. In substance it is more of a security interest than an ownership interest.

In the present case, by contrast, Paramount only has a right to possess the aircraft for a proportion of its economic life. As such Celestial retains a very real interest in the aircraft themselves, including their proper maintenance, the extent of their use, their condition, and their rental and resale value. Possession of the aircraft will revert to it at a time when the bulk of their economic life is still to run, and there are detailed terms addressing the return of the aircraft and their required redelivery condition. Celestial therefore retains many of the risks and rewards of ownership. Moreover, rent was not calculated on the basis of recouping the cost of the aircraft together with interest and profit. In such circumstances Celestial’s general property in the Aircraft was not qualified or limited in the way in which it was in the On Demand case.29 When analysed, the leases in On Demand were finance leases, while those in Celestial Aviation were operating leases.

Exclusions

Exclusions for PPS s 8 – statutory interests (eg under tax laws); security interests arising by operation of law (eg a lien); set-off arrangements (operates as a substantive idea – can resist claims until you get account) (not a security but acts like a security); interests in land and fixtures – Hobson v Gorringe ; special purpose trust (Quistclose); exclusions under Cth and State law eg mining\fishing licences.

Possessory Lien

[14] A lien is the right of one person to retain possession of property belonging to another or to have a charge over it, pending satisfaction of the lien-holder‟s claim against the other person. At common law, a lien is possessory only and depends on the lien-holder having rightful and continuous possession of the property concerned until the claim is satisfied.

o 1 It is well established that at common law a person expending labour and skill on the improvement or repair of chattels delivered for that purpose is entitled to a lien over them for payment of charges for that work.

o 2But a significant body of authority supports the proposition that there can be no lien for the mere maintenance of chattels or for work done to prevent their deterioration as distinct from their improvement.

o 3 As a general rule, a possessory lien is lost by the outright delivery of the article to the owner or his or her agent and cannot be revived if possession is subsequently obtained.

o 4 However, a lien may subsist when the article is released to the owner on a temporary basis, on terms that it is to be returned after use and the lien should continue .

A right to retain possession of goods until debts are repaid Toll Logistics (NZ) Ltd v McKay [2011] NZCA 188; [2011] 2 NZLR 601:

o The common law lien (whether particular or general) is a mere right to retain possession of the chattel and does not confer a power of sale. (Larner v Fawcett)

A special lien (preferred by the common law) is a right to retain possession until the specific debt generated is repaid

A general lien (not preferred) is a right to retain possession until any and all debts owing to the lienee are paid

o May arise at common law only by: o 1. implication of law;

A general possessory lien exists by operation of law in favour of (1) solicitors;

(2) bankers; (3) factors; (4) stockbrokers; and (5) insurance brokers.

o (2) proof of customary usage; oro (3) express agreement. (Majeau Carrying Co v Coastal Rutile)

Contrast with an equitable lien (Hewett v Court) – this is more like an equitable charge and is not dependent on possession:

o An equitable lien is a creature of the laws of equity, and can arise in a diverse set of circumstances;

o It arises by operation of law so as to do justice between partied by adjusting their mutual rights and interests;

o It is not contingent on any contractual right or interest, or by reason of possession of the property;

o An equitable lien becomes apparent from the relationship between the parties;o It constitutes an equitable charge over the property;o It creates a right to obtain an order for payment from a fund;o It is different from an equitable estate or interest insofar as those creatures (also arising from the

laws of equity) exist where there is an anticipated promise to make a payment of transfer interest in the land; and

o The application of doctrines relating to unfairness or unconscionable acts may impose an equitable lien over property.

o Will arise e.g. where a liquidator performs services and is paid out of the fund: Re Universal Distributing Co Ltd

2. Is the security perfected?

Look at section 21-22

3. Is it a purchase money security interest?

Note PMSI – s 14 – special priority – security interest in collateral to the extent that it secures all or part of its purchase price –

4. Apply priority rules

Need to attach security interest (s 19); enforceable against third parties (s 20); perfection by registration, possession or control (s 21) (usually perfection will be obtained by registration). Security interest over goods bailed or leased under a PPS lease attaches when grantor obtains possession of the goods (s 19(5)).

Registration – online financing statement (s 150) – must have reasonable belief that person is or will become a secured party (s 151) – receive verification statement from Registrar (s 156) send notice to grantor (s 157) – grantor may waive right – registration effective when information available on PPSR (ss 160, 163).

Registration – s 153 – PPS Reg Sch 1 – grantor details; secured party details; collateral description – consumer or commercial property; serial number; class of collateral – description of proceeds if covered – end of registration – whether a PMSI or not – defective registration covered by s 164\165.

Priority rules – s 55 – knowledge of prior interest largely irrelevant cp Torrens – perfected security interest beats unperfected – later created may win by first registration – unperfected determined by order of attachment – priority

between security interests determined by earliest priority time – registration\perfection by possession or control – priority time must remain “continuously perfected until enforcement – s 56.

Graham v Portacom New Zealand Limited: It is possible to lose title to a perfected security interest

Taking free rules – buyers or lessees – for value personal property free of unperfected security interest s 43 – special rules if serial number ss 44 and 45; ordinary course of business – s 46 – for new value $5,000 or less where intention to use property for personal, domestic, or household purposes s 47.

5. Look at remedies

Remedies (could seize, sell, possibly foreclose, – do not apply if grantor is a corporation and secured creditor appoints receiver – must act in honest and commercial responsible manner – seize (s 123) and sell (s 128) and possibly foreclose (s 134) – give notice – priority competition between creditors (s 137) – payment priorities (s 140).

Relief against forfeiture

Bulk goods

Has title passed?

Look at SOGA provisions:

8 Existing or future goods

(1) The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or future goods.

(2) There may be a contract for the sale of goods, the acquisition of which by the seller depends upon a contingency which may or may not happen.

(3) When by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.

15 Implied undertaking as to title etc.

In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is—

(a) an implied condition on the part of the seller that in the case of a sale the seller has a right to sell the goods, and that in the case of an agreement to sell the seller will have a right to sell the goods at the time when the property is to pass;

(b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods;

(c) an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party, not declared or known to the buyer before or at the time when the contract is made.

19 Goods must be ascertained

When there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.

20 Property passes when intended to pass

(1) When there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intended it to be transferred.

(2) For the purpose of ascertaining the intention of the parties regard is to be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.

21 Rules for ascertaining intention

Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer—

Rule 1

When there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, is or are postponed.

Rule 2

When there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.

Rule 3

When there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof.

Rule 4

(1) When goods are delivered to the buyer on approval or 'on sale or return' or other similar terms the property therein passes to the buyer—

(a) when the buyer signifies the buyer's approval or acceptance to the seller, or does any other act adopting the transaction;

(b) if the buyer does not signify the buyer's approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.

(2) What is a reasonable time is a question of fact.

Rule 5

(1) When there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer.

(1A) Such assent may be express or implied, and may be given either before or after the appropriation is made.

(2) When, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract.

23 Risk prima facie passes with property

(1) Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer's risk whether delivery has been made or not.

(2) However, when delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault.

(3) This section does not affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.

24 Sale by person not the owner - basic rule

(1) Subject to the provisions of this Act, when goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, (could be an agent) the buyer acquires no better title to the goods than the seller had (nemo dat), unless the owner of the goods is by the owner's conduct precluded from denying the seller's authority to sell (estoppel). (2) This Act does not affect— (a) the provisions of the Factors Act, (factor could be a mercantile agent – one who takes on consignment; an agent generally; someone who buys and sells debt) or any enactment enabling the apparent owner of goods to dispose of them as if the apparent owner were the true owner thereof; (b) the validity of any contract of sale under any special common law or statutory power of sale or under the order of a court of competent jurisdiction.

25 Sale under voidable title

When the seller of goods has a voidable title thereto, but the seller's title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, if the buyer buys them in good faith and without notice of the seller's defect of title.

27 Seller or buyer in possession after sale

(1) When a person, having sold goods, continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for the person, of the goods or documents of title under any sale, pledge, or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same. (variation on estoppel – if the buyer leaves the seller with apparent possession and the means to sell, they forfeit equitably their interest – deemed that it is expressly authorised)

(2) When a person having brought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for the person, of the goods or documents of title under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.

(3) In this section—

mercantile agent has the same meaning as in the Factors Act.

30 Payment and delivery are concurrent conditions

Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods.

FACTORS ACT 1892 - SECT 3

3 Powers of mercantile agent with respect to disposition of goods

(1) When a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, any sale, pledge, or other disposition of the goods, made by the agent when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this Act, be as valid as if the agent were expressly authorised by the owner of the goods to make the same: Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same.

(2) When a mercantile agent has, with the consent of the owner, been in possession of goods or of the documents of title to goods, any sale, pledge, or other disposition, which would have been valid if the consent had continued, shall be valid notwithstanding the determination of the consent: Provided that the person taking under the disposition has not at the time thereof notice that the consent has been determined.

(3) When a mercantile agent has obtained possession of any documents of title to goods by reason of being or having been, with the consent of the owner, in possession of the goods represented thereby, or of any other documents of title to the goods, the agent's possession of the first mentioned documents shall, for the purposes of this Act, be deemed to be with the consent of the owner.

(4) For the purposes of this Act the consent of the owner shall be presumed in the absence of evidence to the contrary.

TRANSFER OF TITLE BY NON-OWNER EASTERN DISTRIBUTORS V. GOLDRING (1957) 1 QB 600 Murphy owned a Bedford, gave documents to Coker, Murphy kept possession Bedford. Documents enabled Coker himself as owner. Coker sold Bedford to Eastern. Murphy sold Bedford to Goldring 6 weeks later

English equivalent of s. 26(1) Owner (Murphy) by his conduct precluded from denying Coker’s authority to sell? Goldring argued Murphy and Coker would have been estopped, but not him!

Devlin J • Directly within s. 24 or s 27 SOGA • Coker armed with apparent authority • Enabled him to represent himself as owner with right to sell • Murphy precluded from denying Coker’s authority to sell • Coke able to give title to Eastern• Murphy had no title left to pass to Goldring

Have the goods been ascertained or appropriated?

THC Holding Pty Ltd v CMA Recycling Pty Ltd

Gillogly v Iama Agribusiness Pty Ltd [2002] NSWCA 251. In that case, the issue was whether property in grain passed to the purchaser at the time it was placed by the seller in a Graincorp silo (where it was intermingled with other grain not necessarily owned by either party), or when the grain was subsequently collected by the purchaser from the silo. That turned on the question of whether the grain the subject of the contract was "ascertained" at the earlier or the later time. The Court of Appeal found it was the later time; that is when the grain was collected by the purchaser.80. Beazley JA said (at [100] to [103]):

"...I am of the opinion that the goods did not become ascertained goods when they were acquired from the grower. At that time, although a quantity and a price had been agreed as between the [purchaser] and the [vendor], there was no intention that the [purchaser] was to receive those specific goods... . Rather, the grain so acquired by the [purchaser] was to become mixed with other grain, not necessarily owned by either of the parties. As the goods were not ascertained, property could not pass: s 21. ...

When, therefore, did property pass in the grain sold by the [vendor] to the [purchaser]?

In my opinion, the contract was a severable contract for the delivery of grain from time to time as and when taken by the [purchaser] from the Graincorp facility, up to the agreed quantity. I consider that the grain became ascertained each time a quantity of grain was allocated to the contract and loaded onto the [purchaser's] truck. At that point, there was specific grain, of a specific quantity, quality and price subject to the terms of the Confirmation of Sale document relating to that load. There was nothing in the agreement or dealings between the parties to evince a contrary intention, so that property passed [at that time]."

83. Unlike the seller in Gillogly (which placed the grain it had sourced to meet its obligations to the purchaser in a Graincorp silo where it was mixed with grain belonging to others, and without any intention that that particular grain would be that destined to the purchaser), CMA placed the scrap metal in a separate pile, distinct from all other scrap in its yard, for the specific purpose of satisfying its remaining obligations under the Purchase Agreement. By doing so, CMA intended that the whole of the pile, as it existed at the time of Mr Harvey's telephone call to Mr Chung referred to at [35] above and at the time of the inspection by Mr Murtha on 22 July 2013 was available for collection by THC or, at its option, by SIMS (see [32] above); whether or not (as seems likely to be the case) there was more than 1,367 MT in the pile (see [55] above).

84. In Karlshamns Oljefabriker v Eastport Navigation Corp; The Elafi [1981] 2 Lloyd's Rep. 679; [1982] 1 All ER 208 at 216, Mustill J said:

"What is needed for ascertainment is that the buyer should be able to say, 'Those are my goods.' This requirement is satisfied if he can say, 'All those are my goods'." (emphasis in original)

…It probably follows that, by reason of the same matters, the goods were also "appropriated" to the Purchase Agreement for the purpose of Rule 5 of the "rules for ascertaining intention" set out in s 18 of the WA SGA, which applies "unless a different intention appears", and provides:

If legal title has not passed, could there be an equitable proprietary interest asserted in the goods?

Cannot have an equitable interest in a part of bulk goods (chattels) that have not been earmarked: Re Wait, Re London Wine Company

Could appropriate goods by segregation or earmarking: Mac-Jordan Construction v Brookmount, Re London Wines

Could have an equitable interest by declaring a trust over the whole and a tenancy in common in proportion – goods should be entirely fungible, so works well with money or identical shares: White v Shortall, Pearson v Lehmann Bros

Be careful of doing this for chattels – the traditional view is that the above scenario is OK for shares (Hunter v Moss) but not for chattels – Re Harvard Securities

Distinguish between generic goods and goods sold ‘ex-bulk’ – look to the intentions of the parties to see whether they intended to have an equitable interest – hard to imply for generic goods as the nature and size of the interest fluctuates depending on the number of customers and the current asset pool of the seller: Re Goldcorp

Can get title to goods by exhaustion: Re Stapylton Fletcher Limited