Breskvar v Wall
126 CLR 376(1971) 46 ALJR 68
[1972] ALR 205
(Judgment by: Walsh J)
Breskvar
vWall
Judges:
Barwick CJ
McTiernan J
Menzies J
Windeyer J
Owen J
Walsh J
Gibbs J
Subject References:
Real Property (Q.)
Torrens System
Indefeasibility of title
Exceptions
Fraud
Protection of purchasers from registered proprietor
Dealing with registered proprietor
Void instrument of transfer
Equities and unregistered interests
Priorities
Statutory invalidity of instrument executed without insertion of name of purchaser or transferee
The Real Property Act, 1861 to 1963 (Q.), ss. 33, 43, 44
The Real Property Act of 1877 (Q.), s. 48
The Stamp Act of 1894 (Q.), s. 53 (5)
The Real Property Act, 1861 to 1963 (Q.), ss. 33, 43, 44
The Real Property Act of 1877 (Q.), s. 48
The Stamp Act of 1894 (Q.), s. 53 (5).
Equity
Priority and notice
Priority generally
Legislative References:
Section 85 of the Land Transfer Act 1952 (N.Z.) - 44 (2); 183
Transfer of Land Act 1915 (Vict.) - 179
Case References:
Assets Co. Ltd. v. Mere Roihi - [1905] AC 176
Frazer v. Walker - [1967] 1 AC 569
Boyd v. Mayor,
&
c., of Wellington - (1924) NZLR 1174
Clements v. Ellis - [1934] HCA 18; 51 CLR 217
Mayer v. Coe - (1968) 88 WN (Pt 1) (NSW) 549
Ratcliffe v. Watters - (1969) 2 NSWR 146
Barry v. Heider - [1914] HCA 79; 19 CLR 197
Great West Permanent Loan Co. v. Friesen - (1925) AC 208
Rice v. Rice - (1854) 2 Drew 73 (61 ER 646)
Shropshire Union Railways
&
Canal Co. v. The Queen - (1875) LR 7 HL 496
Lapin v. Abigail - [1930] HCA 6; 44 CLR 166
Abigail v. Lapin - [1934] HCA 20; (1934) AC 491; 51 CLR 58
J.
&
H. Just (Holdings) Pty. Ltd. v. Bank of New South Wales - [1971] HCA 57; 125 CLR 546
Barry v. Heider - [1914] HCA 79; 19 CLR 197
Shaw v. Foster per Lord Cairns - (1872) LR 5 HL 321
Latec Investments Ltd. v. Hotel Terrigal Pty. Ltd. - [1965] HCA 17; 113 CLR 265
Caldwell v. Rural Bank of New South Wales - (1951) 53 SR (NSW) 415
Davies v. Ryan - (1951) VLR 283
Gibbs v. Messer - (1891) AC 248
Butler v. Fairclough - [1917] HCA 9; 23 CLR 78
Judgment date: 13 December 1971
Sydney
Judgment by:
Walsh J
The appellants were the registered proprietors as joint tenants of an estate in fee simple in certain land under the provisions of The Real Property Act of 1861 (Q.), as amended, (the Act). On 5th March 1968 they signed a memorandum of transfer. This was expressed to be an absolute transfer of all the estate and interest of the appellants in the said land. When they signed it no name of a transferee was inserted. Later, in September 1968, the name of the defendant George Walter Wall was inserted as the transferee. The transfer was registered on 15th October 1968. It was expressed to be in consideration of the sum of $1,200. In an action subsequently brought by the appellants in the Supreme Court of Queensland, the learned trial judge found that the transaction which led to the execution by the appellants of the transfer was not a sale but was a loan for a period of twelve months made to them by the defendant Petrie, who acted as agent for the defendant Wall who was Petrie's grandson and for Petrie's wife (who died before the action was heard). In May 1968 Petrie put the land in the hands of agents for sale. On 14th October 1968 Mr. Baron, who was acting in the transaction on behalf of the defendant Alban Pty. Ltd. (Alban), paid to a firm of estate agents a deposit on the purchase of the land for $3,500, subject to contract of sale. Mr. Baron gave evidence that it was ascertained that Wall who was the vendor was not at that time registered as the proprietor of the land and that the matter "remained in abeyance" until another search was made and it was found that Wall was then registered as proprietor. On 31st October 1968 a contract of sale was made between Wall and Alban for the sale of the land for $3,500 and the balance of the price was paid. On 7th November 1968 Wall executed a transfer of the land to Alban. Up to that time no caveat had been lodged by the appellants. A caveat was lodged by them on 13th December 1968 and it was entered on 6th March 1969. The transfer of 7th November 1968 was not lodged for registration until 8th January 1969. (at p401)
2. The learned trial judge found that Petrie acted fraudulently and that his "fraud was of the relevant kind under The Real Property Acts". He found that Wall was affected by the fraud of Petrie. He found that Alban was a bona fide purchaser for value without notice. He held that Alban had an equitable interest in the land superior to the interest of the appellants and was entitled to have the transfer registered. He ordered that the caveat of the appellants be removed from the register. He gave judgment for the appellants for damages against the defendants Wall and Petrie. This appeal is concerned only with the contest between the appellants and Alban. (at p401)
3. In my opinion it is clear that if the appellants had taken action against Wall, before there had been any dealing by him with a third party, seeking to have the transfer set aside or seeking a declaration that it was held by way of security only and claiming appropriate consequential relief, Wall would not have been able to rely on his registered title to defeat such a claim. It is clear, also, that if Alban had succeeded in obtaining registration of the transfer which Wall executed, its registered title would have prevailed over any claims based upon a challenge by the appellants to the validity of the transaction between them and Wall or of the instrument as a result of which Wall had become registered. But the appellants did not challenge the effectiveness of their transfer as an absolute transfer of their interest in the land or place upon the register any notification of an interest claimed by them, until after Alban had entered without notice of any such interest into a contract of purchase and had paid the purchase price and obtained, from the person who appeared on the register as the registered proprietor, a transfer signed by him. On the other hand, Alban did not obtain registration and, therefore, the problem before the Court cannot be solved, as it could be if Alban had become registered, by reference to the indefeasibility which without doubt would have attached upon registration to the title of Alban. (at p402)
4. The appellants had formerly a registered estate in fee simple. But by a transfer which was registered they ceased to be registered proprietors in fact. They claim, however, that for two reasons that was ineffective to deprive them of the right which they formerly had. One is that because at the time of the execution of the transfer the name of the purchaser was not inserted the transfer was absolutely void and inoperative. That claim is based upon the provisions of s. 53 (5) of The Stamp Act of 1894 (Q.), as amended, which provides that no instrument of conveyance or transfer shall be valid either at law or in equity unless the name of the purchaser or transferee is written therein in ink at the time of the execution thereof and provides that any such instrument "shall be absolutely void and inoperative". The second ground upon which the appellants attack the transfer executed by them is that it was intended to be by way of security only and that it was used in fraud of the appellants as if it had been intended to operate as an absolute transfer. (at p402)
5. It is desirable now to refer to some provisions of the Act to which counsel for the appellants drew our attention. Section 33 provides, in part, that:
"Every certificate of title . . . shall be conclusive evidence that the person named in such certificate of title or in any entry thereon as seised of or as taking estate or interest in the land therein described is seised or possessed of such land for the estate or interest therein specified."
The absolute conclusiveness which that provision might appear to give to the register must be regarded as qualified, in order to give meaning to s. 44, which is to the effect that the registered proprietor of land or of any estate or interest in land shall except in the case of fraud hold the same subject to such encumbrances etc. as are notified in the register book but absolutely free from all encumbrances etc., but the section specifies certain further exceptions in addition to the exception of fraud. This provision would prevent Wall in the circumstances of this case from relying on his registered title to defeat a claim of the appellants based upon fraud for which he was responsible. (at p403)
6. I shall refer later to s. 43 of the Act. (at p403)
7. Section 109 was mentioned in argument but, in my opinion, it is not of importance in this case. It provides that a transferee whether voluntary or not shall not except in case of fraud be affected by actual or constructive notice of any claims rights titles or interests other than those which have been notified or protected by entry in the register book according to the provisions of the Act any rule of law or equity to the contrary notwithstanding. Similar provisions relating to the effect of notice of unregistered rights have been construed as affording protection after and not before the registration of the interest of the person who claims protection. In this case Alban's contention that it is immune from the claims of the appellants is not based on this section but upon other grounds to which reference will be made later. (at p403)
8. Section 123 provides that, subject to certain exceptions, no action for ejectment shall lie or be sustained against a registered proprietor for the recovery of land under the provisions of the Act and the grant or certificate of title shall be held in every court of law or equity to be an absolute bar and estoppel to any such action against the person named in such grant or certificate of title as seised of or entitled to such land. The excepted cases include that of:
". . . a person deprived of any land by fraud as against a person registered as proprietor through fraud or against a person deriving otherwise than as a purchaser or mortgagee bona fide for value from or through a person registered as proprietor through fraud." (at p403)
9. Section 126 provides that a person deprived of any land or of any estate or interest in land in consequence of fraud may bring an action at law for the recovery of damages against the person who derived benefit from such fraud. There is a proviso that nothing in the Act contained shall be interpreted to subject to any action of ejectment or for recovery of damages any purchaser or mortgagee bona fide for valuable consideration of any land under the provisions of the Act although his vendor or mortgagor may have been registered as a proprietor through fraud or may have derived from or through a person registered as proprietor through fraud. Section 123 has no direct application in relation to the competing claims of the appellants and Alban in this case and, in my opinion, it does not assist the appellants to have their rights preferred to that of Alban. Because of the exceptions which it contains, it could not assist Wall if an action for ejectment had been brought against him by the appellants. If such an action had been brought by the appellants against Alban the section would not, in my opinion, have had any application since its subject matter is an action of ejectment brought against a registered proprietor. (at p404)
10. The proviso to s. 126 would preserve Alban from an action of ejectment or for damages if it applied to any "purchaser or mortgagee bona fide for valuable consideration" whether the purchaser or mortgagee had become registered or not. Its language does not restrict it to those who have become registered. In this respect, it may be contrasted with provisions relating to the protection of bona fide purchasers and mortgagees from action of ejectment or for the recovery of land contained in other legislation, such as s. 183 of the Land Transfer Act 1952 (N.Z.), set out in Frazer v. Walker (1967) 1 AC 569, at p 582 , s. 135 of the Real Property Act, 1900 (N.S.W.), as amended, and s. 44 (2) of the Transfer of Land Act 1958 (Vict.). But if, by analogy to the construction that has been put on other provisions giving protection to those who deal with registered proprietors, it should be construed as so restricted (cf. Clements v. Ellis [1934] HCA 18; (1934) 51 CLR 217 , at pp 232, 242 ), that would not have in my opinion the consequence that Alban could not obtain before registration any rights whatever derived from a dealing for valuable consideration and in good faith with a vendor affected by fraud. Section 126 should not be regarded as stating exhaustively the rights that may be obtained from such a dealing. If Alban cannot rely upon s. 126, it is not precluded in my opinion from seeking to rely upon other statutory provisions such as s. 48 of The Real Property Act of 1877 (Q.) which will be examined later, or upon equitable rights arising out of its transaction with Wall. The question whether the appellants have rights superior to any right which Alban is able to assert is the question which I proceed now to consider. (at p404)
11. If the statements which I am about to quote from the judgment of Dixon J. in Clements v. Ellis [1934] HCA 18; (1934) 51 CLR 217 , at p 237 were accepted as correct and as applicable to The Real Property Acts of Queensland, it would appear that the appellants could assert, in effect, that they must be treated, for the purposes of their claim against Alban, as if they still retained the legal estate which they formerly held. On that view, no question of competing equities would arise as between them and Alban and since Alban did not obtain registration no necessity for protecting it would exist to provide a justification for destroying the prior registered estate of the appellants. His Honour said [1934] HCA 18; (1934) 51 CLR 217 , at p 237 :
"The principal, in my opinion, is that a prior registered estate or interest, for the removal of which from the register there is no authority but a forged or void instrument, is not destroyed unless afterwards a person who, according to the existing condition of the register is entitled to do so, gives a registrable instrument which is taken bona fide for value and registered. The justification for destroying an existing legal estate or interest, which has already been duly established upon the register, is, in other words, found only in the necessity of protecting those who subsequently deal in good faith and for value in a manner, which, upon its face, the register appears to authorize, and who then obtain registration" (my emphasis).
His Honour was there dealing with Victorian legislation. I am of opinion that with respect to the effect of the registration of a void instrument, there is no relevant difference between the legislation then in force in Victoria and the New Zealand legislation considered in Frazer v. Walker (1967) 1 AC 569 , where the relevant provisions of that legislation are stated in considerable detail. I am of opinion also that the decision and the reasons in that case are applicable on the question under consideration to the Queensland legislation. (at p405)
12. I agree with respect with the learned trial judge that the case of Frazer v. Walker (1967) 1 AC 569 differs from the present case. In that case there was no question of fraud on the part of the mortgagees who obtained registration of a forged memorandum of mortgage or on the part of the subsequent purchasers from them. The important statements of principle which the Judicial Committee made as to the immunity from attack of a registered title were made subject to exceptions for which the Act then being considered specifically provides. Nevertheless, I am of opinion, as was the learned trial judge, that the principles laid down in Frazer v. Walker (1967) 1 AC 569 are of great importance in considering the present case. The statements which I have quoted from the judgment of Dixon J. in Clements v. Ellis [1934] HCA 18; (1934) 51 CLR 217 , at p 237 and the dissenting judgments in Boyd v. Mayor, & c., of Wellington (1924) NZLR 1174 had been accepted and followed in decisions of Supreme Courts in Australia: see Caldwell v. Rural Bank of New South Wales (1951) 53 SR (NSW) 415 and Davies v. Ryan (1951) VLR 283 . But in Frazer v. Walker (1967) 1 AC 569 the decision of the majority of the Court in Boyd's Case (1924) NZLR 1174 was expressly approved and the principles enunciated by the Judicial Committee are quite inconsistent, in my opinion, with the quoted statements of Dixon J. in Clements v. Ellis [1934] HCA 18; (1934) 51 CLR 217 , at p 237 . The result is, in my opinion, that it is no longer open to the appellants to contend, as it would have been before the decision in Frazer v. Walker (1967) 1 AC 569 , that they still stand in the same position as they did when they were registered proprietors, for the reason that the transfer, being void, could not operate notwithstanding its registration to destroy or to affect their estate as registered proprietors. It is still open to the appellants to say that their transfer was made void by the provision in The Stamp Act. But it is not open to them, in my opinion, to contend that because of that provision the registration of Wall as registered proprietor was absolutely void and inoperative. Apart from the question of fraud, the non-compliance with the provision in The Stamp Act would not have enabled Wall's title as registered proprietor to be impeached. On this point I think that the emphatic language used in that provision ("absolutely void and inoperative") cannot make any difference. As Owen J. said in Caldwell's Case (1951) 53 SR (NSW), at p 423 , it is difficult to see how there can be degrees of nullity. An instrument which is declared by a statute to be "absolutely void and inoperative" is for present purposes no different, in my opinion, from an instrument which, as in Boyd's Case (1924) NZLR 1174 , is void because the conditions precedent to the statutory power under which it purports to be made are not fulfilled or from an instrument which is void because it is a forgery. (at p406)
13. I am of opinion that the submission that s. 53 (5) of The Stamp Act should be regarded as effecting an implied repeal pro tanto or an implied amendment of any provisions of the Act which would otherwise operate to give validity to the registration of the transfer to Wall should not be accepted. (at p406)
14. In my opinion, the principles laid down in Frazer v. Walker (1967) 1 AC 569 as to the indefeasibility of a registered title, where the instrument by means of which registration is obtained is void, are applicable in the present case notwithstanding that it has been found here that there was fraud by which the transferee Wall was affected. The effect of the fraud upon the rights of the parties must, of course, be considered. But it is a different question from that which is raised by the non-compliance with the provisions of The Stamp Act. In so far as the appellants, in addition to their reliance upon fraud, base their claim upon the contention that the transfer was rendered void by s. 53(5) of The Stamp Act, I am of opinion that the principles stated in Frazer v. Walker (1967) 1 AC 569 preclude them from succeeding. I am of opinion that those principles require the conclusion that when the transfer was registered then, as the learned trial judge said, "the registration of Wall as the registered proprietor was effective to vest the title in him and to divest the title of the plaintiffs". Wall was not a person who had nothing and, therefore, could grant nothing to a person with whom he dealt. Although what he had may have been vulnerable because of fraud to a claim by the appellants to have restored to them their former rights, it cannot be said that nothing had passed from the appellants to Wall. (at p407)
15. I must consider now the effect of the fraud which was found to have been practised upon the appellants. It is necessary, in the first place, to recall that the appellants were not induced by fraud to enter into a transaction in which no valuable consideration passed to them and in which they incurred no binding obligations. They obtained by way of loan the sum of $1,200. According to their amended statement of claim they signed a document in blank in order to secure to the second defendant (Petrie) the repayment of the advance, which was to be repaid in one lump sum on the expiration of twelve months from the date when the advance became effective. They alleged that they were induced to sign the document in blank upon his representation to them that it was by way of security for the repayment to him of the advance and for no other purpose. They went on to allege that the completion of the document in registrable form as a memorandum of transfer for registration was fraudulent. The learned trial judge's finding was that "in transferring the land to Wall and in selling it in the way he did Petrie acted fraudulently in that he was attempting to cheat the plaintiffs out of the major part of their interest in the land". Therefore, the case is one in which the appellants did intend to sign a document as a security for an advance and it is not suggested that they did not know when they signed it that it related to their land. (at p407)
16. The appellants claimed that an order should be made that the memorandum of transfer and the entry in the register book relating to it should be cancelled and that the certificate of title should be altered accordingly. In the alternative they sought orders that Wall should transfer the land back to them and that that transfer should be registered in priority to any other documents creating or purporting to create interests in the land lodged for registration with the Registrar of Titles. (at p408)
17. In my opinion, the appellants would be entitled, as between themselves and Wall, to have the registered title restored to them because of the fraud by which he was found to have been affected. He could not defeat their claims by reliance upon his registered title. But nevertheless the registered title was held by him and not by the appellants. It is true that the Act contemplates that there may be a recovery of land by an action of ejectment from a fraudulent registered proprietor and that the Supreme Court may then make orders to correct the entries in the register book accordingly (s. 124). But in the circumstances of this case, the appellants were not entitled in my opinion to take proceedings on the footing that they remained entitled to the legal estate. They could not assert an unconditional right to recover both possession of the land and the registered title to it. The right that they had was in my opinion of the nature of an equitable right. It was a right to ask a court to compel Wall as the holder of the registered title to deal with it in such a way that he would obtain no benefit from the fraud that had been practised on the appellants. In so far as they sought to have the legal title transferred back to them, that relief (if no right of any third party had to be considered) could no doubt have been granted but, I should think, only upon terms that they repaid the loan, which they asserted in their amended statement of claim they were willing and had offered to do. The rights which the appellants had by reason of the fraud were rights enforceable primarily against Wall as a party (through his agent) to the transaction with them and as the holder of the registered title acquired by means of the transfer. But it is important to examine the nature of their rights, not in order to determine what relief could be obtained against Wall, but to ascertain whether any relief can be obtained against Alban. In this respect what I have so far said may be summed up by stating that the provisions of the Stamp Act did not prevent the registration of the transfer from divesting the legal estate from the appellants and vesting it in Wall and that the right of the appellants against Wall to have the legal estate restored to them was, in my opinion, an equitable and not a legal right. It is not necessary in this case, in my opinion, to enter into the question whether the appellants should be regarded as having an equitable estate in the land or as having "an equity unaccompanied by an equitable interest" or, in other words, "a mere equity as distinguished from an equitable estate": see Latec Investments Ltd. v. Hotel Terrigal Pty. Ltd. [1965] HCA 17; (1965) 113 CLR 265 , at pp 277, 285 . I am of opinion that, if it be assumed that the appellants had an equitable estate or interest in the land after their transfer had been registered, that interest is not entitled to priority over the interest which Alban acquired in the land. If the latter interest is to be considered as an equitable interest, arising out of the contract for the purchase of the land made by it with the registered owner of the land without notice of any defect in his title and completed by payment of purchase money and the obtaining of a transfer, Alban is entitled, in my opinion, to priority over the interest of the appellants. In my opinion, the principles enunciated in Butler v. Fairclough [1917] HCA 9; (1917) 23 CLR 78 , and in Abigail v. Lapin (1934) AF 491; (1934) 51 FLR 58 , require the conclusion upon the facts of this case that the interest of the appellants, although prior in time, is postponed to the interest of Alban. (at p409)
18. The appellants placed in the hands of Wall a memorandum of transfer in a form which enabled him to complete it in such a way as to make it appear to be a valid absolute transfer of the appellants' estate. They allowed Petrie to have possession of the certificate of title. Thus they enabled Petrie to procure the registration of Wall as the owner of an estate in fee simple. These acts of the appellants, coupled with their failure at the relevant time to place upon the register any notice of any interest retained by them in the land, enabled Wall and his agent Petrie to represent to an intending purchaser that Wall had an unencumbered estate in fee simple in the land. Although the appellants did not themselves make any direct representations to Alban, their conduct placed Wall in a position to make the representations upon which Alban acted. In this respect their conduct was precisely the same as the conduct described in Abigail v. Lapin (1934) AC, at p 506; (1934) 51 CLR, at p 70 , which was held to postpone the equity of the person who by that conduct enabled a representation to be made upon the faith of which another person acquired an equitable interest. In Lapin v. Abigail, Gavan Duffy and Starke JJ. said [1930] HCA 6; (1930) 44 CLR 166 , at p 198 :
"In our opinion, the Lapins are bound by the natural consequences of their acts in arming Olivia Sophia Heavener with the power to go into the world as the absolute owner of the lands and thus execute transfers or mortgages of the lands to other persons, and they ought to be postponed to the equitable rights of Abigail to the extent allowed by the Supreme Court."
That passage was quoted in Abigail v. Lapin (1934) AC 491, at pp 499-500; [1934] HCA 20; (1934) 51 CLR 58 , at p 64 , and their Lordships expressed their agreement with Gavan Duffy and Starke JJ. in regard both to their reasoning and their conclusion. The passage quoted is applicable, in my opinion, to the acts of the appellants by which Wall was empowered to present himself to the world as absolute owner of the land and to execute a transfer to Alban. (at p410)
19. Section 43 of the Act includes a provision that no instrument shall be effectual to pass any estate or interest in any lands or to render such land liable as security for the payment of money until such instrument shall have been registered. But despite the language used in that provision and in similar provisions in the legislation of other States, a purchaser for value has been regarded as having, before the registration of a transfer of the land to him, an equitable estate in the land which will be recognized and will in appropriate cases be given priority over a prior equitable interest. That was expressly decided in Barry v. Heider [1914] HCA 79; (1914) 19 CLR 197 , and that decision was approved and applied by the Privy Council in Great West Permanent Loan Co. v. Friesen (1925) AC 208 . In Barry v. Heider (1914) 19 CLR, at p 207 , Griffith C.J. referred to s. 48 of The Real Property Act of 1877 (Q.) which his Honour regarded as having given express recognition to the view which he thought should be taken, notwithstanding provisions similar to those of s. 43 of the Act, as to the effect upon equitable rights and interests of legislation embodying the "Torrens system". Section 48 of the Act of 1877 provides:
"48. Unregistered instrument to confer claim to registration. Every instrument signed by a proprietor or by others claiming through or under him purporting to pass an estate or interest in or security upon land for the registration of which provision is made by this Act shall until registered be deemed to confer upon the person intended to take under such instrument or other person claiming through or under him a right or claim to the registration of such estate interest or And the Registrar-General upon application made for that purpose by any person other than the person immediately claiming under or in respect of the instrument signed by a proprietor may either reject such application altogether or register the applicant as proprietor of the land estate interest or security forthwith or at the expiration of some defined period of time and may further direct such other entries to be made as may be in his opinion necessary. Provided that no such registration or entry as last aforesaid which would interfere with the right of any person claiming under any instrument previously registered under this Act shall be made except subject thereto."
That section is still in force. In my opinion, it operated in the present case to confer upon Alban a right or claim to the registration of the estate in fee simple described in the transfer executed by Wall. I am of opinion that that right is superior to the rights upon which the appellants rely in their claim to have the title restored to them. Against a right given by the statute to Alban they cannot set up successfully their equitable right based upon the fraud practised upon them by Petrie and Wall but not by Alban. But even if the provisions of s. 48 were not part of the law by which this case is to be governed, I should be of opinion that the equitable right derived by Alban from the contract made by it in good faith with Wall must prevail, upon the application of the principles established by the authorities to which I have referred to the facts admitted or proved at the trial, against the claim of the appellants. (at p411)
20. I am of opinion that the appeal should be dismissed. (at p411)