Advice on Proprietary Interests and Priorities in Real Property Act 2000 (NSW)

This article provides advice on proprietary interests and priorities in the Real Property Act 2000 (NSW), focusing on a case scenario involving competing interests and fraud. It discusses the rights of the parties involved and the potential legal actions they can take.

ASSINGMENT QUESTION
ANSWER TO PART A;
Advice to Roger
Introduction
The case scenario between Don, Roger, Joan and Orion Bank raises different proprietary
interests, which are competing for enforcement. Some of these interests are legal while others are
equitable. The priority of enforcement depends on various factors and the law as provided for
under the Real Property Act 2000 (NSW). The common law priority rules will also be
considered. Other important circumstances to consider are fraud committed by Roger’s secretary.
All the above mentioned legal issues will have to be considered in order to ascertain Roger’s
rights over the estate and whether he can stop the other two parties from interfering with his
rights as discussed below.1
Roger has a prior legal right of an equitable mortgage over the subsequent equitable interest of
Joan. The only exception where Joan’s equitable interest can prevail over Roger’s legal interest
is where Joan is a bonafide purchaser for value without notice. The term bonafide means that
Joan must have acquired the interest without fraud and any actual, imputed or constructive notice
as to any caveat over the estate. This principle was well illustrated in the case of Pilcher v
Rawlins2where a trustee who acted bonafide and in good faith acquired a legal interest in a
second mortgage over the equitable interest of the beneficiaries.3
For this particular case, the legal interest transferred to Joan was not yet valid and effectual since
the parties had only concluded a settlement and had not yet registered the transfer.4 There was
fraud played by Don and the secretary to Roger. Don’s transfer to Joan was therefore vitiated by
fraud and he could not pass a good title under the concept of nemo dat quod non habet which
means you cannot pass the title of what you do not own.5 Don did not lawfully own all the
1 H, Edward, (1920) ‘Conveyances of Registered Land,’ The Yale Law Journal vol 29, No 4 pp 401-409
2 Pilcher v Rawlins (1872) 7 CH APP 259
3 H.W.R, Wade, (1956) ‘Real Property; Title in Ejectment. Possession,’ The Cambridge Law Journal vol 14, No2 pp
177-179
4 Conveyancing Act No 6 1919 (NSW) s 23C
5 Real Property Act 2000 s 45

interests in the estate as at the time he initiated a transfer of the legal interest to Joan. Roger had
a registered prior legal interest over unregistered subsequent equitable interest which was
occasioned by fraud. Effect of non-registration of interest on real property makes such an interest
not enforceable in the court of law. Though equitable interests can be enforced under certain
circumstances.6
Roder’s interest together with the interest of the Orion Bank were both equitable mortgages.
According to common law of priority, where two equal competing equitable interests arise, the
first in time is given priority. Roger’s equitable mortgage was the first in time and not equal to
Orion Bank’s mortgage because Roger’s interest was registered hence legal and ought to be
given priority as opposed to that of Orion Bank. The purpose of the caveat was to serve as an
injunction to the registrar not to register any interest in land without notice of the original
owner.7 The bank had notice of the caveat which came to their attention before concluding the
registration hence the bank cannot proceed to lodge the documents for registration of its
equitable mortgage.8
Conclusion
Roger therefore has a legal right to institute a case in court seeking for an injunction to stop
Orion bank from continuing with the registration of their mortgage and subsequent transfer of the
ownership title from Don to Joan since Joan had not yet acquired an indefeasible title over the
estate due to fraud committed. The caveat was also lodged earlier with the registrar prior to
completion of sale transfer and Orion Bank mortgage as it was held in the case of Breskvar v
Wall.9Though Roger’s equitable interests can be considered a mere equity due to his failure to
lodge a caveat on Don’s estate immediately after registering the mortgage on it, he can still be
successful by raising the following claims; rectification,10 setting aside a transfer obtained
fraudulently and a claim for specific performance on Don to honour his mortgage obligations as
it was held in Double Bay Newspapers pty Ltd v AW Holdings pty Ltd11
6 H, Edward, (1918) ‘Registration of Title to Land,’ The Yale Law Journal vol 28, No 1 pp 51-58
7 J&H Just (Holdings) v Bank of NSW (1971) 125 CLR 546; Real property Act 2000 s 74F & 74H
8 Conveyancing Act No. 6 1919 (NSW) S 164
9 Breskvar v Wall (1971) 126 CLR 376
10 Real Property Act 2000 s 138A
11 Double Bay Newspapers pty Ltd v AW Holdings pty Ltd (1996) 42 NSWLR 409

ANSWER TO PART 2
This particular case scenario touches on pertinent areas of conveyancing including the effect of
registered leases and effect of property sale transfer to lessees. The scenario also touches on the
equitable rights of mortgages, legal passing of title and effect of fraud on indefeasibility of title
as discussed below in the advice given to each party.
Advice to lee
Lee is the original registered proprietor of the property. Presence of fraud makes a title acquired
by the other third party defeasible hence can be recovered from him or her. Fraud as an exception
to indefeasibility will be admissible if the purchaser had knowledge of the fraud or could have
known by conducting due diligence but failed to do so. In this particular case, Lee can stop
Samuel from proceeding with the registration through a court injunction since registration is not
yet done. Otherwise if registration is already carried out and Samuel is the new bonafide
purchaser for value without notice, Lee cannot recover the land since the title would have already
passed to the new owner. In this particular case, Lee returned before registration was
completed.12
Concerning the mortgage, he cannot do much since his property is already a registered equitable
mortgage to Felix hence his mortgage interest prevail until the mortgage is fully paid and the
property discharged. He can sue Tom for fraud and compensation in terms of damages for
unrepaid mortgage that he will pay Felix so as to get his property discharged.
Advice to Samuel
According to the law of equity of redemption, once a mortgage always a mortgage hence it can
only be discharged upon completion of payment in full with interests due. Samuel can discharge
the mortgage by completing the payment. He cannot have the property transferred in his favour
since the vendor did not have the title to pass to him under the principle of Nemo dat quod non
12 Real property Act 2000 s 118

habet. Tom was transferring Lee’s title using fraud and forgery of Lee’s signature. Where
property was to pass to Samuel he would not have indefeasible title due to fraud13. The position
on fraud was illustrated in the case of Dollars v Sense and Nathan14 where by the fraudulent act
need not be authorized by the principal so long as it falls within the scope of the agent’s task. In
Lee’s scenario the agent is the solicitor Tom while the Principle is Lee.
Advice to Felix
Felix can stop the registration of the discharge through a court injunction and maintain the
property as security until full payment of the loan. The loan could be paid by Lee or if in default
he can exercise power of sale through the court’s blessing if the mortgage was registered through
a deed.15 In this case the mortgage was registered hence Felix can choose to sell the property to
recover his money should the mortgagor default in payment.16
Advice to William
William as a lessee has an equitable interest of a short-term lease which is not required to be
registered. Such lease must conform to the Conveyancing Act by having a market rent paid,
lessee having an immediate right of possession among others.17 The lease can be greatly affected
by the outcome of above discussed parties’ claims. For instance if the mortgage is defaulted and
Felix want to sell the property William’s lease will have to pre-maturely terminated and William
evicted. The lease is a short-term lease with a renewal option. Any purchaser of interest is
supposed to have an actual or constructive notice about the lease at the time of settlement.
William can only bring contractual causes of action such as breach of contractual terms or
unconscionable conduct should any claim affect his lease. He is entitled to damages in form of
compensation should he be evicted before expiry of his lease.18
13 Real Property Act sec 42 (1) and 43A
14 Dollars v Sense and Nathan (2008) NZSC 20,(39)
15 Real property Act s 58
16 A, Canaway, & P, Arthur, The Real Property Act, 1900 (New South Wales): With Notes and Index (Sydney; Law
Book Co. of Australasia, 1902)
17 Conveyancing Act No 6 1919 (NSW) S 23D
18 G, Andrew & Lang, New South Wales Conveyancing law and practice (North Ryde, N.S.W: CCH Australia, 1980

References
J&H Just (Holdings) v Bank of NSW (1971) 125 CLR 546
Breskvar v Wall (1971) 126 CLR 376
Double Bay Newspapers pty Ltd v AW Holdings pty Ltd (1996) 42 NSWLR 409
Pilcher v Rawlins (1872) 7 CH APP 259
Dollars v Sense and Nathan (2008) NZSC 20, (39)
Conveyancing Act No. 6 1919
Real Property Act 2000
G, Andrew & Lang, New South Wales Conveyancing law and practice (North Ryde, N.S.W:
CCH Australia, 1980)
A, Canaway, & P, Arthur, The Real Property Act, 1900 (New South Wales): With Notes and
Index (Sydney; Law Book Co. of Australasia, 1902)
H, Edward, (1920) ‘Conveyances of Registered Land,’ The Yale Law Journal vol 29, No 4 pp
401-409
H, Edward, (1918) ‘Registration of Title to Land,’ The Yale Law Journal vol 28, No 1 pp 51-58
H.W.R, Wade, (1956) ‘Real Property; Title in Ejectment. Possession,’ The Cambridge Law
Journal vol 14, No2 pp 177-179