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

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