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Date: Tue, 29 May 2007 01:35

From: Neil Foster

Subject: Say-Dee in the High Court of Australia


Dear James

The analysis of the indefeasibility point in the NSWCA decision was frustratingly brief - stemming from the amazing fact that the point apparently was not even pleaded at first instance! (See [2005] NSWCA 309 at [237].) One can only guess that, since it was not thought that Mr Elias could rely on it, and Mr Elias was running the litigation, this possible separate defence available to Mrs Elias and the girls was not really considered.

But as I read their reasons for holding that Mrs Elias etc could not rely on the protection of indefeasibility, they went back to the fact that they held the interests on a constructive trust because "they have benefited from and are in receipt of an interest in the property the acquisition of which constituted a breach by their husband and/or father of his fiduciary duties" - para [238]. So this was not based on any personal fault by the wife and daughters. The only basis for the constructive trust was presumably either the imputation of fault from Mr Elias as their "agent" - [215], or a non-fault-based "restitution" remedy which applied because they could not show they were purchasers for value - [217]. The High Court, of course, rejected both these reasons - Mr Elias was not the agent of his wife and children - [2007] HCA 22 at [124]-[125]; in any case they paid value - [191].

To get back to the more general indefeasibility point: suppose I transfer my property to "Harry" instead of "Larry". Larry has paid the money but somehow Harry gets the documents. We have to pile up a few improbabilities here but we can do it - Harry, delighted at the gift, somehow gets the memorandum of transfer, and my duplicate certificate of title, and lodges it all with the Registrar-General and becomes registered proprietor. Should Larry be able to challenge his title? Of course one wants to say that morally he should; but it seems to me that what the High Court is supporting here is a view that "mere notice" of someone else's rights will not amount to an exception to indefeasibility. It will be different if along the line Harry has told lies - that should amount to fraud, and in most conceivable situations like this one would imagine those lies would have been told. But if somehow he has managed to scrape through without doing so, then I think the better view is that the Torrens system would uphold his title. The "policy" reason for this is that the nature of the Torrens system demands that a line be drawn somewhere where we recognise that sometimes people will lose their title, and the system has an Assurance Fund which will provide monetary compensation to Larry.

This, it seems to me, is what Tadgell JA in Macquarie Bank v Sixty-Fourth Throne is saying when he is quoted extensively at para [196] of the High Court judgement: "[T]o recognise a claim in personam against the holder of a mortgage registered under the Transfer of Land Act, dubbing the holder a constructive trustee by application of a doctrine akin to 'knowing receipt' when registration of the mortgage was honestly achieved, would introduce by the back door a means of undermining the doctrine of indefeasibility which the Torrens system establishes".

This in itself doesn't deny the existence or otherwise of a restitution-based claim at common law, but simply says that the Torrens system won't recognise this as the type of in personam claim that can defeat a registered proprietor.


Neil F

Neil Foster
Newcastle Law School
Faculty of Business & Law
University of Newcastle
Callaghan NSW 2308
ph 02 4921 7430
fax 02 4921 6931


>>> James Edelman 8/05/07 5:57 >>>


I wonder whether the High Court's remarks on indefeasibility were really confined to the issue of a constructive trust (which was the finding by the New South Wales Court of Appeal). Suppose I transfer land by mistake to a person being a very similar name to the intended transferee. Would anyone really say that the person now named on the register is immune from any proprietary or personal claim simply because he is not a wrongdoer? Surely at least a personal claim should not be excluded? And if we recognized a personal claim based upon receipt of trust property, why should the situation be any different?



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