Date: Thu, 31 May 2007 05:21

From: Neil Foster

Subject: Say-Dee in the High Court of Australia

Dear Duncan

To take the relatively easy questions first:

1. can we register trust interests in some way under Torrens?

The answer is no, but there is a "parallel" system called the "caveat", which allows a person who claims to have an unregistered interest in Torrens system land to lodge a caveat on the Register. This will then prevent further dealings with the land until it is somehow resolved, which will then mean that either the current registered proprietor or a prospective purchaser may take the matter to court.

2. are there no rectification provisions?

Depends what you mean. There are provisions for correcting formal errors. But there is no general provision for administrative correction of the register. If someone claims they have an interest in land which is not reflected on the register they lodge a caveat (see above.)

As you say, there is a fund (called in NSW the Torrens Assurance Fund) which is meant to provide compensation to anyone who suffers a loss because of the operation of the indefeasibility provisions of the Act. So someone who finds that their land has been taken from them because a forged transfer was made, and the land was then sold to an innocent third party who has now become registered proprietor, can receive compensation.

A claim for "knowing assistance" would probably involve wrongdoing on the part of the registered proprietor which would usually (I imagine) be classified as "fraud" and hence amount to an exception to indefeasibility.

What if Mrs Elias and her daughters no longer had the land, but were prima facie liable for knowing receipt, would the indefeasibility provisions defeat the claim - we're clearly not asking for a proprietary right here, just a personal claim to account.

Suppose that Mrs Elias and daughters had "knowingly received" trust property in some way which did not involve active fraud (simple notice). Then they gave the property to someone else. Does this affect the ability of the person whose "trust property" it was (say, Say-Dee) to seek a personal accounting? Tentatively I will answer, no. But in fact of course the reason that proprietary remedies are significant is that often the land is the only fund of value around. Once the land is gone a personal claim may not be any use.

I guess the more interesting question is, if they sold the land and still held the funds, could the claim be taken against those funds? I need to think about that a bit more. Maybe those who know about "tracing" have a view?

Regards
Neil Foster

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

>>> "Duncan Sheehan (LAW)" 29/05/07 7:15 >>>

I am not entirely sure I follow the HCA on indefeasibility, which may just be my being English and not knowing the Torrens system, or it may be my shocking ignorance of something else.

Whatever we may think of the NSWCA on whether knowing receipt is strict liability or not, they imposed at the end of the day a constructive trust. On the basis that that's a real trust as it were, I can see that it falls with section 42(1) NSW Real Property Act that the HCA

Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded.

Which begs two easy (and maybe stupid) questions - 1. can we register trust interests in some way under Torrens, and 2. are there no rectification provisions?

Nonetheless that's fine; seems a bit harsh to my eyes, but there's an insurance fund available to ameliorate any hardship. If, however, knowing receipt generates a constructive trusteeship of the "I know you're not really a trustee, but I'm going to treat you as it you were one" variety, is that really an estate or interest under section 42? Presumably a successful claim (had there been one) for dishonest or knowing assistance would not have been defeated, despite being described in terms of constructive trusteeship. What if Mrs Elias and her daughters no longer had the land, but were prima facie liable for knowing receipt, would the indefeasibility provisions defeat the claim - we're clearly not asking for a proprietary right here, just a personal claim to account.

I hope those questions made some sense; I'd welcome some attempt to clear things up for me.

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