COMPETING OFF-REGISTER INTERESTS

property law test

What are competing off-register interests?

Competing equitable interests that have not yet been registered or cannot be registered

What is the basic effect of registration under the Torrens system?

Registration gives indefeasible title, so a registered owner generally takes free from unregistered interests or interests incapable of registration, unless an exception applies

When do priority disputes between off-register interests arise?

Mainly where competing interests are both unregistered or incapable of registration

What is a caveat?

A notice protecting an existing interest in land by preventing further dealings with the title

What is a main function of a caveat?

It freezes the title

Does a caveat create an interest?

No. It only protects/promotes an existing interest

What is the starting rule for competing equitable interests?

Qui prior est tempore potior est iure — the first in time has the better equity

When can the first equitable interest lose priority?

Where the equities are unequal because the first interest holder's conduct has been sufficiently blameworthy and has prejudiced the later purchaser

What are the two central questions when deciding whether to reverse priorities?

Did the first interest holder arm the registered owner with the power to act under false colours, and did that conduct cause the later purchaser to act to their prejudice?

What does it mean to "arm" the registered owner with false colours?

The first interest holder has allowed the registered owner to appear to have unrestricted ownership, enabling them to mislead later purchasers

What is an example of conduct that may arm the registered owner with false colours?

Failing to lodge a caveat or otherwise failing to protect the equitable interest

What does "prejudice" mean in competing equities?

The later purchaser suffers legal or financial detriment that they would not have suffered had they known about the earlier interest

What factors are relevant when assessing the first equity holder's conduct?

Whether they lodged a caveat, otherwise protected their interest, acted commercially recklessly, or enabled the registered owner to mislead others

What factors are relevant when assessing the second equity holder's conduct?

Whether they knew of the earlier interest, ignored warning signs, acted honestly, or were put on inquiry

Why is occupation of land important in priority disputes?

Occupation can be a warning sign that another person has an earlier interest, so a purchaser may be expected to make further enquiries

What is constructive notice?

Where a person does not actually know of an earlier interest but has knowledge of facts that would put a reasonable person on enquiry, so the law treats them as having notice

Does constructive notice automatically reverse priorities?

No. The court must conduct a global assessment of the conduct of both parties and determine whether the equities are unequal

What is the key principle from Mercury Geotherm Ltd v McLauchlan?

Constructive notice alone does not automatically reverse priorities

What happened in Mercury Geotherm Ltd v McLauchlan?

McLauchlan held an unregistered lease and right of first refusal. Contact Energy agreed to buy the land and had constructive notice because McLauchlan's occupation and involvement should have prompted further enquiries

Why did Contact Energy have constructive notice in Mercury Geotherm?

It knew of McLauchlan's longstanding involvement, occupation and farming of the land and should have made further enquiries

What conduct counted against McLauchlan in Mercury Geotherm?

He failed to register the interest properly, had limited documentary evidence, delayed acting, and failed to caveat all relevant lots

What conduct favoured McLauchlan in Mercury Geotherm?

He reasonably relied on the larger joint venture partner, was unwell, his solicitor was unwell, and his failure was confusion rather than recklessness

What was the result in Mercury Geotherm?

McLauchlan retained priority because his conduct was not sufficiently blameworthy to justify reversing priorities

What is the key lesson from Mercury Geotherm?

Priority is determined by a balancing/global assessment of the parties' conduct, not simply by notice

What was the issue in Emslie v Genuine Investments?

Whether the Emslies' earlier equitable interest under a constructive trust or RS Trust's later agreement for sale and purchase had priority

What was the Emslies' equitable interest in Emslie v Genuine Investments?

A constructive trust, giving them a caveatable equitable interest

Why did the Emslies initially have priority in Emslie?

They were first in time, so the starting presumption favoured them

What conduct counted against the Emslies in Emslie?

They entered a commercially reckless buy-back agreement, gave Genuine Investments complete control of the title, and allowed Genuine to appear to own the property outright

What conduct favoured RS Trust in Emslie?

RS Trust acted honestly, knew only of an ordinary tenancy, had no notice of the buy-back arrangement, and had not engaged in disentitling conduct

What was the result in Emslie v Genuine Investments?

Priority was reversed and RS Trust won because the Emslies had armed Genuine Investments with false colours

What principle does Emslie v Genuine Investments reinforce?

The first equity can lose where its own conduct enables the registered owner to mislead later purchasers

What happened in Australian Guarantee Corporation v CFC Commercial Finance?

AGC held the first unregistered mortgage but failed to caveat and retain the certificate of title. CFC later acquired another mortgage after searching the title

What was important about CFC's conduct in Australian Guarantee Corporation?

CFC delayed registering for a long period even after discovering the competing interests

Can the court consider conduct occurring after the competing interests arise?

Yes. The whole picture can be assessed, including conduct after the parties become aware of each other's interests

What was the result in Australian Guarantee Corporation v CFC Commercial Finance?

AGC still lost priority, but CFC was ordered to compensate AGC because CFC's delay destroyed AGC's remaining opportunity to protect itself

What principle does Australian Guarantee Corporation illustrate?

Priority disputes can take account of post-acquisition conduct and assess the conduct of both parties as a whole

What happened in Perkins v Purea?

The daughter had an equitable interest under an agreement with her parents to obtain the property after paying off the mortgage. The father later agreed to sell to Perkins

Why was the daughter first in time in Perkins v Purea?

Her equitable interest arose under the earlier 1988 agreement

What counted against the daughter in Perkins?

She had failed to lodge a caveat

Why did the failure to caveat not defeat the daughter in Perkins?

The failure resulted from lawyer error

Why did Perkins have constructive notice?

They knew the daughter occupied the property, knew the father had allegedly been "kicked out", and knew something unusual had occurred but failed to make further enquiries

What was the result in Perkins v Purea?

The daughter retained priority because she was first in time and her conduct was not sufficiently blameworthy, while Perkins had constructive notice

What is the significance of the warning sign of occupation?

A purchaser should ask why someone other than the registered owner is occupying the land, because occupation may indicate an earlier equitable interest

What happens once a competing equities dispute is resolved?

The successful party is entitled to register their interest

Does knowledge of the losing party's interest make subsequent registration LTA fraud?

No. The competing equities analysis determines who is entitled to registration, and that resolves the priority issue

Which case establishes that constructive notice alone does not reverse priorities?

Mercury Geotherm Ltd v McLauchlan

Which case illustrates the first equity losing because the owner was armed with false colours?

Emslie v Genuine Investments

Which case shows that post-acquisition conduct can be considered in the overall priority assessment?

Australian Guarantee Corporation v CFC Commercial Finance

Which case shows that failure to caveat caused by lawyer error does not necessarily amount to commercially reckless conduct?

Perkins v Purea