REGISTERED INTERESTS - PROPERTY

Indefeasibility rule

Registration confers indefeasible title

Frazer v Walker rule

Confirmed the principle of immediate indefeasibility.

Frazer v Walker facts

Mrs Frazer forged husband’s signature to grant a mortgage. Mrs Frazer defaulted and the Radomskis exercised their power of sale, selling to the Walkers. The Radomskis acquired immediate indefeasible title upon registration of the forged mortgage - the Walkers acquired a fee simple title and Mr Frazer lost his legal ownership upon registration

LTA s51(1)

Registration confers legal title to an estate or interest in land that cannot be set aside

LTA s51(2)

A registered owner takes their title free from prior unregistered interests

s51(4)(a)

voluntaries: indefeasibility protects ROs who are volunteers

s51(4)(b)

Fictitious proprietor exception: codifies exception in Gibbs v Messer. a forged transfer to a fictitious person does not result in indefeasibility.

Fraud against a registered owner

Occurs where RO/agent engages in dishonest conduct to deprive RO of their title

Burmeister v O’Brien

Burmeisters were tricked into an investment scheme, unknowingly signing a sale agreement. O’Brien forged signatures to obtain a mortgage from bank. The trust acted fraudulently and the bank was innocent; its registered mortgage remained valid and indefeasible. Court imposed a constructive trust requiring the fraudulent party to hold the fee simple on trust for the Burmesiters until state compensation.

in personam claims

allows a claimant to enforce personal legal or equitable obligations against RO (ie, breach of contract, unconscionable conduct)

elements of in personam claim

1. recognised cause of action (known to equity or common law)

2. personal conduct of RO (or authorised agent)

3. Consistency with LTA objectives: claimant must provide more than mere notice (ie, prove dishonest behaviour/fraud)

Potts v Anderson

in personam claim: Potts sold land to Andersons, keeping an unregistered agreement that he could draw water from a reservoir on their land. Andersons later moved land into a family trust - the formal water agreement was omitted from the new trust title. Relationship breakdown led to shutting off of Pott’s water. in personam claim succeeded: Andersons and the trust knew about the water agmt and gave their word; the court declared constructive trust ordering trust to uphold water rights

fraud against unregistered (equitable) interests

Under s6(2)(b), acquiring title with knowledge of an unregistered interest constitutes fraud only if:

1. s6(2)(b)(i) - the RO had actual knowledge of or was wilfully blind to the existence of the unregistered interest at the time of acquiring the interest; AND

2. s6(2)(b)(ii) - The RO registered with the intention at the time of registering that registration would defeat the unregistered interest

knowledge of unregistered interest + simple registration =

no fraud

knowledge + dishonest intention to defeat known interest =

LTA fraud

Estrafiou

Husband sold house (wife had 50% equitable interest) to a purchaser within 24 hrs at undervalue to beat injunction. LTA fraud established; purchasers knew enough of wife’s claim + acted with intention of helping husband defeat her rights. Agent also liable for dishonest assistance

Satnam Investments

Purchaser knew of tenant’s right to first refusal. Tenant lodged caveat which later lapsed. P’s solicitor advised that lapse meant the claim was settled. The purchaser settled and registered. No fraud established. An honest belief that the unregistered interest no longer existed negates dishonest intent. Making reasonable inquiries protects the purchaser

Bunt v Hallinan

Purchaser knew tenants were unregistered occupiers using sheds on the property. P’s solicitor searched for title and found no caveat or registered lease. Advised P they were entitled to take title. No fraud established - they acted in good faith and relied on legal advise (even though incorrect). Demonstrates absence of dishonesty.

Tuscany Ltd v Gill

Developer bought property knowing unregistered tenant held a 6-year non-demolition proviso in lease. Yankov assured Gill ‘I wouldn’t to that to you’ prior to purchase but later tried to enforce a demolition clause. LTA fraud established. Yankov acquired registration knowing of the lease proviso and intending not to honour his assurance. A promise to respect equitable interest and then using registration to defeat it is fraud.

Timing of fraud*

LTA s6(2)(b)(ii) specifies that the dishonest intention to defeat the interest must exist at the time of registration

Smith v Hugh Watt Society

Local Labour party trustees held land. to prevent head office from getting property they secretly transferred it to Hugh Watt Society. Soc later wa sold to a group of ACT members who knew about the history. LP branch sued to get the property or the $$ back. LTA fraud failed: buyers had notice of the trust’s history but hadn’t committed dishonest fraud. In personam claim succeeded: society’s lawyer knew land was held on trust for LP. Moving trust assets to avoid beneficiary was unconscionable. Court declared constructive trust.

CN & NA Davies Ltd v Laughton

Parents agreed to put mortgage over home to help secure business loan for son. He forged documents to greatly increase mortgage amount. The son defaulted and the lender tried to sell the parent’s house to collect the full amount. Lender gets indefeasible title unless the lender committed fraud; here, the son committed fraud. LTA fraud fails. In personam: succeeded. Because the parents never contracted or agreed to guarantee the higher debt, there was no contract for that amount. Court said it would be unconscionable to rule a power of sale based on a forged variation.

Exception 1 to indefeasibility

overriding statutes: an express statutory clause is not required. Sufficient to imply

Te ture whenua maori act

does not override LTA indefeasibility

Housing Corp v Māori Trustee

Mortgage of Maori freehold land was not notes by the registrar of the MLC as required by MAA. Housing Corp acquired indefeasible mortgage title upon LTA registration. If Parliament intended the MAA to defeat indefeasibility, it would have stated so.

R-G of Land v Marshall

Land transfer lacked required MLC consideration. Held that the registered proprietor gained indefeasible title. Reaffirms that explicit override language required.

Warin v R-G of Land

Māori trustee sold MFL to private buyers without obtaining MLC consent. Held: buyers acquired indefeasible title upon registration. Court confirms that while indefeasible, land retains its status as Māori freehold land. Future dealings with land remain subject to TTWMA.

Mercury NZ Ltd v Māori Land Court

Mercury became RO of riverbed land under LTA. Claimants argued the land was Māori customary land. Held: title under LTA trumps customary land claims once registered. Land loses customary status once processed through TTWMA into MFL and registered.

Muraahi and Barlow v Phillips

Unsuccessful attempt to bypass indefeasibility under TTWMA. LTA fraud: claimed non-compliance with TTWMA (failing to offer land to preferred class of alienees) and breach of an alleged ancestral trust. Court found there was no fraud and Mr Phillips was the full legal/equitable owner. Parties made a genuine, honest mistake regarding TTWMA rules.

Manifest injustice/discretionary relief

s55 - a court may make an order cancelling or altering a registration where immediate indefeasibility causes manifest injustice to a former owner

manifest injustice threshold requirements

1. applicant lost an estate or interest in land through forgery or other invalidity

2. the registration occurred under s51 (immediate indefeasibility)

3. it would be manifestly unjust for the registered owner to retain title

*must involve exceptional circumstances

manifest injustice further requirements

• must be a legal defect in the document (ie, forged signature)

• admin errors count as defect (ie registrar mistakes)

• court claim must be filed within 6 months of discovering that they lost property right

state compensation

s 58: losses caused by land registrar errors/system glitches

s 59: compensation for permanent loss of land interest

exclusions: no payout for breaches of trust or mortgagee sales

contributory loss (s69): payout reduced/barred if claimant was negligent