| Author: | Sandra Boyle School of Law, Murdoch University |
| Subjects: | Torrens System (Other articles) Torrens system Western Australia |
| Issue: | Volume 1, Number 1 (1993) |
| Category: | Refereed Articles |
There is a commonly held belief in all jurisdictions where Torrens System forms
the basis of the statutory system of registration of title to land that
the interest in land sufficient to support a caveat must be proprietary in
nature. That is, only a person who has
a legal or equitable interest in land, in partaking of the character of an
estate in it(1), has a caveatable interest.
This is a myth derived from a belief that Torrens System denotes discrete, coherent
legal doctrine rather than the fact that it is a statutory system of title
by registration and the Torrens Statutes vary markedly from state to
state.
The myth is further enhanced by constant references to aged authorities which
indicate firstly, a failure to appreciate the differences in the Torrens
Statutes and secondly, that caveatable interests are derived from the
application of equitable rules and principles to those statutes. Equity
is dynamic. It is in constant evolution
and notions which influenced the finding or otherwise of a caveatable
interest half a century or more ago may no longer be appropriate.
As a consequence, the lore is in danger of becoming the law. It is time to put an end to the heresy.
1 A Radical Proposal?
In my view, in Western Australia, a proprietary interest in land will always
be sufficient to found a caveatable interest, but a proprietary interest
is not necessary for the establishment of a caveatable interest. Consequently,
an equitable interest of the sort often dismissed as in the nature of a
claim in personam, a mere personal right, is a caveatable interest.
This thesis results from a close examination of the existing statute law and
a considered analysis of cases frequently cited as authority for propositions
which, I will demonstrate, have limited application where the Western
Australian statutory provisions are concerned.
I shall begin by entering a plea in mitigation on behalf of any Judge that I
may, in the interests of this discussion, explicitly or implicitly criticise. Many, indeed most, of the reported cases on
caveats concern interlocutory proceedings intended to p reserve the status
quo pending resolution of a claim or dispute. Frequently, the Judge is forced to deal with an application
for the maintenance of a caveat on a provisional basis considering both
the facts and the law on scant material, in a limited ti me and often
presented in an unsatisfactory form. It
is difficult to extract principles from such cases. Whether a caveat is
maintained in such interlocutory proceedings is a matter within the
exercise of the Judge's discretion.
That discretion must of course be exercised judicially but it is
vital to remember that in such circumstances it is exercised on the basis
of equitable considerations. Therefore,
such cases tend to turn on "what is just and convenient" or
"the balance of convenience" or the exi stence of "an
arguable case", rather than the ultimate validity of the caveat or
the precise nature of the interest claimed.(2)
2. The Statutory Basis
Given that the caveat is a creation of statute, the only logical starting point
for identifying caveatable interests must be the statute itself.
In Western Australia, the right of a private individual to lodge a caveat is
conferred by s.137 of the Transfer of Land Act(3). It grants to a beneficiary
or other person the power to prevent the Registrar from recording in the
register any dealing proh ibited by the caveat, or at the very least, the
recording of a dealing not subject to the claim noted in the caveat.
The section identifies four categories of caveatable interests. They are:
(a) any estate or interest in land
under the operation of this Act;
(b) any estate or interest under
any:
i) unregistered instrument;
ii) document; or
iii) writing
in any lease mortgage or charge;
(c) any estate or interest in any equitable mortgage or charge by a
deposit without writing; and
(d) any estate or interest which arises
i) by devolution in law; or
ii) otherwise.
Section 137 is annexed to this paper. If you look at it, you will see
that I have done a little more than just provide an explicit
organisational hierarchy. I have slightly altered the order of words in
category (b). That is because the words as set out in the statute suffer
from a sentential ambiguity. The ambiguity has to do with whether it is
(i) the estate or interest being caveated,
or
(ii) the lease mortgage or charge,
that arises from the unregistered instrument document or writing. The alternative
way of looking at the category (b) would be to say that it is:
(b) any estate or interest under
any lease mortgage or charge [arising from any]:
i) unregistered instrument
ii) document, or
iii) writing.
This second way of reading the words might appear at first glance to be the
more obvious reading, but I suggest, that it cannot be the better reading.
The reason is that the estates or interests in land in category (a) will
generally arise by an unregiste red instrument, document, or writing. The
second reading renders category (b) meaningless, whereas the first gives
it real content. In accordance with settled principles of statutory
interpretation, it is therefore the first reading that is to be preferred.
3. What is Required?
There is no mention in the entire section of the word "proprietary". Indeed,
if you dissect the section and lay it out in the way that I have, you will
see that it clearly contemplates caveatable interests which are not just
in the land. For example, th e
caveatable interests contemplated in category (b) are interests in any
lease, mortgage or charge. An example
of such an interest is a sub-mortgage which is a charge on the interest of
the original mortgagee. In Western
Australia such an interest cann ot be registered on the title to the land
because only the proprietor of land can mortgage or charge it. This is specifically provided by s.105 of
the Transfer of Land Act. Thus, an
interest created by the registered proprietor of a mortgage, and not the
registered proprietor of the land, is an equitable interest only in the
hypothecation which is the mortgage.
The only means that a chargee of a mortgagee's interest has to protect
his interest is by a caveat.
Category (c) recognises a caveatable interest in any equitable mortgage or charge
by a deposit of title without writing.
Since 1783,(4) the deposit of deeds has been held to evidence an
agreement to mortgage land. The deposit
of the title or deeds gives rise to a presumption in law of an implied
agreement to mortgage. The interest
created is not a proprietary interest in the land. The equitable interest of the mortgagee in
these circumstances is a right to compel by specific performance the
execution of a mortgage in registrable form. When executed and registered
the mortgage gives rise to an interest in the land.(5)
A caveatable interest that arises by devolution in law as in category (d) is
the interest that a beneficiary may have in the estate of a deceased. Immediately
upon the death of a testator, the interest is contingent. The contingent interest can be displ
aced by creditors of the deceased or by the application of another
interested party under the provisions of the Inheritance (Family and
Dependants) Act in Western Australia.
The interest of a beneficiary is not necessarily a proprietary
interest in lan d. As has been
held by the Privy Council(6) and accepted by the High Court in
Australia,(7) where a beneficiary is entitled to participate in some
unquantifiable share in a deceased's estate then a beneficiary has the
following successive interests of di fferent characters:
(a) During the course of administration the entire ownership of the assets in
the estate is vested in the personal representative so that the beneficiary
has no proprietary interest in any particular asset in the estate. The beneficiary's right at this point is to
compel the personal representative to administer the estate correctly and
to obtain the assistance of a Court and equity to that end. (b)
The right that the beneficiary has to compel administration is a chose in
action which is transmissible under the Will of a beneficiary as personal
property.
(c) On completion of administration, but before transfer to a beneficiary, the
personal representative may hold the particular asset under a constructive
trust for the beneficiary.
The caveatable interest of a beneficiary of the estate of a deceased is in the
first instance derived from a chose in action being the right to compel
proper administration in accordance with the Will and ultimately to transfer
the land so devised. Agai n, s.137 of
the Transfer of Land Act contemplates a caveatable interest which is not
necessarily a proprietary interest in land.(8)
4. Estates and Interests
Each of the several categories of caveatable interests in s.137 is prefaced
by the words "an estate or interest". It is necessary to examine their relevance.
In property law the expression "estate or interest" is used so
frequently that it can easily be assumed that it is a compendious
term. This is not so.
The concept of an estate is of course derived directly from the feudal system
of tenure. An estate is the nature and
duration of the lineal holding from the Crown either immediately, or
mediately. Estates are either
freehold (the fee simple or the life estate) or, as they are traditionally
described, less than freehold estates.
The latter are of course leasehold estates of varying duration.
Interest describes the nature, quality or extent of a person's rights in
the estate. Section 137 requires the ide ntification of an estate or an
interest.
Equity recognises that interests can be proprietary in nature. That is, certain interests will have
all the characteristics of property in that: the interest may be
assignable or transferable to a third party; remedies exist to pursue the
interest again st third parties into whose hands the interest falls; and
when certain requirements are satisfied, the proprietary interest may
assume priority in relation to other competing rights or interests.
Equity also recognises other interests.
These are interests in the nature of personal rights which can be
enforced only against the person creating the right. Whether you term these "equitable
interests" or "mere equities" or "rights in
personam", they exist and they exist because an equitable remedy
exists to enforce the right.
Section 137 does not distinguish between categories of equitable interest. The
section only requires the identification of an interest. Why then is it constantly said that the
interest necessary to support a caveatable interest must be
"proprietary in na ture"?
5. Early Cases
The misconception is derived directly from some of the earliest cases on caveats.
In 1905, in Municipal District of Concorde v. Coles(9) the High Court of Australia,
still in its infancy, considered the provisions of s.24 of the Real
Property Act (New South Wales).(10) An application had been made to bring
land under the Real Pr operty Act which was the equivalent of the Transfer
of Land Act in operation in that State at the time. The Municipality had lodged a caveat claiming an estate or
interest in the land, the land being arguably a public road which an
individual had made application to bring under the Real Property Act and
thereby vest title to that land in the applicant. The Municipal District lodged a caveat to prohibit
the land being brought under the Act. The question was did the municipality have a caveatable in
terest under the Real Property Act?
The relevant part of the Real Property Act provides:
"Any person having or claiming an interest in land so advertised ... may ...
lodge a caveat ... forbidding the bringing of such land under the provisions
of this Act, and every such caveat shall particularise the estate,
interest, lien or charge claimed b y the caveator, and the caveator shall
if required deliver a full and complete abstract of his title."
The municipality based its claim of an "interest" on the provisions
of the Municipalities Act in that State which required local authorities
to take care of, manage and control public roads. The local authority further argued that
in exercise of that fun ction it had constructed gas works and pipes under
part of what they considered to be a public road. It claimed that this was a sufficient interest to prohibit
the land being brought under the Act.
The Chief Justice, Sir Samuel Griffith said:
"... in this case we are concerned merely(11) with the interpretation of the
Act. The terms of s.24 of the Real
Property Act were interpreted by the Supreme Court(12) in 1891, 14 years
ago in the case of Tierney v. Loxton(13).
In that case a caveat was lodged by a person who owned land bounded
by what was said to be a highway. An
application was made to bring land including the soil of the highway under
the Real Property Act, and the adjoining owner lodged a caveat. The Supreme Court held that he had no
authority to lodge it. The judgment was
a considered one, having been reserved for 3 months ... After a very anxious consideration of
the words of the section and of the whole of the Act, we have come to the
conclusion that the intention of th e legislature in using the word 'interest'
was that only a person having or claiming to have some legal or equitable
interest in the land partaking of the character of an estate, or of an
equitable claim upon the land, can be a caveator. This inference i s to be drawn not only from the way in
which the word 'interest' is used in the latter part of the section in
connection with the words 'estate, lien or charge' which points to the
conclusion that the interest is to be one ejusdem generis , and, therefore
, one which gives the caveator a legal or equitable claim to or upon the
land itself, but also from the concluding words of the section under which
the caveator may be required to deliver a full and complete abstract of his
title."
His Honour went on to say that "the interest spoken of by the Supreme Court
in that case was in the nature of a proprietary interest."(14)
In the context of the particular provisions of s.24 of the Real Property Act,
applying the ejusdem generis rule to the interests specified in the section,
it was not difficult to find that the legislature contemplated only
similar proprietary interests. On the basis of that statutory provision
and the facts in that case, the decision was undoubtedly correct. The unfortunate result has been that the
description of the caveatable interest in that case as being "a
proprietary interest" has been taken to be of general application in
dealing with all the Torrens Acts.
Therein lies the heresy. Of course, I am saying that the
heresy exists insofar as it applies to s.137 of the Transfer of Land Act
in Western Australia because s.24 of the Real Property Act and equivalent
in most other States(15) are in similar terms. Section 137 of the Tran
sfer of Land Act is in different terms.
Therefore, I maintain that in relation to caveats arising under s.137
of the Transfer of Land Act the case is of limited authority, if it is any
authority at all. In any event, it has
to be confined to its part icular facts.
The myth however has been perpetuated in numerous other cases and by text writers(16)
and regrettably in other judicial decisions.
A frequently cited authority is that of Clark J. of the Tasmanian Supreme Court
in Woodberry v. Gilbert(17). A close
examination of the decision surely raises grave questions about its value
as an authority. There the Court
was concerned with the ques tion of whether a particular contract (which
was really in the nature of a restrictive covenant, registration of which
was not then possible under the Tasmanian Real Property Act) created an
"interest" sufficient to support a caveat. The Judge treated t hat
question as being the same as whether the contract was caught by s.4 of
the Statute of Frauds, or as an "interest in land" under the Dower Act
or statutes authorising the compulsory sale of land. That would not now be accepted as an appropriate a
pproach. He then went on to say that:
"...the result of the cases seems to be that any claim to an interest in land
which would be within the purview of any of the above-mentioned statutes, not
being a purely equitable interest, must be or include a claim to a right
which would be classifia ble under one of the following seven descriptions,
viz:- (18)
1. A right to the present or future possession of the land, either as owner
of the fee simple, or as a tenant for life, or for years, or for some
shorter period.
2. A right to the proceeds of the sale
of the land or to a share thereof; or to payment of a sum of money secured
by mortgage of the land.
3. A right to a rent or an annuity charged on the land.
4. A right to the rents and profits of the land, or to a portion thereof.
5. A right to take from the land some natural product of it, such as peat, stone
or timber, or to shoot game thereon, and to take it away for one's own
benefit.
6. A right to take water out of a well situate on the land, or from a stream
or water courses running through it.
7. A right to enter upon the land for the purpose of securing the benefit of
a contract for the purchase of anything situate or growing on the land.
Unfortunately, His Honour's purported seven categories of caveatable interests
are nothing more than instances. It was not legitimately an exercise in
categorisation. Like many of the cases, and indeed, most of the leading
texts(19), this decision provide s only a list of some interests that will
support a caveat and some that will not. It can no longer even be regarded
as an accurate list, let alone a complete one. The Tasmanian statute is
in terms different from the West Australian statute. I have emph asised His Honour's words
"not being a purely equitable interest" because in the context
it is not clear whether these words indicated an assumed inclusion of
purely equitable interests, or an exclusion.
6. A Clearer View
If we return to Sir Samuel Griffiths again, by 1917, 12 years after Coles' case
his view of the Torrens statutes was becoming clearer. In Butler v. Fairclough(20) he said:
"It must now be taken to be well settled that under the Australian System of
registration of titles to land the Courts will recognise equitable estates
and rights except so far as they are precluded from doing so by these
statutes. This recognition is, i ndeed,
the foundation of the scheme of caveats which enables such rights to be
temporarily protected in anticipation of legal proceedings. In dealing with such equitable rights the
Courts in general act upon the principles which are applicable to equita
ble interests in land which is not subject to the Acts."
Sir Samuel was emphasising that it is important in dealing with the Torrens
statutes to look at the statutory base.
One of the few judges to consider the particular provisions of
s.137 of the Transfer of Land Act in Western Australia was Jones J. in th
e case of Ioppolo v. Ioppolo(21).
A wife claimed an interest in land as a person entitled to some
form of claim "for property settlement pursuant to proceedings commenced
under the Family Law Act 1975, (Comm.)." The wife lodged the caveat
in circum stances where she alleged the husband intended to sell the land
so as to defeat her claim for a property settlement in the Family Court.
Did the wife have a sufficient interest in the land to support the caveat
she had lodged?
It was argued for the husband that the "interest" necessary to
support the caveat under this section must be an interest in the technical
land law sense. In other words, in
the nature of an estate and therefore necessarily a proprietary
interest. In a s hort and explicit
judgment Jones J. said:
"I do not accept that contention.
In the forefront of the section is the mention of "any
beneficiary". A beneficiary may
well have a right or interest which is not, or is not yet, of the nature
of an estate. Part of the purpose
of the scheme of caveats under the Torrens legislation is to give
temporary protection to such rights pending the outcome of proceedings
taken to establish or quantify them.(22) Mrs Ioppolo has an interest in
the caveated land sufficient to satisfy the requirements of s.137 an d to
support her caveat. It is an interest
which is inchoate. Its precise nature, form and extent will not be known
until the determination of her claim by the Family Court; but pending that determination
it is still an interest. The situation
of Mr s Ioppolo may be, as it seems to me, somewhat analogous to that of a
constructive cestui que trust; and it is just that kind of interest that
the caveat system was deigned to protect.
The difficulty of definition of such an interest may well be the
reas on for the inclusion in s.137 of the elastic phrase 'or
otherwise'."
The analysis and reasoning of Jones J. are in my opinion absolutely correct.
The only difficulty that I have with the decision was the way that the
claim was expressed in the caveat.
Mrs Ioppolo claimed as "a person entitled to some form of claim for an order
by way of property settlement pursuant to proceedings commenced ... under
the Family Law Act 1975."
Section 78(1) of the Family Law Act enables the Court to declare the interest
that the parties to the marriage have in any property. The interests can be legal or
equitable.(23)
Section 79(1) of the same Act enables the Court to alter existing property interests. This is an explicit statutory power granted
to the Court, to be exercised on the basis of certain factors listed in
sub-section 79(4).(24)
If the claim had been expressed in the terms that the registered proprietor,
Mr Ioppolo, was a constructive trustee of certain property for the
caveator, Mrs Ioppolo, as beneficiary or that Mrs Ioppolo was entitled to
a declaration in these terms from the Family Court pursuant to s.78 of the
Family Law Act, then I submit, the Judge's reasoning would have been unimpeachable.
7. A Passing Cloud
Jones J.'s judgment was overturned by the Full Court in the same year.(25) In
an even shorter judgment the then Chief Justice said:(26)
"The respondent to the appeal when she lodged her caveat contended that her
capacity to make that application in the Family Court was an interest in
land within the meaning of s.137 of the Transfer of Land Act. The interest she was putting forward
and seeking to protect by the caveat was formulated by her in para. 5 of
the statutory declaration which he filed in support of it, in these terms:
'My claim for an order by way of settlement of property ... '
In my opinion, that is not an interest in the land within the meaning of s.137
of the Transfer of Land Act and accordingly I would hold, for that short
single reason, that she had no caveatable interest in the land, or that
such an interest was not reve aled by her in support of the caveat which
she sought to lodge."
With the greatest respect, which was the defect His Honour found? Was there no caveatable interest or did
the wife's caveat fail to specify the interest claimed in support of the
caveat?
The then Chief Justice's judgment was supported by Brinsden J. He held that there was a New Zealand
case which was a direct and contradictory authority to the respondent's
position. The case he referred to was Re An
Application by a Liquidator of Haupi ri Courts Limited.(27)
In that particular New Zealand case and the one that immediately followed it(28)
the Judge, Richmond J., was at pains to emphasise that he was dealing with
the particular provisions of the New Zealand statute. Again, the New Zealand statute is in terms d ifferent from
the West Australian statute. The
New Zealand statute requires that in order to found a caveatable interest
two conditions have to be satisfied. First, that the caveator is a person
claiming to be entitled to, or to be beneficially intereste d in, any
land, estate or interest under this Act and secondly that the caveator
claims by virtue of an unregistered instrument, transmission or trust
express or implied. This provision is not at all like the West Australian
provision and indeed, at the c onclusion of Richmond J's judgment, after
being cited various Australian and Privy Council authorities he
acknowledged:
"In effect, I find myself unable to derive any real assistance from the various
authorities to which I have just referred, particularly having regard to
the difference in wording between the various statutes. ... I am of the opinion that in the present
c ase Haupiri Courts Limited was not entitled to lodge a caveat."
The New Zealand case was distinguishable because it dealt with a provision in
different terms to the West Australian Act, with a particular fact situation
and it was not intended to be of universal application to any other
Torrens statute.
In Ioppolo, Jones J. contemplated that a person could maintain a caveat even
where the right supporting the caveat was inchoate. Any right that Mrs Ioppolo did have had to be personal to
her, it was not a proprietary right.
8. The State of the Art
In Kuper and Kuper v. Keywest(29) the Full Court of Western Australia has
upheld the right of a caveator to maintain a caveat in circumstances where
the agreement between the registered proprietor and the caveator was still
at that inchoate stage. Inde ed, at the
time the caveat was lodged in Kuper, the subject of the matter of the
agreement had not yet come into existence. There could not have been a proprietary interest in the land. Nor, would the interest necessarily develop
into a proprietary in terest.(30)
The facts in Kuper's case can be limited for the purpose of this paper to
the following. In September 1988, Mr
and Mrs Kuper entered into two contracts to purchase two separate home
units off the plans. That is, at the
time the contracts were entered into the land, being the two proposed strata
title units, did not exist. Section 4
of the Strata Titles Act in Western Australia provides that no lot is
capable of being sold until the plan from which the lots are derived is
registered.
The contracts were offer and acceptance forms incorporating the 1985 Law Society
and Real Estate Institute of Western Australian Joint Form of General
Conditions for the Sale of Land. All
practitioners are familiar with clause 14 of those Conditions. In November 1989, more than nine months
after the contracts were executed, on what appeared to be a misunderstanding
of the circumstances in which the contract would cease to have effect,
Keywest purported to terminate both contracts.
Shortly thereafter, the Kupers issued a writ claiming specific
performance of the contracts.
The Kupers had lodged a caveat over portion only of lot 180 claiming an interest
arising out of the offer and acceptances whereby they had contracted to
purchase the two lots on the yet to be registered strata plan. The caveat was absolute. The caveat i ssue came before the Court on
an originating summons under s.137 of the Transfer of Land Act.
The strata plan in question was lodged at the Land Titles Office after the 29th
November 1989. It contained 22 units,
including the two the subject of the agreement with the Kupers. Keywest sought to deal on the plans so that
it could complete sales of other units.
It was prevented from so doing because of the existence of the
Kupers' absolute caveat.
Ultimately, the Kupers' caveat was withdrawn and new caveats substituted identifying
units 9 and 10 on the registered plan.
At first instance the Supreme Court was asked to determine whether
the caveat which had caused the delay in dealings was lodged w ith
reasonable cause. Rowland J. held that
it was not, because the caveat failed to identify the land or the extent
of the caveator's interest in the land that it sought to protect. Therefore,
it was lodged without reasonable cause.
The decision was reversed by the Full Court.
The present Chief Justice delivered the reasons for judgment. He began by restating in full s.137 of
the Transfer of Land Act. He then cited
the dictum of Griffiths C.J. in Butler v. Fairclough as is re peated on
page 9 of this paper. He went on
to characterise the contract made between Kuper and Keywest as contracts
for the sale of the respective units, to be completed within 14 days after
the strata plan had issued in order for dealings. He specific ally acknowledged that at the date of the
contract neither in fact nor in law did the units exist. Once the building is constructed and the
plan registered the land the subject matter of the contract is then
brought into existence.(31) The contract was one to be completed once the
relevant Certificates of Title had issued. The land the future subject matter of the agreement, was
identifiable and ascertainable but not yet in existence.
Referring specifically to the judgements of Mason and Deane J.J. in Legione
v. Hateley(32) His Honour said that the "interest" claimed was that
commensurate with the availability of the equitable remedy of specific
performance.
"... the purchaser's equitable interest under a contract of sale is commensurate
not with her ability to obtain specific performance in the strict or
primary sense, but with her ability to protect her interest under the
contract by injunction or otherwis e ..."(33)
Again, relying on the judgments of Deane and Dawson J.J. in Stern v. MacArthur(34)
he affirmed:
"The extent of the purchaser's interest is to be measured by the protection
which equity will afford to the purchaser."
He pointed out that the High Court had made it clear in their view that the
equitable interest was something less than equitable ownership and that
the protection that equity afforded was not confined to specific performance. The High Court had referred to "other
remedies": specific performance or injunctions were simply instances.
His Honour acknowledged the broad approach adopted by the High Court in
respect to the protection that equity will afford a purchaser or a
prospective purchaser. He distinguished
a line of Queensland cases all of which had previously found that no
caveatable right arose until t he conditions of an inchoate agreement were
fulfilled. His Honour acknowledged the
development of equitable principles by the High Court of Australia in such
cases as Stern v. MacArthur(35), Chang v. The Registrar of Titles,(36) Legione v.
Hateley (37) and in Bahr v. Nicolay(38) and he concluded:(39)
"In my opinion, in appropriate circumstances, a Court would be prepared to protect
a purchaser's interest under a contract such as that in the present case,
at the so called inchoate stage, both by granting specific performance in
the sense of requiring t he vendor to do all things necessary to be done
to procure registration of the strata plan, as well as restraining the
vendor by injunction from dealing with the land inconsistently with the
purchaser's right to specific performance of the contract, both in the
special sense, and subject to fulfilment of the condition, in the ordinary
sense."
The interest arose by operation of law or perhaps, we should say, by operation
of equitable principles. The right to
caveat the interest that arises in this manner has to be caught by the
words "or otherwise" in s.137 of the Transfer of Land Act.
9. What does "proprietary" mean anyway?
Generally, the interest of a purchaser under a contract of sale, even a conditional
contract, is assignable. This confers a
critical "proprietary" element.
However, it is possible to limit the contractual rights to the
parties to the agreement and remov e that element of assignability. I submit that in Kuper's case, it would have
made no difference to the Chief Justice's reasoning whether or not the
interest was categorised as proprietary.
Was the Kupers' interest at the time they lodged the caveat even an interest
in land? It was not, because "in
law or in fact"(40) the units did not exist. What the Kupers had was a right in equity to
pursue a remedy being specific performance of a contr act for the sale of
land. When and if the contract was enforced and the conditions satisfied
an interest in land could then arise.
What Kuper's case emphasises is the protective nature of equity. The proprietary nature of an interest
is irrelevant to the finding that there is an interest which equity
recognises and to which it will afford its protection.
10. The Core of Torrens
When the High Court handed down its judgment in Leros Pty Ltd v Terara Pty
Ltd(41) a quaking of seismic proportions should have been recorded emanating
from conveyancing lawyers in Western Australia. In Leros the High Court reminded us all that under a Torrens
System a person who seeks to preserve an unregistered interest against a
subsequent inconsistent dealing must at the very least, lodge a caveat to
preserve and maintain it, or that interest will be extinguished. It cannot be reasserted against a later
registered proprietor, or the holder of a later and inconsistent
registered interest. The strictness of
the principle of indefeasibility is common to all the Torrens statutes and
injustice can easily be effected where a right is ignored or remai ns
unprotected.
My view is the right that may require protection may be a non proprietary right. It will relate to, or have a nexus with, the
land in some way and certainly will result from the actions of the
registered proprietor of the land, but it need not arise onl y in the
context of transactions which confer a proprietary interest.
I offer the following illustrations.
First, a right of pre-emption to purchase land, or as commonly
described, a right of first refusal.
When you have a contractual arrangement, in clear and unequivocal
terms on the fulfilment of certain conditions (us ually the desire of the
registered proprietor to sell), the beneficiary of the right can obtain
specific performance of the agreement, or an injunction, prohibiting the
sale of the land in contravention of the registered proprietor's
contractual obligatio ns. The
beneficiary of the right is in a similar position to that of the
purchasers under the inchoate contract in Kuper's case.(42)
Secondly, where the secured creditor of goods under say the Chattel Securities
Act in Western Australia(43) supplies goods which are affixed to the land
for the purpose of the exercise of the secured parties right to retake
possession of the goods, remo ve or sell them, they are deemed not to have
become fixtures. The statutory abrogation of the law of fixtures will not
apply where a person, other than the secured party, acquires an interest
in the land for value in good faith and without notice of the i nterest of
the secured party.(44)
Where the subject goods are supplied to a debtor who attaches them to premises
which he leases, it is in my view essential for the secured party to
caveat the title to the land of the registered proprietor. Where there exists no contractual
arrangement b etween the registered proprietor and the secured party(45)
the secured party may claim a right to the equitable remedy of specific
restitution. Any subsequent registered
proprietor or mortgagee, would then take with notice of the interest.(46)
Thirdly, where a party to any registered instrument alleges that a mistake has
been made in that document which requires rectification by a court the party
claiming rectification should caveat to protect its right to seek the
remedy. Rectification will no t be decreed if to do so would prejudice the
bona fide purchaser for value who has acquired an interest in the land the
subject of the instrument which is sought to be rectified.(47) Where the
mistake relates for example to the length of the term of the lease, it is
critical to protect the right to seek the equitable remedy.
11. What is the purpose of a Caveat?
What is a caveat? It is itself a
statutory injunction.(48) It has all the characteristics of that equitable
remedy. It restrains the Registrar of Titles
from registering a dealing that is inconsistent with, or at the very
least, not made subject to, th e caveator's alleged claim. It effectively prohibits a registered
proprietor from dealing with his land in a manner inconsistent with rights
and obligations that he may have created.
It confers no proprietary interest itself.
Its purpose and function is to maintain the status quo to preserve
and protect the rights of a caveator. It prohibits the caveator's
interest from being defeated by the registration of a dealing without the
cav eator having first had the opportunity to invoke the assistance of a
Court to give effect to the interest.(49) The interest may arise through
the application of legal rules and principles or it may arise because a
specific equitable remedy exists to pr otect it.
To limit the right to caveat only to interests which are classified as proprietary
in nature is to deny the very purpose of a caveat.
It is said of equity:
"The essential concern of equity is remedy where needed. In some contexts equity allows a bundle
of remedies so cohesive and purposeful that the rights which they protect
take on the appearance of an institution of interests in property. To require of e quity, however, that it
should at all times underwrite a proprietary system is to forget its
origins and to pervert its destiny."(50)
The same is appropriate to a caveat.
NOTES
(1) Municipal District of Concord v Coles [1905] 3 NSWLR 97 per Griffith CJ
@107
(2) As an example of the application of these considerations see Custom Credit
Corporation v Ravi Nominees, unreported Fct Sct Library No. 92025 Fct Sct
(28th April 1992) and Eng Mee Yong v Letchumanan [1980] AC 331
(3) Western Australia (1893-1972)
(4) Russel v Russel (1783) 28 ER 1121
(5) See Sykes, 315 where he says that the notion that such an arrangement in
immediate equitable mortgage is "assumed". No authority is cited.
(6) Commissioner of Stamp Duties v Livingston [1965] AC 694
(7) The Official Receiver in Bankruptcy v Shultz (1990) 170 CLR 306
(8) See the effect of Section 142 of the Transfer of Land Act as well. It
contemplates the lodging of a caveat by a beneficiary under a will prior
to transmission.
(9) [1906] 3 CLR 96
(10) Act No. 25 of 1900, NSW
(11) The emphasis is mine
(12) Being of course the New South Wales Supreme Court
(13) (1891) 12 NSWLR (L.) 308
(14) (1906) 3 CLR @ 107
(15) See in particular what is now s. 74F of RPA (NSW)
(16) A clear example is found in Baalman @ 301 but note that the text is intended
for use in New South Wales, and the relevant caveat provisions at that
time were in narrow terms. Others
include Butt, Sykes.
(17) (1907) 3 Tas LR 7
(18) Ibid @ 9
(19) The most comprehensive list is found in Baalman
(20) (1917) 23 CLR 78
(21) (1978) 4 Fam LR (Sp. Ct WA) 124
(22) Jones J. applying the dictum of Griffith CJ in Butler v Fairclough ((1917)
23 CLR 78 @ 91)
(23) Dickey Ch. 26
(24) Dickey Ch. 27
(25) Ioppolo v Ioppolo unreported Supreme Court Library 2469 p. 1
(26) Burt CJ op cit @ 1
(27) [1969] NZLR 349
(28) Re an Application by a Liquidator of Haupiri Courts Limited (No. 2) [1969]
NZLR 353
(29) Kuper & Kuper v Keywest Constructions Pty Ltd and Anor; Registrar of
Titles & Anor v Keywest Construction Group Pty Ltd (1990) 3 WAR @ 419
(30) Because the conditions of the contract may never have been fulfilled
(31) Chan v Dainford Ltd (1985) 155 CLR 533
(32) (1983) 153 CLR 406
(33) Above cit @ 44
(34) (1988) 165 CLR 489 @ 522
(35) (1988) 165 CLR 489
(36) (1976) 137 CLR 177
(37) (1983) 153 CLR 406
(38) (No. 2) (1988) 164 CLR 604, See comments of Mason & Dawson JJ @ 611-612. "The existence and extent of the
purchaser's equitable esate or interest in the property the subject of a
contract of sale is commensurate with his ability to specifically enf orce
the contract. If the vendor's obligation
to transfer title is subject to a contingency then, ... any order for
specific performance will be expressed to be subject to that contingency. In that event, the purchaser, though
entitled to specific perfo rmance, has a contingent equitable estate or
interest in the land until the contingency is fulfilled."
(39) 3 WAR 432
(40) @ 428
(41) [1992] 66 ALJR 399
(42) There exists a controversy as to whether or not a right of pre-emption
confers a proprietary interest in land, see Manchester Ship Canal Co. v
Manchester Race Course [1901] 2 Ch 37 and see Pata Nominees Pty Ltd v
Durnsford Pty Ltd [1988] WAR 365 .
Frequently cited as authority for the proposition that it does not
confer a propreitary or consequently a caveatable interest is Eudunda
Farmers Co-operative Society Ltd v Mattiske (1920) SALR 309. This is another case that must be
limited to its pa rticular facts. The
agreement on which the caveat was based in that instance was not an
enforceable agreement. It was held in
terms to be void for uncertainty and as a consequence could not support the
caveat. This is another instance of an
authority being cited for a proposition which in fact, or in law, it does
not support.
(43) See Section 6(1), 6(3), 6(5)
(44) See Section 6(7)
(45) See Kays Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty
Ltd [1962] VR 429 @ 436-8 for an illustration of the nature of the equitable
interest arising where there is a direct contractual relationship between
the registered proprietor and the owner of the goods.
(46) In this instance the claim is not based on any interest in land because
the secured party is relying on the protection of the Chattel Securities
Act to ensure that the goods remain in the character of chattels and do
not become fixtures.
(47) See Meagher para. 2619 and the authorities cited therein and also Coolibah
Pastoral Co v Commonwealth (1967) 11 FLR 173
(48) Barry v Heider (1914) 19 CLR 197 @ 221
(49) See Kerabee Park Pty Ltd v Daley (1978) 2 NSWLR 222
(50) WA Lee 1965-6 UQLJ 214 @ 217 approved in Pierce v Pierce [1977] 1 NSWLR
170 at 180 - and see Meagher, 425