Understanding the Torrens System

Introduction

As famously stated in the case of Breskvar v Wall, a Torrens system is not as system of registration but a system of title by registration. The Torrens system developed in South Australia to overcome challenges pose by the deed system of registration that provided no real guarantee of title. It was simply a record of the chain of title that provided neither security of title nor a solution to any defects in the chain of title. In order to cure the insecurity of title, the system consisted of the mirror, curtain and insurance principles. These principles meant that the contents of a land register were accurate and one did not need to go behind the register because if the mirror of title reflected incorrect information then the person affected would be compensated by the state for any loss.

As a result, the Torrens system requires registration of interests in land in the central register. Registration of an interest in land provides an accurate picture to any prospective buyer of the details and the status of the land in question. By entrenching certainty, the register basically confers immediate indefeasibility implying that a purchaser of land obtains an immediate title to the land created by an instrument despite the instrument itself being invalid. Establishment of a central register did away with the expensive legal fees and survey, simplified the conveyancing process and facilitated the dealings in land through a central point of reference. Because these principles have been incorporate into statutes including the Land Titles Act, it is subject to interpretation by the courts. In most instances, Australian courts have interpreted indefeasibility of title in a way that protects the Torrens system. In the ensuing discussion, this paper will look at the role played by the torrents system in registration of different interests in land and their effect.

Boundaries of Land

Title to property in land in Queensland, particularly freehold land and other interests are registered in line with the Torrens system in the Land Title Act. Consequently, the

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1. (1971) 126 CLR 217, at 241 – 242 per Dixon J
2. Hossein Esmaeili, The Boundaries of Australian Property Law (Cambridge University Press, 2016) 65
3. Frazer v Walker [1967] 1 AC 569, 580 per Lord Wilberforce
4. Reddington, Brittany. ‘Extrinsic Evidence: Far from Instrumental.’ (University of Otago, 2016))7

confines of land has been defined in statutes and subsequently interpreted by courts over time to establish precedence on the matter. Although the Land Title Act provides for freehold ownership of property, there are restrictions as to the boundaries of a proprietor’s ownership. Therefore, there are laws that govern horizontal and vertical subdivision of land into lots and the transactions attendant to the same. Presently, the Body Corporate and Community Management Act 1997 provides for the use of freehold land through community titles schemes. However, registration of such titles is still within the ambit of LTA.

Regarding the use of land, Ainsworth v Albrecht upheld the common law principle that land includes the soil, the airspace above, to the extent of ordinary use of the land in question. In fact, the value of the airspace was estimated to be worth at least $10,000 thus reaffirming the contention that airspace has monetary value. More importantly, the case provided a determination of a dispute between owners of lots in community titles scheme. In deciding on the matter, the court stated that the correct test to be applied in the dispute was whether there were any objections to the use of the land, after a consideration of the circumstances.

While the proprietor of a freehold land has a good title against the whole world, they do not own all that is in their land. Accordingly, there are statutes that separate the ownership of minerals and other resources from the ownership the land. It means that a parcel of land can be owned by a person and the government will also have an interest in the same land as per the Mineral Resources Act 1989. These separate interests are capable of registration on the Torrens register in the form of freehold interests and ingests of petroleum authority, greenhouse gas authority, and geothermal tenure holders among others. In the Schwennesen case the court explained the essence of the Water Act 2000 highlighting the manner it limited use and flow of water including the application for licenses and the amendment of the same under the Act. Through the Water Allocation Register, a system of registration of water allocation was created separately from the Land Registry. Generally, the legislation monitors water use and prescribes punishment for unauthorised use of water and interference with its flow.

A land register contains all the details of a registered land including the boundaries of a lot which can be identified through a cadastral system. A lot can be separated from another by an adjacent lot, water or a public road. These boundaries are diagrammatically represented in a survey plan which is submitted to the land registry upon registration. When the survey plan becomes part of the register, it will be considered as forming parts of the particulars that one does not need to go behind the register to find out its true status. For any inaccuracies in survey plan, the Registrar is mandate to correct the register and issue a new title as appropriate but a bona fide purchaser who acquires the land will still gain an indefeasible title. However, it is no the duty of the registrar to preside over disputes regarding boundaries of land. Notably, there is a boundary established between land and chattels through the application of ‘all circumstances test’ in TEC Desert Pty Ltd v Commissioner of State Revenue.

Leases

A lease is a conveyance of an interest in land for a specified period of time. It can arise out of a proprietary or contractual interest. Consequently, a long term farm lease conferred by a commercial contract will be construed in consideration of its commercial purpose as held by the High Court in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd. Just like freehold interest in land, dispositions involving leases for periods exceeding three years are required to be in writing and no action can be brought upon disposition in land which is not writing. It is the instrument creating a lease that is required to be registered in the Torrens register with the intent of creating a lease. Thomas JA in Ashton v Hunt was of the opinion that whereas sections 71 and 181 of the LTA provides that unregistered instrument transfers no interest at law, the lack of registration does not in any way render it invalid. Instead the agreement for lease, in a scenario of unregistered instrument, may have the effect of conferring an equitable interest to the intended lessee.

Leases can be categorised as equitable or under common law. Under common law there are fixed-term, periodic, for life, at will and at sufferance. The question as to whether a lease can be classified as any of the above depends on the circumstances of each case. Under equitable leases a lease can be created by estoppel or agreement for lease. Estoppel will arise where a lessor lacking title grants a lease and both parties are precluded from denying its existence provided that either party has relied to his detriment, on the representation made by the other party. On the other hand, a mere agreement to lease grants an equitable lease where it is oral, the instrument lacks form or where the agreement is executed so that instrument confers rights. More remarkably, the LTA imputes the principle of indefeasibility of title to leaseholds such a registered proprietor of a lot subject only to other registered interests but not for constructive notice of unregistered interest.

Mortgages

Mortgage is a conveyance of land securing the payment of money or money’s worth or the performance of an obligation. The Torrens system accommodates and allows for registration of mortgages as interests in land. Whereas a legal mortgage must be in writing and signed by the person making an assurance, an equitable mortgage is created as when the substance of the transaction is to create a mortgage. According to the LTA, a mortgage is a security for payment of debt which does not operate as a transfer of the land. At all times, the mortgagor remains as the legal proprietor of the charged property and the mortgage operates as a burden on than land until the debt is repaid and the charge on it cancelled. The nature of a mortgage is such that an unregistered mortgage amounts an equitable mortgage and it will rank lower than a registered interest in the same property. Being an interest in land, a registered mortgage is clothed in the cloak of indefeasibility of title as in Tessmann v Costello [1987] 1 Qd R 285.

It is prescribed by legislation that a valid mortgage must involve both parties signing a mortgage contract followed by a mortgage deed which must be registered. Registration confers upon the parties both common law rights and statutory protection. A Torrens mortgagor hangs onto rights attendant to the legal estate including that of leasing, possession and the right to mortgage the same property. Equally, the law of equity extends equitable protections to the mortgagor including equity of redemption of the property upon full payment of the debt and other related costs. The principle ‘once a mortgage always a mortgage’ refers to the right of redemption that cannot be excluded in a mortgage contract and any attempt to subvert the right will render it void. Henry J in Sun North Investments Pty Ltd v Dale & Anor stated that the right of redemption can arise from a contract so long as the mortgagor is not in default, but even where he fails to redeem by the repayment date, he can still exercise the equitable right to redeem. Therefore it appears that the Torrens system protects the mortgagor to an extent that they can seek an injunction against an auction against their property upon giving an unconditional offer to refinance before sale.

A mortgagor may be relieved of their obligations under the agreement due to equitable vitiating factors such as duress, unconscionable dealing, and undue influence. Statutory protections a mortgagor are provided for under the Land Titles Act, Property Law Act, National Consumer Protection Act 2009 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). A mortgagee is equally protected by sections 78(1) and 83 of Property Law Act placing obligations on the mortgagor. Generally, a mortgagee has the right to alienate the mortgage, to make demand for payment in case of default, to foreclose, take possession and go as far as exercising the statutory power of sale. However, it is apparent that the law gives a mortgagor a wide berth so that it is takes a long time before the statutory power of sale can be exercised. As a result the mortgagor has a leeway to apply for an interlocutory injunction and block the impending sale.

Co-ownership

Co-ownership refers to where two or more people have a shared interest in the same property. An instrument transferring an interest to co-owners of any property will be registered as tenants in common or joint tenants. Where such an instrument is silent on the nature of ownership, the registrar will register the owners as tenants in common. Unlike tenancy in common where there is only unity of possession, a joint tenancy must have unity of time, interest, possession and title. Upon death of a co-owner, the interest of a tenant in common his or her interests devolves to his next of kin; the interest of a joint tenant is extinguished and the last survivor becomes the sole owner of the property. Significantly, the High Court has referred to joint tenants as one person for most purposes.Co-owners of property has rights and duties including: right of occupation, to receive income from the property, to mortgage the property, disposition of property and compensation for repairs.

Restrictive covenant

The position of restrictive covenants under the Torrens system is rather controversial. Apparently, Sir Robert Torrens did not envision the registration of covenants in the same manner as easements, mortgages and leases. In Queensland, registration of covenants is only permitted for State or local governments to the exclusion of private restrictive covenants. The High Court in Forestview v Perpetual Trustees WA appreciated the importance of the equitable doctrine stating the value of land may be affected by activities in the adjacent land restrictive covenants are essential in protecting such as value. In the same vein, non-registered covenants are enforceable under the Property Law Act. For the government, restrictive covenants allows planning and control of land use. However, restrictive covenants remains a controversial interest in land within the Torrens system. It appears that it is one of those instances where it can authoritatively be said that the Torrens system does not fully facilitate the registration of land or interest in land.

Profits

Profits a prendre is the right to take something from another’s land or the soil itself. It is to be distinguished from easements which denotes a right of way over another’s land although both are non-possessory right. The Torrens system recognises the registration of the right to profits in sections 97E, 97EA and 97F of Land Title Act. To qualify as a profit the following elements must be present: the profit must come from the land itself; the right must be to take something ;and concerning crops, the right must only allow the removal of the crop that does not require attention after planting

Easements

According to Re Ellenborough easements include a right to pass over someone’s land and certain conditions must be fulfilled for it to exist. There must be a dominant and servient land, the right must be capable of forming the subject matter of a grant and the easement must accommodate the dominant tenement. Easements can be created through registration of an instrument under the Land Title Act, through prescription flowing from limitation of actions or where equity upholds a non-registered grant of easement. As a proprietary interest in land, its holder is protected by Australian law in the same manner as other interests in land. Be that as it may, the courts’ interpretation of easements has been rather controversial. As a result the interpretation of grants of easement has produced various results and sometimes conflicting precedence.

In 2007 the High Court was tasked with interpretation of a grant of easement giving access to Skygarden from Glasshouse and whether the same document intended to give further access to Centrepoint and Imperial Arcade. The court adopted a restrictive approach to the construction of easements stating that extrinsic evidence was

inadmissible except where there was a bare easement. Whereas extraneous evidence is normally admissible in construction of contractual provisions as Codelfa case, an easement registered under the Torrens should be construed in light of the principle of indefeasibility of title. Therefore a registered Torrens system should not be construed in the same way as a normal contract that would necessitate the admission of extrinsic evidence to determine intention of the parties to the contract. Earnestly, a third party who inspects a register is not expected to go beyond the register to find out additional extrinsic information on the title. If this were to apply, then it defeats the essence of the Torrens system and the privilege of indefeasibility conferred on a proprietor.

However, the court pointed out in its dictum that there was an exception where bare easement was involved. It follows that extrinsic evidence would be admissible for the construction of easements that are created but do not contain substantial covenants. In Sertari Pty Ltd v Nirimba Developments Pty Ltd NSW, the Court of Appeal upheld the decision in Westfield finding that except for the physical features of the tenements, no extrinsic evidence was admissible in construction of a registered easement under Real Property Act 1900. Clearly, the Court of Appeal in the Sertari case disregarded the reference to bare easements in Westfield and pointed out that the exception applied to standard easements. This later decision was confusing in light of the High Court in Westfield. Subsequently, Queensland Court of Appeal sitting in 2008, found that it was not correct to admit extrinsic evidence in construction of a bare easement except in reference to physical characteristics.

Conclusion

In the end, it goes without saying that there is justification that the Torrens system of registration has played an indispensable role in the registration of land and interests in land. Although, the principle of indefeasibility is limited to interests that are regarded as part of the estate or interest in land created by the instrument. For this reason, restrictive covenants do not enjoy the same level of protection as other interests like easements, mortgages. More importantly, the decision in Westfield exhibits the intention of the courts to protect the integrity of the Torrens Title register despite the uncertainties accompanying it.

Bibliography

Cases

Ainsworth v Albrecht [2016] HCA 40

Asia Pacific International Pty Ltd v Dalrymple & Anor [1999] QSC 204; [2000] 2 Qd R 229

Beames v Leader [1998] QSC 44

Breskvar v Wall (1971) 126 CLR 217

Cassegrain v Gerard Cassegrain & Co Pty [2015] HCA 2

Chan v Cresdon Pty Ltd [1989] HCA 63

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Currumbin Investments Pty Ltd v Body Corporate Mitchell Park Parkwood CTS [2012] QCA 9

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12

Forestview v Perpetual Trustees WA [1998] HCA 15

Frazer v Walker [1967] 1 AC 569

Permanent Trustee v Shand (1992) 27 NSWLR426

Re Ellenborough Park [1955] EWCA Civ 4

Santley v Wilde [1899] 2 Ch 474

Schwennesen v Minister for Environment and Resource Management [2010] QCA 340

Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324

Sertari Pty Ltd v Nirimba Developments Pty Ltd NSW [2007] NSWCA 324 at [15].

Six Bruce Pty Ltd v Jadig Finance Pty Ltd [2018] VSC 552

Sun North Investments Pty Ltd v Dale & Anor [2014] 1 Qd R 369

TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49

Theodore v Mistford Pty Ltd (2005) 221 CLR 612

Westfield Management Limited v Perpetual Trustee Company Limited (2007) 239 ALR 75

Legislation

Australian Securities and Investments Commission Act 2001 (Cth)

Body Corporate and Community Management Act 1997 (Qld)

Land Title Act 1994 (Qld)

Mineral Resources Act 1989 (Qld)

National Consumer Protection Act 2009 (Cth)

Property Law Act 1974 (Qld)

Journals

Reddington, Brittany. ‘Extrinsic Evidence: Far from Instrumental.’ (2016). University of Otago

Weir, Michael, ‘Westfield 5 years on.’ (2012) 21 Australian Property Law Journal

Weir, Michael, ‘The Westfield Case: A Change for the Better.’ (2009) Bond Law. Review.

Books

Hossein, Esmaeili, The Boundaries of Australian Property Law (Cambridge University Press, 2016)

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