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The Torrens System as a Core Element of Australian Property Law

Question:

Discuss about the Equitable Interests and Torrens Title.

There are several species of property that are unique to Australia, along with statutory mechanisms used for regulating their acquisition and dealings. For instance, the statutory tenure represents a unique Australian development. Similarly, the Strata title was also conceived and implemented in the jurisdictions of Australia. The native title, in its present form that is present in Australia, even if it is considered to be influenced by the course adopted in other Commonwealth jurisdictions, is basically antipodean concept. As a result of these developments, several academics have argued that the present day concepts of Australian property law are basically different from their English counterparts and their predecessors. It has been stated in this regard that the real property law in Australia is peculiarly Australian.[1] It cannot be properly understood, unless it is recognized that the basic concepts of Australian law are different from English feudal system.

Even if there is a controversy present regarding the basic character of Australian real property law, it cannot be questioned that the Torrens system remains its core element. The system was introduced for the first time in South Australia in 1854. The Torrens system of title by registration results in the creation of incidents of land ownership of a different nature as compared to the ones recognized by the English model. While in England, the existing paper title can be registered for the purpose of record keeping, but the legal title is already present. But in case of Torrens jurisdictions, the title to land is itself derived as a result of the act of registration.[2] Therefore it has been stated that the essence of real property law in Australia is the Torrens system. This system needs to be considered as changing the nature of interests in land. Under this system, they title to land is derived from the act of registration. It is a system of title by registration and not the registration of the title. Even if it has been suggested by some commentators that most of the real property law in Australia has been simply adapt it from received law, Torrens system can be described as a novel development.

It is not surprising that the law property in Australia is radically different from the law of property in England. The reason is that in case of different jurisdictions there were hugely different social, economic and environmental conditions present after the Australia is federation in 1901. Therefore, even during the 19th century, there was an era of rapid colonialization and inland expansion started to take place in Australia as a result of which development of unique statutory tenures and bureaucratic procedures were developed for the registration of land title. However, the move towards a statutory system of registration of title was not unique in case of Australia.[3] Consequently, similar developments were also taking place in a large number of common law countries during the second half of the 19 century.

Development of Unique Statutory Tenures and Bureaucratic Procedures in Australia

Even the concepts and the structures that have been retained from England were recognized in transfigured form, mainly due to the presence of different registration procedures. For instance, the concepts of "title" and 'fee sample' had been. Inherited from England, but the way in which title to an estate is obtained by registered proprietors in fee sample (by registration) is a mechanism that was not present under the English property law jurisprudence. Therefore, there are a number of ways in which land in Australia is held. There are several private interests that are the products of statute, common law, equity and native title that is supported by statute. Apart from it, there are large tracts of Crown land. Gradually, more privately held land was brought under the Torrens system after its inception, and therefore only isolated regions of general law (old system) title were left. It needs to be mentioned at this point that the two models of land title, general law and the Torrens system operate simultaneously, and in concert with statutory tenures regarding Crown land.

Features of Torrens System: It has been argued by some of it makes that the property law in Australia does to some extent is influenced by the concepts of property law from England. Particularly the courts and legislatures in Australia have not completely dispensed away with received law and its associated values and concepts. This is particularly the case in context of equity where the property law of Australia is strongly impacted by the English equitable doctrines.[4] As compared to this situation, it was stated in Mabo (No 2) v Queensland[5] by Brennon J that "property is no longer the prisoner of imperial history". But it can be respectfully suggested in this regard that still the property law in Australia remains the prisoner of historical development in several respects, particularly in view of the fact that it acknowledges the English maxims of equity.

Problems with the old system of title: there were some priority rules in the previous system that will general and inconsistent. In some rare cases, where the land was still not registered, in fact, these priority rules still apply as mentioned in Barry v Heider.[6] The problems that were present in case of the old system were related to the need for reviewing each sale of property or what was known as the 'Chain of Title'. For this purpose, lengthy inspection of each deed and conveyance of counsel was required in order to make sure that each woman had passed the lives and property and reviewing the interests that was still held by others. Different rules of notice were present in case of the old system as a result, there was an expectation to inspect the land, title documents and the general law deeds. There were three types of notice present, actual, imputed and constructive. All these notices were sufficient to establish the contribution of an earlier equitable interest on the sale of property. There will complicated rules related with weighting of nature and the condition of respect in equitable interest, manner and circumstances of acquisition and the overall conduct of parties need to be considered under the old system as mentioned in Rice v Rice.[7]

Problems with the Old System of Title

In Breskvar v Wall,[8] Barwick J had described the Torrens system as not a system of registration of title, but it was a case of title by registration. The registration under Torrens system had been established with a view to protect the purchasers from any uncertainty of notice and different rules regarding prior legal and equitable interests. Hence the concept of indefeasibility is basic to the Torrens system. This suggests that the registered proprietor is only subject to the estates and the interests that have been mentioned on the registered even if there are certain exceptions present. The concept of indefeasibility can be considered as a basic part of God's system. However, in the beginning, the concept of deferred indefeasibility has been accepted in Australia.[9] The meaning of the situation was bad in certain cases of fraud with the genuine purchaser, indefeasibility was not conferred until the innocent proprietor as well as an innocent purchaser were present. However this position was overruled in Frazer v Walker. The same was also accepted in Breskvar v Wall, which means that now indefeasibility is passed immediately to the purchaser of property.

According to the widely held view, the large system of land registration has proved to be a successful system. Perhaps this is the result of its ability to allow simple searches in order to see the interests that were attached to the land. This system also allows the persons purchasing property to avoid expensive queries and searches. This is the result of one of the pillars of the system, that the register reflects everything. As mentioned by Edwards J in Fels v Knowles.[10] At the same time, this legal position is also consistent with the Torrens ideology of "Mirror Principle". Before Torrens, the searches that were conducted in order to prove title were complex and expensive.[11] Hence it was stated that "registration therefore provided no insurance regarding the validity and it only provided priority if valid". As a result of this position, INS was created that complex, expansive and time-consuming searches have to be conducted and there was still a risk that even after the such as been conducted, there was an inherent risk that the surge may not find out the defect in title.

Due to this reason, generally indefeasibility is described as the basic feature of the Torrens system. It has been suggested that the purchasers are aware of the interests by buying the property. However, the principle of indefeasibility has also faced a lot of criticism. It has been argued by some experts that in many cases, it is time thing for the courts to impose restrictions on indefeasibility in order to do justice in a given case. A large number of exceptions or limitations are present in case of the principle of indefeasibility in Australia. These include the cases of fraud or to protect the personam rights.[12] However, it can be argued in this regard that these exceptions or limitations in fact act to reduce the effectiveness of indefeasibility and as a result, they undermine the original purpose of the dollar's system to create certainty and the ease of purchase. It has also been generally suggested that as a result of indefeasibility, certainty is increased for the purchasers. However, it is also true that there are several limitations present and the in personam exception has also been criticized severely for undermining indivisibility and as a result, the Torrens system as a whole.

In Personam Rights

In Personam Rights: In personam rights take place when a proprietor has entered into a transaction that leads to personal obligations/equities. In an English case titled, Frazer v Walker[13], it was stated that a person cannot rely on merely the registration for defeating personal obligations. The main example from Australia in this regard is present in the form of Bahr v Nicolay.[14] In this case, Bahr's had agreed to sell the land belonging to them to Nicolay but a condition was attached that they were going to hold a lease of land for three years and were going to buy back the land after the conclusion of the lease. Later on, Nicolay agreed to sell the land to Thompsons who had also acknowledged the arrangement in writing. It was heard by the court that mainly due to the assurances of the Thompsons, a right in personam had been created and as a result their title was not indefeasible. In this context, the notion of unconscionability was also discussed by the court, and it was suggested that having notice and the undertaking to adhere to the notice are two different things. Arguably this finding is in contrast with the suggestion that notice is no longer relevant under the Torrens system, and it appears to undermine and defy the concept of indefeasibility.


It has also been suggested by some critics that it is arguably the most unclear part of the system. But at the same time, they also admit that it is too late to retrace the steps of 'in personam'. It has also been argued by some scholars that in personam does not go far enough. Therefore it has been suggested that the view expressed in White v Tomasel[15] by McMurdo J. needs to be adopted and unconscionability should not be a necessary element in case of every in personam claim. However, it is also been suggested that if indefeasibility was let down on the grounds of unconscionability only, even the most severe critics of in personam have admitted that the decision given in Bahr v Nicolay was correct and therefore the principle of indefeasibility should not be used only by the registered proprietor for the purpose of circumventing voluntary obligations. It has been nicely stated by Brennon J. that indefeasibility has been designed with a view to protect the transferee from the defects that are present in the title of the transferor and not for the purpose of freeing the transferee from the interests that are present on his own title. In fact, it is easy for the critics to discover the trade-offs, where the concept of indefeasibility has been compromised for the purpose of achieving individual justice. But it can also be argued that there appears to be an unfair focus present on the criticism of the exceptions or limitations to indefeasibility and not a legitimate focus on the protections that are provided by the Torrens system. Therefore it can be suggested that the Torrens rules tried to replace the earlier system, and it has also been generally stated that this system have not established a company new system of conveyancing. It has also been suggested that the Torrens system had superimposed its ideas on the present system. Similarly, the supporters of in personam also claimed that the principle of indefeasibility in the Torrens system only serves to protect the title from unregistered interests and it does not provide a cloak of immunity to indulge in wrongful conduct. There are many who also claimed that the exception of in personam as not being a greatly described and it needs to be categorized as an area not falling in terms of indefeasibility. It has also been suggested in this context that indefeasibility covers the previous adverse claims and on the other and in personam is only related with the claims that are independent of prior title. After considering the original Torrens statute from South Australia it can be said that indefeasibility only extend to 'estates, liens or interests, and it does not try to cover legal or equitable actions that have been mentioned in Frazer v Walker'.[16]

Criticism of the Principle of Indefeasibility

The Torrens System: the Torrens system can be described as the legal mechanism that can be used for the solid information regarding acquisitions and dealings in land in the public register. The basic feature of Torrens system is that there is a register of proprietary interest in land. This register is maintained by the registrar of land titles and is publicly accessible. According to the Torrens system, the title to land is granted on the basis of the act of registration. In this case, the registration does not merely formalize and recognize the existing title, but the legal title in land is itself created as a result of registration.

Indefeasibility of title: Another important feature of the Torrens system is the indefeasibility of title. Hence, generally the unregistered interests will not be considered as sufficient to defeat a registered legal proprietary interest. Due to the reason that the register is conducive, an indefeasible title is conferred as a result of registration, although there are certain exceptions present. The Torrens system was proposed by Sir Robert Torrens. In 1984, and then it was introduced in South Australia. The purpose behind the introduction of this system was to introduce a more efficient, cheaper and a reliable way to transfer land and also to ensure certainty of title. The intrinsic problems present in case of general law land titles have been overcome with the introduction of:-

Public title documents: due to a private system of title documents it becomes difficult to trace back to a chain of title in order to ensure that the current owner of land as good rule of title (and therefore a certain, unimpeachable title that is capable of sale).


This problem was not much prevalent in England due to the reason that typically the land was transferred within families.

However, a number of problems were present with the earlier system of private titles: for example,

The documents and deeds would go missing;

Informal equitable interests were not recorded and therefore they could not be traced through title deed.

Due to the doctrine of notice, bona fide purchasers were bound with knowledge of earlier equitable interests to continue to recognize these interests.

Efficiency and reliability: The Torrens system had been designed in such a way that it was more reliable, as well as cheaper as compared to the general law system. It was costly and labor-intensive to trace title claims. The search of register can also be done quickly, and the transactions could be noted and recorded easily.

Indefeasibility of title: As a result of the introduction of the Torrens system, doctrine of notice was abolished in favor of people who have registered their interest in the land. The Torrens system had effectively abolish the doctrine of notice, in case of registered titles. The title to land was conferred by an entry into the public register. This title had a priority over the unregistered equitable interests. As a result of the fact that the registration of was considered as conclusive and indefeasible, there was no more any need to look behind (to find out the history of) a title purportedly held.

A look at the preamble of the Real Property Act,[17] which was the statute through which Sir Torrens gave initial form to the system, clearly indicates that he was inspired as a result of their dissatisfaction that was present with the system of legal and equitable estates and also with complexities in conveyancing due to which the division had arisen. The present system of title registration is completely in contrast with the earlier procedure to transfer proprietary interest that was based on written deeds. Hence, historically the process of convincing, or the process through which the interests in land were transferred from one owner to the other, mainly operating on the basis of a contractual regime that was supported by professional practices of solicitors developed over a long time.

Fraud can be described as an exception that is applicable to the indefeasibility of title under the Torrens system. However, he needs to be noted that the principle of fraud has been strictly interpreted. As a result, it excludes 'equitable fraud' out of the scope of statutory definition. For example, in Corin v Patton,[18] it was stated by the court that would title is past when all the steps have been performed by the tuner which were reasonably required in order to give effect to a transfer.

In the same way the decision given in Barry v Heider makes it clear that under the Torrens system, equitable interests can be given effect to if they are recognized. Different houses have been given the question of the source of this recognition. For example, Griffith CJ has described the source as being legislated in nature, which invests upon the interpretation of the relevant statutory instrument. As compared to it, Isaac J had used the doctrine of conscience in order to justify the continuous recognition of equitable principles in statutory environment.

As noted above, the interaction that takes place between legal Torrens interests and the informal equitable interests is like the interaction that takes place between native title rights and the common law. This interaction is related with the intersection of two systems, while one is the dominant system torrents and the other is the secondary system, equity. Interests need to be recognized by Torrens system, but there are recognize is that the registered as well as unregistered. Therefore, basically, the Torrens sets up a priority system and also the mechanism that can be used for regulating the disputes regarding priorities. Hence, subject to certain exceptions, the registered title rules over equitable interests. There are certain circumstances where the Torrens system recognizes the equitable interests as is the case with property law which recognizes native title at some point of intersection. However it needs to be noted that generally a registered title extinguishes an equitable interest. 

In this context, some authors have argued that the judges had been successful in discovering a wide range of legal and equitable rules that qualified the protection that is otherwise provided by registration. But in this regard, it also needs to be noted that Moses and Edgeworth had made a point according to which most of the commentators have wrongly focused on the exceptions present in personam instead of the protections that are granted to the registered proprietors by the Torrens system.[19] While it may be significant that in personam should not be interpreted to widely that the results in undermining the Torrens system, but overall it is significant in promoting certainty and it cannot be held to the rotten at the foundations.

Conclusion:

It can be stated in the end that the Torrens system had not been successful to completely rid itself off, the more general law system, as there are certain remains of common law and equity that are still applicable today. It has been argued by some critics that these result in interfering with the principle of indefeasibility and also undermined the Torrens system as a whole. However it can be stated that overall Torrens had been successful in creating a system that is much less confusing, easier to search and is also more certain, as compared to its predecessor. Even if it is not hundred percent certain, but the foundations of this system are clearly much less rotten than the previous system.

It has been confirmed by Barry v Heider[20] registration in itself creates a proprietary interest in land. It is not merely the matter of formalizing a present legal right as that right is conferred by registration itself. This case can also be described as an authority in favor of proposition that the equitable title is valid under the Torrens system if it does not exclude the operation of equity. For example, it needs to be noted that in the present case. The fraud committed by Schmidt could have provided an alternative ground on which the transfer of land could have been set aside. Although it is a narrow concept of fraud under the common law that is recognized but if it is established, it can act as an exception to indefeasibility.

Therefore, in the end it can be concluded that equity needs to be considered as 'oiling the mechanisms of a statutory scheme'. The 'modifications' made to the Torrens system had resulted in recognizing registered and unregistered interests, as well as the operation of equity. This view is reflected by the decision given in Barry v Heider but still, there is some tension present between equitable and legal estates in land under the system.

Barry C Crown, ‘Equity Trumps The Torrens System’ [2002] July, Singapore Journal of Legal Studies 409, 409

Jonathan P Moore, ‘Equity, Restitution and In Personam Claims under the Torrens System’ (pt 1) (1998) 72 Australian Law Journal 258

Kelvin F K Low, ‘The Nature of Torrens Indefeasibility: Understanding The Limits Of Personal Equities’ [2009] 33 Melbourne University Law Review 205, 206

Lynden Griggs, ‘In Personam, Garcia v NAB and the Torrens System – Are they Reconcilable?’ (2001) 1(1) Queensland University of Technology Law and Justice Journal 76

Lyria Bennett Moses and Brendan Edgeworth, ‘Taking it Personally: Ebb and Flow in the Torrens System’s In Personam Exception to Indefeasibility’ [2013] 35(1) Sydney Law Review 107

Richard Wu and Mohd Yazid Bin Zu Kepli ‘Expedition of Torrens system in the common law world and its Asian development in Singapore and Hong Kong’ (2012) 2 Property Law Review 99, 102

Roy A. Woodman, ‘The Torrens System in New South Wales: One Hundred Years of Indefeasibility of Title’ (1970) 44 The Australian Law Journal 96.

Tang Hang Wu, ‘Beyond The Torrens Mirror: A Framework of The In Personam Exception To Indefeasibility’ (2008) 32 Melbourne University Law Review 672, 672

Barry v Heider (1914) 19 CLR 197

Mabo v Queensland (No 2) - [1992] HCA 23

Barry v Heider (1914) 19 CLR 197

Rice v Rice (1853) 2 Drew 73

Breskvar v Wall (1971) 126 CLR 376

Fels v Knowles (1906) 26 NZLR 604

Frazer v Walker [1967] 1 AC 569

Bahr v Nicolay (No. 2) (1988) 164 CLR 604

White v Tomasel [2004] 2 Qd R 438

Frazer v Walker [1967] 1 AC 569

Corin v Patton (1990) 169 CLR 54

Real Property Act, 1857 (SA),

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