Assignment Three 201001

PART A 1. Advise Joyce as to whether her concerns are justified: would her paramount interest in the property be protected if she settles the sale of the property immediately, prior to the discharge of the mortgage being registered? (4 Marks) s43A of the Real Property Act 1900 (NSW) 1 (the 'Act') is paramount in determining whether Joyce is protected. The purpose of the provision is to protect purchases in the period that extends between settlement and registration 2 . In order to ensure Joyce's protection, she must be a bona fide purchaser 3 , which can be assumed from the facts. Furthermore, Joyce must have given value 4 (Joyce's supply of $700,000 for the exchange of the contract implies such value), she must be aware of the mortgage 5 (similarly, established in the facts), and registration must be reasonably prompt 6 . Per s43A of the Act, Joyce will have to ensure that all required documents needed for registration are in registrable form in order to be protected from Quahog Savings and Loans (QSL) mortgage 7 . If these details are followed and settlement occurs, Joyce will have a legal interest. Therefore would be protected prior to the registration of the discharge of mortgage 8 . 2. If Joyce did proceed with settlement but was yet to register, what would your advice be to Cleveland? Could he take any action to protect his interest? (4 Marks) If Joyce fails to promptly register, Cleveland may have the ability to stop the registration of sale documents. In order to do so, Cleveland must lodge a caveat, otherwise Joyce's interest would gain indefeasible title 9 . This caveat would act as an injunction to the Registrar-General to prevent registration of dealings to the Spooner Street property 10 and allow for Cleveland to give notice to Peter that he will be pursuing repayment 11 . This caveat, however, does not entirely protect Cleveland as it is considered constructive notice and not actual notice 12 . Furthermore, to ensure legitimacy of his caveat, Cleveland would have to ensure that it is stamped for the same amount as his original mortgage of $45,000 as well as being in registrable form specifying his equitable interest 13 . If Cleveland manages to properly lodge this caveat, the Registrar-General will be unable to lodge any further registrations and thus Cleveland would be entitled to be paid back his loan over Joyce's settlement 14 . 3. Would your advice to Cleveland be any different if he discovered the sale prior to settlement? (2 marks) 1 Real Property Act 1900 (NSW) 2 Barlin Investments Pty Ltd v Westpac Banking Corporation [2012] NSWSC 699 per Ball J. 3 Diemasters v Meadowcorp (2001) 52 NSWLR 572. 4 Westpac Banking Corporation v Ollis [2008] NSWSC, [49] - [56]. 5 Drulroad v Gibson (1992) NSW ConvR 55-637. 6 Couretenay v Austin [1962] NSWR 296. 7 Real Property Act 1900 (NSW) s 43A(1). 8 Ibid. 9 Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22. 10 J&H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 552. 11 Real Property Act 1900 (NSW) s 74F(1). 12 Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128. 13 Real Property Act 1900 (NSW) s 74F(5). 14 Ibid s 74H(1)(a).

There are alternatives that Cleveland could seek upon discovery of the sale prior to settlement. Cleveland could apply to the Supreme Court for an order to enforce the terms of the unregistered purchase and secure the sale of the property 15 . However, the court will have a wide discretion in granting such an order. Moreover, as the holder of an unregistered mortgage, Cleveland could also apply for an order compelling the Land Titles Office to register the mortgage 16 . PART B Advise Veronica as to whether she is bound: 1. by the mortgage to Archie (4 marks) At prima facie it would seem that Veronica would be bound to the mortgage to Archie. Although having no legal interest 17 , as it has not been registered, the mortgage would be binding under equity. This would be binding due to the fact that Archie has lodged a caveat. The purpose of which would be to act as an injunction for any registration that is applied to the Registrar-General 18 . Thus, ensuring that Archie receives repayment for such a mortgage. However, as was established in Leros v Terara , upon registration of sale, any unregistered mortgages are to be eliminated granting indefeasible title to the registered proprietor 19 . Therefore, as Archie was notified of the sale to Forsythe and made no objection to the sale, Archie's mortgage would be eliminated, and Veronica would no longer be bound to it. Also, of note is the forged nature of Veronica's signature on Archie's mortgage. However, Mayer v Coe illustrated that if the fraud is executed by a third party (in this scenario, Betty) it does not constitute an exception to indefeasibility 20 . 2. by the transfer of the property to Forsythe? (6 marks) Veronica wishes to know whether she is bound to the transfer of the property to Forsythe. Forsythe has, on honest and good faith, agreed to a contract of sale to Veronica, which is secretly forged by Betty. Pursuant to s41 of the Act, at prima facie, the person on Torrens Title register has immediate and indefeasible title to the property as the act of registration equates to title 21 . In this case Veronica must "bring the fraud home to the registered proprietor" 22 in order to claim Forsythe's title as defeasible. 15 Goldstein v Shyzi Pty Ltd [2017] NSWSC 398. 16 Unregistered Mortgages: Are They Really Worth The Paper They Are Written On? (2018) Meyer Vanderberg < https://www.meyervandenberg.com.au/ebrief/unregistered-mortgages/#:~:text=While%20an%20unregistered %20mortgage%20gives,benefits%20as%20a%20registered%20mortgage .>. 17 Real Property Act 1900 (NSW) s 43A(1). 18 J&H JUST Holdings v Bank of New South Wales (1971) 125 CLR 546 per Barwick CJ 552. 19 Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22. 20 Mayer v Coe (1968) 88 WN (NSW) (pt 1) 549. 21 Real Property Act 1900 (NSW) s 41. 22 Assets Co v Mere Roihi [1905] AC 176.

For Forsythe to be guilty of fraud a determination must be made as to whether his agent 23 , Betty, was acting within her scope of authority to maintain the property. As Betty is bound to disclose all relevant information, her actions to not disclose the property as Veronicas and rather state that it was "nearby" is beyond her scope, thus, Betty was acting fraudulently. Therefore, Forsythe would be able to claim ignorance of the fraudulent activity. Furthermore, as it is the fraud of a third party, Betty, her actions do not constitute an exception to indefeasibility 24 . Thus, Betty's knowledge and fraud would not be implicated on towards Forsythe. 25 Unfortunately, Veronica would be unable to implicate Forsythe in Betty's actions and therefore the priority rules would take precedent with his registered title taking precedent. It is worth noting that although Veronica is bound to the transfer of the property to Forsythe. s120 of the Act provides a statutory cause of action for persons who suffer loss or damage from fraud 26 . 23 Cassegrain v Gerard Cassegrain (2015) 254 CLR 425. 24 Mayer v Coe (1968) 88 WN (NSW) (pt 1) 549. 25 Cassegrain v Gerard Cassegrain (2015) 254 CLR 425. 26 Real Property Act 1900 (NSW) s 120(1).