Clements v Ellis [1934] HCA 18

Clements v Ellis [1934] HCA 18 - HCA 1934 case summary — Zoe

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agent of the vendor, who handed it to one, B, for the purpose in part of his paying off 'and procuring a discharge of the mortgage. B, having misappropriated such part of the money as was required to discharge the mortgage, prepared a discharge of mortgage, forged thereon the signatures of the mortgagees, and lodged the forged discharge of mortgage at the Office of Titles, together with a transfer, which disclosed no encumbrance, signed by the vendor and purchaser, for registration. An unencumbered certificate of title was subsequently issued to the purchaser. The Supreme Court of Victoria (Lowe J.) held (1) that the forged discharge of mortgage was a nullity, and (2) that the purchaser not having dealt at all with the registered proprietors of the mortgage, did not obtain either a valid transfer of the mortgage or a valid instrument of discharge, and, consequently, could not become effectively registered as proprietor of the land free from encumbrance. On appeal to the High Court : - Rich J. was of opinion that sec. 72 of the Transfer of Land Act provided the purchaser with complete protection, as there was no fraud on his part, and no forgery of such a kind as to prevent him having dealt with a real person, and that sec. 179 did not in any way restrict the operation of sec, 72, the result being that the purchaser was properly registered as proprietor of the land free from encumbrance. Dixon J. was of opinion that the con- ditions which give a transferee indefeasibility of title are not satisfied when up to the time of the transfer being presented for registration the transferor is not registered,in respect of an unencumbered estate for which the transfer is apt, and the transferee has dealt, not upon the faith of the existing state of the register, but upon the footing that it will be put in a condition to enable him to be registered free from encumbrance ; and that a prior registered estate or interest, for the removal of which from the register there is no authority but a forged or void instrument, is not destroyed, unless afterwards a person who, according to the existing condition of the register is entitled to do so, gives a registrable instrument which is taken bona fide for value and registered. Evatt J. was of opinion that the purchaser should succeed ; A bona fide purchaser of the fee simple of registered land to

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memorandum of discharge of the mortgage, signed by the plaintiffs, discharging the land from the whole of the moneys secured by the mortgage, was produced by one Beamsley to the Registrar of Titles, who thereupon made an entry upon the original mortgage to the effect that such mortgage was wholly discharged, and the land thereupon ceased to be subject to or liable for such moneys. The discharge of mortgage was not in fact signed by the plaintiffs or either of them, or by any person or persons acting on their behalf, and the signatures thereon purporting to be the signatures of the plaintiffs were forgeries, and the document was so produced to the Registrar of Titles and such entry was made by the fraud of Beamsley, without the authority, knowledge or consent of the plaintiffs or either of them. At the same time, i.e., at 12.34 p.m. on 4th October 1929, an instrument of transfer, whereby the defendant Lily Holmes transferred her estate and interest in the said land to the defendant Clements, was lodged in the Office of Titles, and the defendant Clements became registered as the proprietor of an estate in fee simple in the said land free from all encumbrances. The plaintiffs alleged that Beamsley, in so producing the discharge of mortgage for registration, did so as agent of the defendant Lily Holmes, and/or the defendant Clements, or alternatively on his own behalf and for his own purposes; that the defendant Lily Holmes had not paid to the plaintiffs the sum of £800, and there was then due and owing by her to them the sum of £1,056 for principal and interest, payable under the instrument of mortgage, and that by reason of the matters aforesaid the plaintifis had been wrongfully deprived of the security over the land provided by the instrument of mortgage for the repay- ment of the loan and interest, and had suffered damage in that they were unable to obtain payment thereof from the defendant Lily Holmes, and were deprived of their security. The plaintiffs claimed (a) from the defendant Lily Holmes, the sum of £1,056, and (b) against the defendants Clements and/or the Registrar of Titles, (i.) an order (a) that the duplicate of the certificate of title be delivered up to the Registrar of Titles ; (b) that the Registrar of Titles cancel, delete or remove from such certificate of title and the duplicate thereof and mortgage the entries made in consequence of the lodging of the

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discharge of mortgage by Beamsley, and make such amendment, alteration or endorsement on the certificate of title and duplicate and the mortgage as might be necessary to give to the plaintiffs the security over the land which they had when the mortgage was registered; (c) that the duplicate of the certificate of title and mortgage be delivered up to the plaintiffs ; (ii.) £1,056 damages. The defendant Holmes, by her defence, in substance alleged that if Beamsley produced the purported discharge for registration, he did not do so as her agent. The defendant Clements, by his defence, in substance alleged that Beamsley did not produce the purported discharge of mortgage as his agent, and that he (Clements) was at all material times a bona fide purchaser of the legal estate in the land for value, without notice of the plaintiffs' rights therein. As to the relief claimed in par. (b) (i.) of the statement of claim, Clements alleged that in becoming registered proprietor of the land under the Transfer of Land Act he dealt with the defendant Lily Holmes, the registered proprietor thereof, bona fide and for value, that if any such forgery or fraud as alleged was committed, Clements was not a party or privy thereto; that the Registrar, in addition to the entries of discharge made upon the certificate of title and upon the original mortgage also made an entry as required by the Transfer of Land Act upon the duplicate mortgage ; that Clements was at all material times, or, alternatively, before becoming aware of the plaintifis' claims, the registered proprietor of the land under the Transfer of Land Act free from encumbrances ; and that the Court had no jurisdiction to direct the Registrar to do the acts claimed by the plaintiffs. As to the relief claimed in par. (6) (ii.) of the state- ment of claim, Clements claimed that he was at no time a person upon whose application any erroneous registration to the prejudice of the plaintiffs was made by the Registrar; that he did not acquire title to the estate or interest of the plaintifis through fraud, error or misdescription, and accordingly no other right to damages against him was available under the Transfer of Land Act or other- wise ; that the plaintiffs had not exhausted their legal remedies against the defendant Lily Holmes, and were consequently unable to show any damage resulting to them from the loss of the interest

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Holmes, who, if any person was at any time registered as proprietor of the plaintiffs' estate or interest through fraud or error, was the person so registered; that Beamsley was not his agent to do, and had no authority from him to do, any of the acts or things alleged ; and that the plaintiffs were estopped from relying upon their claims against him, or alternatively were disentitled by their own conduct to the relief sought, inasmuch as the plaintiffs being trustees had in breach of trust allowed Beamsley to retain in his possession the certificate of title and the mortgage, and in breach of trust had for a period of several years failed to collect or endeavour to collect interest on the mortgage, and had thereby put it in Beamsley's power to commit the alleged fraud, or had represented that Beamsley was a person having authority to deal with the documents relating to the land ; and moreover that he (Clements) had paid the whole of his purchase money to one Holmes, husband of the defendant Lily Holmes, to be paid to the plaintiffs for the purpose of obtaining a certificate of title in his (Clements') own name free from encum- brances, and thereafter he obtained a certificate of title free from encumbrances in his own name, which purported to state that the mortgage in question had been discharged, and by reason of the plaintiffs' failure in breach of trust to collect interest over a long period, they induced him to believe that the mortgage had been discharged, and that the discharge referred to on the certificate of title 'was a genuine one ; and as a result of these facts after the issue of the certificate of title free from encumbrances to him on 18th November 1929 he equitably mortgaged the land to the Bank of New South Wales to secure the sum of £3,000 advanced to him, and interest, which mortgage was still in force, and that he until September 1932 believed that the plaintiffs' mortgage had been duly discharged, and acted in accordance with such belief, in that he did not in the meantime attempt to obtain repayment of the moneys from Beamsley, who, prior to September 1932, became impecunious, and he (Clements) in his financial expenditure had proceeded on the basis that he was entitled to the property free from encumbrances. Alternatively, Clements claimed that to the extent of the sum of £3,000 and interest,

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to pay to the plaintiffs the moneys owing to them on mortgage, and to procure a discharge thereof. Holmes paid the cheque for £1,200 to Beamsley, and the latter paid it into his trust account on 21st June 1929. On the same day Beamsley drew a cheque on this account for £400 in favour of Mrs. Holmes, which she paid into her account on 26th June, and which was subsequently paid by Beamsley's bank. The balance of the £1,200, namely, £800, which should have gone to discharge the mortgage to the plaintifis, Beamsley misappropriated. His Honor also found that Beamsley prepared a discharge of mortgage bearing date 21st June 1929, and thereon forged the signatures of the plaintiffs. On 1st October 1929 both Mrs. Holmes and Clements signed a transfer of the land, which indicated no encumbrance thereon. This transfer was lodged in the Office of Titles together with the forged discharge of mortgage and the duplicate certificate of title on 4th October 1929, and, the forgery not being detected, in due course the certificate of title was endorsed with a memorandum of discharge of the mortgage and of transfer to Clements. His Honor drew the inference that Beamsley either personally lodged these documents or caused them to be lodged, and found that according to the true bargain between Mrs. Holmes and Clements the transfer was to be free of encumbrances, and that Clements had the right to require, and Mrs. Holmes was therefore under the obligation to procure, a discharge of the mortgage she had given to the plaintifis. His Honor held that the fact that Clements did not insist upon getting the transfer and discharge of mortgage in exchange for the balance of purchase money did not affect his rights and obligations, and that what followed after the execution of the transfer, in the lodging thereof and of the forged discharge of mortgage in the Office of Titles, was in the circumstances 'of this case merely machinery to give effect to the rights of the various parties as effected on settlement. His Honor found that Beamsley was not the servant of any of the parties, and his mere act of forgery did not impose upon any of them liability for that forgery on the footing that he was an agent. His Honor also held that it was not material to consider for the purpose of imposing liability the question raised by the statement of claim: On whose

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Enus, speaking, two, namely, the effect of the forged document in itself,

- and the question whether the registration provisions of the Transfer of Land Act had, in favour of the registered proprietor Clements, given any validity to that document. His Honor held that at common law, apart from the Transfer of Land Act, the forgery was a nullity, and that Clements could not derive protection from sec. 179 of the Transfer of Land Act, as that section affords protection only to those who actually deal with and derive right from a proprietor whose name is upon the register, and Clements dealt only with the proprietor of the land subject to the mortgage, and did not deal at all with the registered proprietor of the mortgage; that Clements had contracted to buy both Mrs. Holmes' interest and that which resided in the plaintiffs; that he could only become effectively registered in respect of the latter by a valid transfer of their interest to him, or by a valid instrument of discharge, and he got neither. His Honor also found that the alleged estoppel in favour of Clements had no foundation. As to the priority set up by Clements in favour of his creditor, the Bank of New South Wales, to whom Clements had equitably mortgaged the land, the Bank of New South Wales was not before the Court, and his Honor declared that his order was without prejudice to any question of priority between the plaintiffs' mortgage and the rights of the other encum- brancer. His Honor accordingly ordered the defendant Clements to deliver up to the Registrar of Titles for rectification the duplicate certificate of title in question, and ordered the Registrar to rectify the certificate of title and the duplicate thereof so as to restore to the plaintiffs the security given to them over the land by the instru- ment of mortgage No. 590,322, unless in the meantime the defendant, Lily Holmes, should have paid the moneys due under the mortgage, and also directed as against Clements and the Registrar of Titles that the duplicate of such instrument of mortgage should be delivered to the plaintiffs. His Honor also held that the claim against the Registrar for damages against the assurance fund failed. From this decision the defendant Clements now appealed to the High Court.

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Ricx J. Mrs. Holmes, who was the registered proprietor of certain land under the Transfer of Land Act, agreed to sell it to the appellant for the sum of £1,500. On 8th June 1928 he paid Mrs. Holmes' agent first the sum of £2 and then a further sum of £48 on account of a deposit of £300. During the oral bargaining, nothing was said about the existence of a mortgage registered in the names of the plaintiffs (respondents) over the land, and the appellant was not aware of it. On 2nd July 1928 a formal contract of sale was signed by the appellant, which embodies the conditions in Table A of the Transfer of Land Act. Clause 10 of the written contract pro- vided that " the said property is sold subject to the existing mort- gage." Lowe J., who tried the case, was " quite satisfied on the evidence that neither " the appellant "nor Mrs. Holmes intended by the formal contract to vary the terms of the bargain they had orally arrived at in regard to the purchase price, and that neither intended by the words of the condition quoted to impose any greater obligation on" the appellant "than to pay the sum of £1,500 and interest" (1). From first to last the contract was a purchase by the appellant from a registered proprietor of an unencumbered estate. On 7th July 1928 the appellant paid £250, the balance of the deposit. On 20th June 1929 the appellant paid Mrs. Holmes' husband and agent in this regard the balance of purchase money, namely, £1,200. The appellant asked Holmes to allow him to inspect the certificate of title. Holmes said it was in the possession of one Beamsley, and took the appellant to the latter's office. After a conversation with Beamsley, Holmes told Clements that he could not then produce the certificate of title as there was a mortgage upon it, but that he would procure a discharge of the mortgage and let the appellant have the certificate of title later on. The appellant was content with this assurance, left the cheque with Holmes and departed. The appellant asked Holmes to see that the transfer was properly attended to, and to do it by whatever procedure he thought fit. Lowe J. found the following further facts relating to the transaction (2) : - '" The contract incorporated the provisions of Table A of the Transfer of Land Act 1915, which, in clause 7,

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provided that the transfer was ' to be prepared by and at the expense - of the purchaser.' I draw the inference from the evidence before - me that in the preparation of the transfer to Clements, Beamsley was instructed by Holmes and was the agent of Clements. He was, on the other hand, in my opinion, Mrs. Holmes's agent to pay to the plaintiffs the money owing to them on mortgage and to procure a discharge thereof. Holmes paid the cheque for £1,200 to Beamsley, and the latter paid it into his trust account on the 21st June 1929. On the same day Beamsley drew a cheque on this account for £400 in favour of Mrs. Holmes, which she paid into her account on the 26th June and which was subsequently paid by Beamsley's bank. The balance of the £1,200, namely, £800, which should have gone to discharge the mortgage to the plaintiffs, Beamsley misappro- priated. Apparently realizing, however, that the transfer to Clements of an unencumbered interest in the land sold could not be made if matters remained in this state, Beamsley moreover prepared a discharge of mortgage bearing date the 21st June 1929, and thereon forged, as I find, the signatures of the plaintiffs. Time went on, but the transfer was not executed. Clements' requests for explanation of the delay brought forth various excuses, until, on the 1st October 1929, both Mrs. Holmes and Clements signed a transfer of the land, which indicated no encumbrance thereon. This transfer was lodged in the Office of Titles together with the forged discharge of mortgage and the duplicate certificate of title on the 4th October 1929, and, the forgery not being detected, in due course the certificate of title was endorsed with a memorandum of discharge of the mortgage and of transfer to Clements. I draw the inference from the evidence that Beamsley either personally lodged these documents or caused them to be lodged. The result therefore is that the plaintiffs to whom the mortgage money has not been repaid find themselves, as the register now stands, deprived of their security over the land; that Mrs. Holmes has lost the mortgage money which she supposed had been paid to the plaintiffs; and that Clements, who has paid the whole of the money he agreed to pay for an unencumbered title, is threatened with an encumbrance of £800 and interest on the land he bought."

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proprietor, and it intimates that such a person shall enjoy certain immunities. Read literally, the section is applicable to such persons irrespectively of whether they procure the registration of the interest which they may acquire from the registered proprietor. But the substance of the scheme of the Act is to substitute conveyance by registration for conveyance by deed (Perpetual Executors and Trustees Association of Australia Ltd. v. Hosken (1); Crowley v. Templeton (2) ). Until registration, the estate and interest of the proprietor remain in him ; and until then the proprietor has not done all that is necessary to divest the estate out of himself and vest it in the transferee (Taylor v. Land Mortgage Bank of Victoria Ltd. (3) ). The section then is not available to any person who has not registered the interest which he has so acquired. It applies moreover to the dealing from its initiation down to registration (per Way O.J., Public Trustee v. Arthur (4) ). Construed in this way, what is the operation and significance of the section? Is it intended to confer on the registered proprietor who has acquired his interest from a previous registered proprietor a higher immunity than a registered proprietor who has otherwise acquired it? Or does it impliedly restrict the generality of the immunity conferred by sec. 72? In Assets Co. v. Mere Roihi (5), the Privy Council expressed the view that no distinction can be drawn between the first registered owner and any other, except that a registered bona fide purchaser from a registered owner whose title might be impeached for fraud has a better title than his vendor. The exception is implied in sec. 72. Gibbs v. Messer (6) is explained as being a case in which, by reason of the interposition of a mythical person to and from whom forged transfers were executed, there was nothing to deprive the first registered owner of her property - nothing on which the subsequent registrations could operate (7). Two bona fide purchasers were on the register, and the case turned on the non-existence of any real person to accept a transfer and get registered himself, and then to make a transfer to some one else (8); and not, it is conceived, on

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1929 the defendant Clements, who appears to have made no inves- tigation of the title and to have been unaware of the plaintiffs' mortgage, nevertheless paid over the balance of purchase money, He obtained a cheque for £1,200, and attended with it at the place of business of the vendor's husband, Holmes, who acted in the transaction on behalf of his wife. He asked Holmes for the title. Holmes took him to the office of a neighbouring estate agent named Beamsley, who had, he said, acted for him for a considerable time. After consulting with Beamsley, Holmes said that he could not produce the title then, as there was a mortgage upon it, but that he would discharge the mortgage and let the defendant Clements have the title later. Clements appears to have been content with this statement, and he simply left the cheque with Holmes, who handed it over to Beamsley. Beamsley paid it into his bank account, and drew against it a cheque for £400 which he paid to Holmes. He retained the balance of £800, which was the amount of the plaintiffs' mortgage, ostensibly for the purpose of paying off that encumbrance. But he soon appropriated the money to his own use. After the lapse of some six weeks Clements again applied to Holmes for the title, who again took him to Beamsley. Beamsley said that the delay was caused by the Titles Office. Over the next few months, Clements repeated the request many times, but was put off with the same or similar excuses. A solicitor named McKinley occupied or used the same office as Beamsley, who sometimes acted as his clerk. This solicitor was acquainted with the plaintiffs, and sometimes acted on their behalf. It was he who had in the first place put before the plaintiffs the application of Lily Holmes for a loan, and they had made the investment through him. They had left the duplicate mortgage and certificate of title in his custody on their behalf. On 14th September 1929 McKinley died. On the following day his nephew wrote to the plaintiffs informing them of his death, and adding : - * Uncle has left the whole of his legal documents and affairs in my hands together with certain requests I shall in a day or two be addressing you thereon, so would ask you (if you do not mind) to await same before contemplating the making of any change in relation to your business association with him. In the meantime both Mr. Beamsley and I shall safeguard your interests." Apparently

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feree became registered as proprietor subject to the mortgage, and then afterwards the mortgage was discharged by registration of the forged instrument, indefeasibility could not be claimed for the resulting certification of freedom from encumbrances, except upon the ground, which I consider untenable, that a certificate of title cannot be recalled, although founded upon a forged or void instru- ment, unless it is obtained by fraud to which the proprietor is privy. But when the forged discharge is registered before the instrument of transfer, however short may be the interval of time, the register in that interval is in a condition in which it states a title in the transferor to an unencumbered estate. The transferee, having in good faith paid his purchase money and obtained a transfer in anticipation of the removal of the encumbrance, acquires by the registration of his transfer the unencumbered estate so stated to belong to his transferor, and obtains a certificate of his proprietorship. Ts his title absolute, or is it liable to the reversal of the unwarranted entry made upon the register immediately prior to his registration ? My answer is that his title is not absolute, is not protected from the rehabilitation upon the register of the mortgage, because upon the true interpretation of the Transfer of Land Act. an interpretation settled by authority, to obtain that protection it is necessary to deal with a person who is then actually registered as the proprietor of the estate or interest intended to be acquired. The principle, in my opinion, is that a prior registered estate or interest, for the removal of which from the register there is no authority but,a forged or void instrument, is not destroyed unless afterwards a person, who, according to the existing condition of the register is entitled to do so, gives a registrable instrument which is taken bona fide for value and registered. The justification for destroying an existing legal estate or interest, which has already been duly established upon the register, is, in other words, found only in the necessity of protect- ing those who subsequently deal in good faith and for value in a manner, which, upon its face, the register appears to authorize, and who then obtain registration. Almost since the legislation was first adopted, its application has been found difficult when innocent

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parties, assert conflicting claims to estates or interests, or claims to conflicting estates or interests. A reason for this difficulty is the existence in the statute of provisions which lay down general propositions, without qualifications which other provisions require or clearly imply. By emphasizing one of these provisions and ignoring another, each claim may in turn be supported. Thus the appellant, Clements, relies upon the provision which lays down in universal terms the rule that a certificate of title shall be conclusive evidence of proprietorship ; while the respondents, the plaintiffs, emphasize the provision which relieves from inquiry into the cireum- stances in which registration was obtained only those who take a transfer from or otherwise deal with the proprietor of the estate or interest. The sections which deal with the defeasibility and indefeasibility of titles must be considered together in order to obtain a just view of the meaning of the legislation. In Gibbs y. Messer (1), in the Privy Council, the sections as they stood in Act No. 301 were all examined and discussed closely during the re-argu- ment, a shorthand report of which I have had the advantage of reading. The statement of their effect contained in the judgment appears to me to have been framed by Lord Watson as a brief, but exact, expression of the rule which their Lordships deduced from "the various enactments of the statute relating to the validity of registered rights" (2) which he did not "criticise in detail" (2). But, as the nature or extent and the operation of the statutory principles are in dispute, and as another decision of the Privy Council, Assets Co. v. Mere Roihi (3), is relied upon as supporting the interpretation of the legislation urged by the appellant, I shall state the effect of the material provisions of the legislation. They have undergone no substantial change, except of order, since they appeared in Act No. 301. Sec. 51 of the Transfer of Land Act 1928 ends with a declaration that "the person named in any grant certificate of title or instrument so registered as the grantee or as the proprietor of or having any estate or interest or power shall be deemed and taken to be the duly registered proprietor thereof." Sec. 67 contains the statement: " Every certificate of title issued

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must be remembered that the word " proprietor," which is used in sec, 72, is defined by sec. 4 in terms which require the existence of ownership as well as its registration. Further, the subject of proprietorship is not merely land, but also leases, mortgages and charges. An encumbrance upon or other dealing with a lease, mortgage, or charge, is not notified on any certificate of title (cf. secs. 51, 52 and 62), and, accordingly, some difficulty exists in applying the provisions of sec. 72 literally in respect of these interests inland. But, apart from these difficulties, this section, like sec. 67, must be read subject to the provisions of secs. 80, 81 and 245. Secs. 80 and 81 enable the calling in for correction or cancellation of certificates issued in error, or bearing entries or endorsements made in error, and certificates wrongfully or fraudulently obtained, or bearing entries or endorsements so obtained. Sec. 245 refers to the recovery of land or of any estate or interest therein by any proceeding at law or in equity from the person registered as proprietor. These expressions are of much importance. They imply that the person registered as proprietor may be unable to resist an adverse claim to that property in respect of which he is registered, and the implication extends, not only to land, but to interests therein such as mortgages, which are not the subject of certificates of title. Further, the section expressly authorizes the cancellation of certifi- cates and entries. In reference to the provisions of the present sec. 67, Lord Herschell, during the argument of Gibbs v. Messer (1), suggested that, while the state of the register might be conclusive so long as it stood, that was not a reason why there should not be power to rectify it and set it right. Sir Horace Davey : - "No. I was going to suggest what is the same proposition, that it means conclusive evidence except in an action or proceeding to rescind, or vary, or rectify the register. I am not quite sure that that would be sufficient. We need not discuss it, because everybody admits that it must be read together with the other sections of the Act." Lord Watson : - " It comes to the same thing. The register may be rectified on any of the grounds set forth in the Act." At an earlier stage, Lord Watson had said in reference to the same provision e "The provisions of this Act seem to be perfectly consistent, if you

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The circumstances of the Assets Co.'s Cases (1) arose out of the provisions of the New Zealand law governing native land, the con- version of customary native tenure to freehold, and the registration under the Torrens system of estates acquired therein. Until 1894, when customary land was converted by statute into land in which the native owners, subject to all equities affecting their estates or interests therein and to all existing restrictions on alienation, took estates in fee simple, the native owners of such land could obtain from the Native Land Court declarations of ownership specifying who were the collective owners and what were their shares and identifying the land by means of a sealed plan showing its boundaries. This declaration was embodied in a memorial of ownership inscribed upon the folium of the Court rolls. | After a memorial was obtained, the native owners might sell the land by a transaction conducted in the Court. The sale was effected by a statutory form of transfer, but it was necessary that, after an investigation of the proposed transaction, the Court should make an endorsement upon the memorial that it appeared to be bona fide, and no difficulty existed in respect of the alienation of the land. A certificate of the complete- ness of the sale was required, and a declaration that thenceforth the purchasers should hold the land as freehold. A Crown grant might then be issued. If it appeared that some of the collective owners were unwilling to sell, but that a majority wished to do so, the Court might partition the land, and those who wished to sell might then proceed with a sale of the land apportioned to them. Upon the making of an order declaring that land should be held as freehold, the land came under the provisions of the Land Transfer Act, but, until the registration of a Crown grant, it was made the subject of a provisional register of which the order of the Court formed the first folium. As against the person named in the order of the Court, and all persons claiming through, under or in trust for him, the provisional register was conclusive and the provision of the Land Transfer Act applied. A warrant from the Governor-in-

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thereupon he did so, and closed the provisional register. But the certificate of title was subject to all dealings appearing upon the provisional register, and if, according to it, the estate had already become vested in some other person, the certificate might then be issued directly to him as proprietor. Within a limited time, the Governor-in-Council might order a re-hearing of any proceedings in the Native Land Court, and thereupon the order already made became null, and the entries upon the provisional register were vacated. But if, upon the re-hearing, an order was again made in favour of any of the persons previously found entitled, all dispositions made by them in the meantime regained their efficacy. Trust Commissioners were appointed to supervise the alienation of native Jand, and, after 1881, no instrument might be registered unless bearing an endorsement by a Commissioner to the effect that, after inquiry, he was satisfied of the validity of the alienation according to the true intent of the legislation. When, in 1894, native owners of customary land became ipso facto proprietors of estates in fee simple under the Land Transfer Act, subject to equities affecting the estates, it was provided that persons claiming to have acquired an interest in such land by an alienation might apply to the Native Land Court for confirmation of the alienation, and upon confirmation should he entitled to be registered under the Land Transfer Act as proprietors of the estate or interest acquired. But it was also enacted that an instrument already endorsed with a Commissioner's approval should be deemed to have been confirmed by the Court, and no further confirmation should be necessary. In the Privy Council (1) these provisions were considered to give efficacy to existing transfers approved by a Commissioner, and to authorize the registration of the transferees as proprietors of the new fee simple arising from the statutory conversion of customary tenure into estates. (See Native Land Act 1873, secs. 33, 47, 58, 59, 60, 61, 75, and 83; Native Land Act Amendment Act 1878 (No. 2), sec. 10; Native Land Frauds Act 1881, sec. 15; Native Land Division Act 1882; Native Land Court Act 1886; Native Land Administration Act 1886; Native Land Court Act 1894, secs. 57 and 73; Creditors?

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mortgage by the European so registered to clients of the bank, who ultimately transferred it to the bank, was then given and duly registered. Shortly afterwards a caveat was lodged by the Crown to protect an interest it claimed in part of the land. After the caveat a transfer was presented for registration. This was a transfer to persons whoserights passed to the bank. Registration was prevented by the caveat. Some ten years afterwards an arrangement was made with the Crown by the Assets Co., which in the mean- time had succeeded to any beneficial rights given by the transfer as well as those given by the mortgage. Under this arrangement the Crown was to withdraw its caveat, and steps were to be taken to obtain for the Crown a title to a relatively small quantity of the land, and for the company a title to the balance. Transfers of the respective portions of the land direct to the Crown and to the company were executed by the European, the earlier transfer to the company being discarded. The memorial of ownership and order for freehold tenure in favour of the European were again drawn up and signed by the then Judge on behalf of the former Judge who had made them. The Governor signed a warrant authorizing the issue of a certificate of title to the European, and, upon receiving it, the Registrar issued a certificate of title to the Assets Co. None of the steps taken in the Native Land Court was regular, and the Supreme Court held that the Assets Co. obtained no title to the Jand. The Privy Council reversed this decision, not because it considered the transactions with the native land were regular, but because of the effect of registration. Now it is apparent that this conclusion might be supported because of the effect attributed to the transactions on the provisional register treating the company as bona fide purchasers for value of land held by the transferor upon a registered but defeasible title ; or, on the other hand, upon a view of the effect of the certificate of title issued to the company as an initial registration of land definitively brought under the system. The latter, in my opinion, was the view upon which the decision in this and the other two cases proceeded.

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irregular, but that the irregularities were of such a nature as to affect the jurisdiction of the Native Land Court, and to render its proceed- ings and its order of freehold tenure absolutely null and void on the ground that it was coram non judice. The same contention assumed another shape when relied on to show that the lands in question were never brought under the Land Transfer Act, 1885, so as to render its provisions applicable to them. Their Lordships have very care- fully considered the judgments delivered in the Court of Appeal upon this part of the case, as well as the very able and exhaustive arguments of the learned counsel for the native claimants ; but their Lordships are unable to concur in the view taken by the majority of the Court, and they concur in that taken by Williams J. who dissented from the judgment. The sections making registered cer- tificates conclusive evidence of title are too clear to be got over." Now Williams J. had described the protection given to a regis- tered proprietor's title, and had conceded that the order of freehold tenure forming the first folium of the provisional register had been improperly obtained, and that there were irregularities of procedure in the Native Land Court prior to its issue, but had denied " that a purchaser or other person claiming title bona fide and for value under the order is affected by constructive notice of such impropriety or irregularity " (1). The mortgage and the transfer, registration of which was blocked by the Crown's caveat, he considered, put the mortgagees and the transferees in the position of bona fide purchasers for value (2). The subsequent transfer direct to the Assets Co., which was registered on the provisional register, he treated as com- pleting the title bona fide. Had these dealings been transferred to the register from the provisional register, they would have given a protected title, and the issue to the company of a certificate in its own name gave the same or an equal protection (cf. the New Zealand Law Reports (3) ). These reasons of Williams J. rather rely upon the bona fides of the derivative title shown on the provisional register. It is with this fact in view that the next ensuing observation of Lord Lindley should be read (4): - "In dealing with actions

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proprietor had, ex hypothesi, been transferred from him without lawful authority to a new registered proprietor. Salmond J. said (1): - "In order to avoid misapprehension it is well to observe that the question now under consideration does not relate to the effect of that initial registration whereby land for the first time is brought under the Land Transfer Act in the name of a registered proprietor. The question relates exclusively to the effect of subse- quent registration as against the title of an already registered proprietor. It is obvious that in point of conclusiveness and indefeasibility very different considerations may apply to initial and to subsequent registration. In the case of initial registration in error the contest is between the registered proprietor and outsiders whose unregistered interests have been erroneously disregarded by that registration. In the case of subsequent registration, on the contrary, the contest is between two registered proprietors, one of whom has been displaced by the erroneous registration of the other. As to the former case, there are many different methods by which land may be brought under the Land Transfer Act and initial registration obtained: as, for example, on the application of the owner, or by the issue of a Governor's warrant, or by the registration of a Native Land Court order. Where land is brought under the Act on the application of the owner and in pursuance of a quasi-judicial investigation of the precedent title by the registrar, it is settled law that the registered title so obtained is indefeasible, and cannot be attacked by the owners of prior adverse interests on the ground that the registrar erroneously disregarded those interests and issued a registered title to one who was not entitled to it. All such prior interests are, in the absence of fraud or other specific exceptions, finally and conclusively destroyed by the bringing of the land under the Act and the issue of an adverse title to some other person. The remedy of persons whose titles have been thus destroyed is not by way of attack on the indefeasible registered title, but by way of claim for pecuniary compensation against the assurance fund estab- lished by the Act for this purpose. This was long since determined

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tion of this transfer, and on the same day, there was registered a transfer from Kinross & Graham to the Assets Co., dated 30th July 1895. Thereafter on the 19th September 1895 a Governor's warrant was issued for a certificate of title in favour of the natives in pursuance of the registered Native Land Court order. In pur- suance of this warrant, and in pursuance of the intermediate trans- fers appearing on the provisional register against the natives' title, the certificate of title was issued directly to the Assets Co. as being the owner registered on the provisional register." There is something wrong with the dates given ; 12th May 1876 was clearly a mistake for 12th May 1886. A transfer of 30th July 1895 could not have been registered on Ist July 1895 as stated. I think 30th June 1895 was probably the date which Salmond J. intended to give, from the records available to him. The date of the transfer is not given in the reports. But, upon this basis, the dealings which were lodged together by the Assets Co. were all transactions prior to the land coming under the provisions of the Act, which renders his explanation impossible. Until the legislation of 1894, the land remained native land (see per Edwards J. (1)). The Supreme Court took the view that no estate or interest whatever could be passed by the so-called transfers to Kinross & Graham, and that this appeared on the face of the documents from their character and nature. In these circumstances it appears to me to be an untenable explanation of the decision to say, as Salmond J. does (2) : - '* There was no invalidity in the instrument under which the Assets Company immediately claimed - namely, the conveyance from Kinross & Graham to the company. This was a purchase in good faith by the company, effected by an instrument which inter partes was perfectly valid and capable of transferring any title which the vendors possessed. The invalidity was in the prior instrument whereby the natives sold this land to Kinross & Graham. But this invalid instrument was on the registered title before the registration of the valid instrument under which the company derived its own title. The company, therefore, acting in good faith, obtained the benefit of this prior registration."

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There is no suggestion that either the appellant or the vendor was involved in any fraud. The respondents, the mortgagees, are also entirely free from any suspicion of fraud. In Gibbs v. Messer (1), Lord Watson, speaking for the Judicial Committee, said : - " The main object of the Act, and the legislative scheme for the attain- ment of that object, appear to them to be equally plain. The object is to save persons dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of their author's [sic] title, and to satisfy themselves of its validity. That end is accomplished by providing that everyone who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer for mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author's title." And his Lordship also said (2) : "The protection which the statute gives to persons transacting on the faith of the register is, by its terms, limited to those who actually deal with and derive right from a proprietor whose name is upon the register." It is not disputed that the appellant succeeded at least to the estate of Mrs. Holmes, who was the proprietor of the fee simple subject to the mortgage. Although the appellant did not deal with the proprietors of the mortgage, it is contended nevertheless that, upon the registration of the transfer of Mrs. Holmes' estate, the appellant acquired an indefeasible title to the land free from any encumbrance. This contention is founded upon the assumption that the instrument of discharge was registered before the instrument of transfer, and upon the view that the process of " dealing with " or "taking a transfer" from the registered proprietor, who after such registration would, according to the register, hold the land free from the encumbrance, continued, although perhaps only momen- tarily, until the conveyance of the unencumbered estate was effected by the registration of the transfer. But, as already stated, the evidence is that the discharge and the transfer were produced together for registration at 12.34 p.m. on 4th October 1929. There is no evidence that the discharge was in fact registered before the transfer. The discharge, it is true, is entered in the register across the memorial of the mortgage, which is above the memorial of the

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transfer to the appellant. But there is no reason, it seems to me, for the presumption that the instrument of discharge became operative by registration before the instrument of transfer was registered. Sec. 53 provides that every instrument shall be registered in the order of and as from the time at which the same is produced for registration, and that instruments purporting to affect the same estate or interest shall be entitled to priority as between themselves according to the date of registration, and not according to the date of the instrument. By force of this section the registration of the discharge and the transfer became effective from the same point of time. Neither the order nor the time of their production entitled one to priority over the other. They were produced together at the same time. Sec. 47 provides that the Registrar shall endorse on the folium in such manner as to preserve their priority, the particulars of all dealings and matters affecting land required by the Act to be registered. There was no order in the production of these two instruments, nor any difference in the time at which they were produced whereby one obtained a priority which it was necessary to preserve in registering them. In the case where instruments signed by the same proprietor and purporting to affect the same estate or interest are at the same time presented to the Registrar for registration, he is directed by sec. 61 to " endorse " that instrument which is presented by the person producing the duplicate grant or certificate of title. But this provision does not apply to the present case. The result of the operation of secs. 47 and 53 is, in my opinion, that the discharge of the mortgage and the transfer of Mrs. Holmes' estate in the land, which according to the evidence were produced together for registration, became operative simultaneously. The removal of the mortgage from the register and the conveyance of the land, both of which occurred upon registration, were contem- poraneous acts. Assuming that the process of "dealing with" or "taking a transfer" from Mrs. Holmes continued until the registra- tion of the transfer to the appellant, it follows that such process continued while the mortgage was still on the register, and it was not discharged by registration until the process ended. Even on that assumption, therefore, the appellant did not deal with Mrs.

At a glance

Court

Decision date

Before

Source

Judgment (232 paragraphs)

Cited By (1)