Property Law Act 1969 - Power of court to grant relief in cases of encroachment - Encroachment due to builder's error in construction of dividing walls - Agreement by owners to resurvey and create new titles to land affected by the error - One of the subject lots transferred to an incoming purchaser - Application of just and equitable criteria prescribed by s 122 and s 123 of Property Law Act - Relief granted pursuant to statutory powers

Application of common law rules concerning adverse possession - Adverse possession held not to apply where the subject land was occupied pursuant to a consensual arrangement - Application for relief on this ground dismissed

Application of equitable principles concerning estoppel and constructive trust - Agreement between neighbouring owners to remedy problems caused by encroachment - Purchaser found to have acquired land with notice of boundary discrepancy and prior agreement - Purchaser required to transfer land affected by the encroachment to the plaintiff as a party to the prior agreement

Interpretation Act 1984, s 18

Limitation Act 1935, s 4, s 5

Property Law Act 1969, s 34(1), s 34(2), s 122, s 123

Settlement Agents Act 1981

Supreme Court Act 1935, s 24(7)

Transfer of Land Act 1893, s 68, s 134

Western Australian Planning Commission Act 1985

Carlin & Anor v Mladenovic & Anor [2000] SASC 142

Cockles Pty Ltd (ACN 009 111 979) v Western Australian Planning Commission, unreported; SCt of WA (Parker J); Library No 950422; 11 August 1995

R v Stephenson [1976] VicRp 34; [1976] VR 376

1 HASLUCK J: The plaintiff in these proceedings, Executive Seminars Pty Ltd, seeks to obtain title to a small piece of land occupied by Executive that lies within the boundaries of a title vested in the second defendant. For ease of reference, the land the subject of the dispute was referred to in the pleadings and throughout the hearing as "the Executive portion".

2 The dispute concerning the Executive portion arose as a result of an encroachment upon the neighbouring land when certain building works were being undertaken upon the plaintiff's land in 1984. It was common ground at the trial of the action that the plaintiff company has been in continuous occupation of the Executive portion since completion of the works, namely, the construction of a domestic residence for the directors of the plaintiff company, Brian John Allen and his wife, Levene Allen.

3 The plaintiff asserts title to the Executive portion pursuant to principles of adverse possession at common law, the special rules applicable to encroachments set out in the Property Law Act 1969 and equitable rules concerning constructive trust and estoppel.

4 It will be useful to begin by looking at the history of the matter.

5 Brenda Svenson, an American citizen, was living in Perth in the 1960s and was known to Mr Allen. In 1973, a company controlled by Mr Allen, Whitehall Holdings Pty Ltd, and Brenda Svenson bought an old house that straddled two blocks of land on the corner of Salisbury Street and Heytesbury Road, Subiaco, as tenants in common in equal shares.

6 The land in question, known in these proceedings as the original land, comprised 754 square metres and was the whole of the land comprised in certificate of title volume 1674 folio 22.

7 Brenda Svenson went back to America in the 1970s. Whilst she was there, she married. She and her husband intended ultimately to come to Perth to live.

8 In or about 1983, Mr Allen and Brenda Svenson agreed that they would demolish the house on the original land and subdivide it into three lots, with a view to building three two-storey residential dwellings. The new lot on the corner of Salisbury Street and Heytesbury Road, which was destined to become No 42 Heytesbury Road, would be vested in Brenda Svenson, to the intent that it would be occupied by she and her husband. I note in passing that in due course vehicular access to this lot was obtained from Salisbury Street.

9 The middle lot of the three lots was to become No 40 Heytesbury Road and was to be sold off to a purchaser who was prepared to come in at cost on the development. Vehicular access to this lot was eventually obtained via a lane, or right of way, at the rear of the property connecting to Salisbury Street.

10 The remaining lot of the three lots was destined to become 38 Heytesbury Road. The intention was for this lot to be vested in Whitehall Holdings, to be occupied as a domestic dwelling by Mr Allen and his wife.

11 These arrangements were made in the course of telephone discussions between Mr Allen and Brenda Svenson. The verbal agreement constituted by such discussions was effected in 1983 and will be called the First Agreement.

12 Towards the end of 1983, a Mr Adrian Peck was introduced to Mr Allen as a prospective purchaser of No 40, that is to say, the middle lot. Mr Allen had obtained a valuation indicating that the lot in question was worth $35,000.

13 On 28 December 1983, Brenda Svenson gave Mr Allen a power of attorney prepared in the State of Texas in the United States of America so that he could execute documents on her behalf concerning the management of her interest in the subdivision. The settlement of lot 40 sold to Peck was effected on 31 January 1984.

14 The three parties with an interest in the matter, that is to say, Svenson, Whitehall and Peck (known in these proceedings as the original owners) engaged a surveyor named Mr Fisher to prepare a diagram to give effect to the creation of the new lots. They also engaged the services of David Beetles and Associates, architects, to advance the project. In due course, in or about early 1984, the original owners entered into a contract with Messina Building Company to erect units on the three new lots. It was known to the interested parties that the plaintiff in these proceedings, Executive Seminars, would take over the Allen lot in place of Whitehall Holdings.

15 These arrangements were reflected in an agreement in writing dated 1 June 1984 entered into by the plaintiff company (Executive Seminars), Mr Peck and Brenda Svenson. In the pleadings and at the trial of the action, this was known as the Second Agreement.

16 On 4 July 1984, the old certificates of title, namely, certificate of title volume 1670 folio 525 and volume 1366 folio 630 were cancelled and a new title was issued in respect of the two former lots 97 and 98. The new title was in respect of an estate in fee simple in the portion of Perth suburban lot 251 and being the subject of diagram 66735 and being the whole of the land comprised in certificate of title 1674/022. The registered proprietors of the land in question were the three parties to the Second Agreement as tenants in common in equal shares.

17 Diagram 66735 had been brought into existence as a result of the work undertaken by the surveyor, Mr Fisher. The diagram was approved by the Town Planning Board and registered with the Titles Office, Department of Land and Administration, or DOLA, on or about 29 August 1984. The diagram shows that the land the subject of the Second Agreement was divided into three lots. When one looks at the northern boundary of the land, that is to say, the boundary separating the land from the right of way at the rear of the property, one notices that the northern boundary of the middle lot known as 40 Heytesbury Road and destined to become the Peck lot, is 4.46 metres in length; the northern or rear boundary of the land destined to become 38 Heytesbury Road or the Executive lot was 12.41 metres in length.

18 Consistently with the terms of the Second Agreement, Svenson, Executive and Peck signed transfers, with the result that a new certificate of title was created for each of the three lots comprising the subdivision effected by diagram 66735.

19 The land known as 42 Heytesbury Road comprising lots 1 and 2 on diagram 66735 within certificate of title 1680/047 was issued to Brenda Svenson.

20 Adrian John Peck became the registered proprietor of the middle lot known as 40 Heytesbury Road and being lots 3, 4 and 5 on diagram 66735 in certificate of title 1674/023. It is apparent from the relevant certificate of title that the Peck lot comprises 187 square metres and, consistently with diagram 66735, the rear boundary is 4.46 metres in length.

21 I digress briefly to note that it is apparent from both the relevant certificate of title and diagram 66735 that at the rear of the property the boundaries of the land slant inwards for a few metres or so. This was because, as I have already noted, the vehicular access to the Peck lot and the Executive lot was to be via the right of way at the rear of the property. Walls and carports were being constructed by the builder on the assumption that these physical improvements upon the land would indicate the boundary line.

22 Executive became the registered proprietor of the land known as 38 Heytesbury Road and being lots 6 and 7 on diagram 66735 in certificate of title volume 1681 folio 694. It is apparent from the relevant certificate of title and from diagram 66735, as mentioned earlier, that the rear boundary of the Executive lot is 12.41 metres in length.

23 The Messina Building Company completed its work, with the result that garages, walls and driveways were erected at the rear of the Peck and Executive lots to be accessed from the rear lane in the manner suggested by the relevant titles and related diagram.

24 Shortly after the building work had been completed, Mr Peck encountered some difficulty in getting into the carport at the rear of his house and this prompted him to check the measurements. As appears from his letter dated 16 October 1984 to the builder, his conclusion was that both side walls of his carport, which should have conformed to the property title boundaries, were significantly out of place. He raised the issue with Mr Allen also. Put shortly, improvements which should have been constructed exclusively on the Peck lot were encroaching fractionally upon the Svenson lot and improvements which should have been established exclusively upon the Executive lot were encroaching fractionally upon the Peck lot.

25 The estimated cost of rectifying the problem by removing the improvements and reinstating them upon or within the true boundaries was in the order of $50,000. The parties accepted that Messina had erected the wall of the garage for the Peck lot on the Svenson lot and the wall of the garage for the Executive lot on the Peck lot. The parties recognised also that Mr Peck's access problem could be alleviated to some extent by shaving a portion of the wall that was inhibiting access to his garage.

26 On the plaintiff's case, in or about late 1984, the original owners entered into an oral agreement concerning the issue that had arisen. In order to rectify the misalignment, it was agreed that the land would be resurveyed so as to reflect the actual position of the walls, with the cost in that regard being covered by the builder. This would mean that the wall for the Peck lot (the 3 metre fragment in question being described at trial as the Peck portion) would be owned by Peck. The wall for the Executive lot garage would be incorporated into the Executive lot (the 3 metre fragment in question being described at trial as the Executive portion). Transfers would be executed to effect the conveyance and each party would thereby retain exclusive possession of any encroachments that they had enjoyed.

27 On 14 December 1984, a surveyor in Mr Fisher's employ, Chris Gill, did a resurvey of the land. Mr Fisher said in evidence at the trial that the file relating to the matter has been lost, but other records revealed that it was the builder, Messina, who instructed his firm to do the resurvey. The purpose of the survey was to realign the boundaries to comply with the improvements in the form of external walls which should have been constructed along the land boundaries.

28 In due course, three diagrams were drawn up by Fisher's office and lodged at the Land Titles Office in accordance with the usual procedures. These diagrams were given the numbers 67834 (relating to the Svenson lot on the corner of Salisbury Street and Heytesbury Road), 67836 (relating to the middle lot owned by Peck) and 67835 (relating to the Executive lot). I note in passing that it is apparent from diagram 67836 that the rear boundary of the Peck lot has been reduced to 4.28 metres (as compared to 4.46 metres on the earlier diagram 66735) and the rear boundary of the Executive lot has been expanded to 13.17 metres (as compared to the 12.41 metres depicted on the earlier diagram 66735).

29 In the course of his evidence at trial, Mr Fisher drew attention to the fact that diagram 67836 (the Peck lot) and 67835 (the Executive lot) bore an endorsement showing that as from March 1985 the diagrams were "in order for dealing". This meant that as from that date, it was open to the owners to apply for a new certificate of title. In each case, the handwritten notation "two owners" indicated that the two landowners affected by the reconstitution of the boundaries would have to execute the relevant documents.

30 Mr Fisher went on to say that, consistently with the usual Titles Office practice, a handwritten notation would have been made at that point upon the relevant titles to indicate to an experienced eye that the land the subject of the certificate of title had been resurveyed, with the result that it was open to the registered proprietors in question to deal with the fragments of land affected by the resurvey. Indeed, one notices that immediately beneath the title "Particulars" on certificate of title volume 1674/023 (the Peck lot) the handwritten endorsement appears "D67836" and "D67835".

31 Mr Fisher said in evidence that as there were three separate owners for all of the three lots created in the original survey, three separate diagrams were prepared on the resurvey in order to facilitate the transfer of the land containing the encroachments to their future prospective owners.

32 He said further that once the new diagram number has been pencilled on the original certificate of title, the diagram is then placed in storage ready for dealing. On receipt of the "in order for dealings" diagrams at the Titles Office, a draftsman prepares new certificates of title and advises the client or his agent. An application for the issue of a new certificate of title will then have to be made.

33 This practice can be illustrated by events following the original survey which led to the approval of Mr Fisher's previously prepared diagram 66735 concerning the original land. Once the diagram was approved as in order for dealings, a new certificate of title 1680/047 was issued in favour of Brenda Svenson, a new certificate of title 1674/023 was issued in favour of Mr Peck and a new certificate of title 1681/694 was issued in favour of Executive Seminars. I note in passing that the Peck and Executive Seminars titles immediately became subject to a mortgage to the R & I Bank.

34 In the period following approval of the three diagrams the subject of Mr Fisher's resurvey as being in order for dealings, it seems that although new titles for each of the three lots could have been applied for and issued, no application was made. There is a degree of ambiguity as to why this aspect of the matter was not rounded-off neatly.

35 Mr Fisher did not address this question in his evidence, although it will be recalled that on this occasion his client was the builder Messina and the relevant file has been lost. It seems that Mr Fisher saw his role in the matter as being completed when the diagrams were in order for dealings so that the client, by his solicitors or other knowledgeable agent could take the final step and apply for new titles.

36 In the absence of any evidence from Messina as the party conscious of an immediate obligation to remedy the problem caused by the encroachments, it is not entirely clear what information he conveyed to the landowners about completion of the formalities or as to what instructions, if any, he may have received from them. With the benefit of hindsight, it is now starkly apparent that the failure to take the final steps and arrange for new titles to be issued in respect of each of the three lots in early 1985, so that the relevant certificates of title would conform to the boundaries depicted on the three diagrams (and thus bring about a situation whereby each owner now had a registered title to the land he or she physically occupied) was the root cause of the many years of disputation that followed.

37 Mr Allen gave evidence concerning this aspect of the matter at the trial. According to him, he was told by Mr Peck that as a result of information Mr Peck had received there was no need to apply for new certificates of title as it would involve extra expense. Mr Peck said new titles would be issued when the properties were sold. Mr Peck said in evidence that he understood from the builder that new certificates of title would be issued at the next change of ownership of one of the three properties, namely, when the next document was registered at the Titles Office. He understood that the new titles would have as their boundaries the constructed external walls north of the party walls. This was the intent of the agreement between Messina as the builder responsible for the encroachment, Mr Peck himself and Mr Brian Allen acting for Executive Seminars and as a party with power of attorney for Brenda Svenson.

38 In summary, then, as at 1985, the matter had been left on the basis that the land physically occupied by each owner (such occupation including the encroachments) lay within the boundaries depicted on the newly approved diagrams. In each case, the land comprising the lot did not exactly coincide with the land the subject of the certificate of title and there was therefore a risk that if a person sought to purchase one of the lots after a physical inspection of the property, but the contract or land transfer described the land by reference to the title details only, the purchaser would not obtain exactly what he had inspected.

39 Nonetheless, if the transaction was carried into effect by an experienced conveyancer, who had searched the title and noted the annotations alerting him or her to the presence of a newly approved diagram, then the discrepancy would have been identified and the encroaching fragments of land could have been dealt with in the course of the transaction by an application for a new certificate of title coinciding with the boundaries on the diagram and with the transfer documents then effecting a transfer by reference to the details on the newly issued title.

40 Even so, on this scenario, adjoining owners would have to co-operate in the signing of the necessary forms. This is evident from the handwritten notation on the diagrams beneath the inscription "in order for dealings" where it is said "two owners". The notation indicates that the two owners affected by the encroachment will have to combine before a new certificate of title can be issued.

41 This brings me to a transaction that took place on 13 August 1985. On that date, Brenda Svenson transferred the property situated on the corner of Salisbury Street and Heytesbury Road known as 42 Heytesbury Road and being ostensibly the land within certificate of title volume 1680 folio 047 to new owners, Mr and Mrs Glance.

42 It seems that this transaction was carried into effect after a proper search of the title and with a full awareness that diagram 67834 affecting the subject land was in order for dealings. One notices that a new certificate of title 1695/586 was brought into existence. The rear boundary of the subject land which was formerly described on the earlier title 1680/047 as 6 metres has now been reduced to 5.42 metres. It follows that the land transferred and the new title conform to the resurvey reflected on diagram 67834 with the result that the incoming purchasers acquired a slightly reduced area of land.

43 This meant also that the small 3 square metre sliver of land at the rear of the property (described in these proceedings as the Peck portion) remained in existence as a balance of the land in the earlier title 1680/047 and was available to be transferred into the Peck lot in conformity with the third agreement and the remedial action effected by the resurvey as reflected on the Fisher diagram. The Peck portion represents the encroachment of the Peck garage wall upon the Svenson lot. Put shortly, what had been transferred to Mr and Mrs Glance consistently with the third agreement, was the original Svenson lot minus the Peck portion.

44 The situation remained in abeyance for the next seven years. It was then that the second defendants in these proceedings, David Russell McPhee and Suzanne Margaret McPhee, became involved in the matter as a consequence of Mr Peck deciding to sell the middle lot known as 40 Heytesbury Road (the Peck lot).

45 It will be recalled that as at 1992, Mr Peck was the registered proprietor of the land comprised in certificate of title 1674/023. However, as a consequence of the Messina encroachments, the land occupied by Mr Peck did not correspond exactly with the boundaries depicted on his title. As a consequence of the third agreement and the resurvey, it was envisaged by the original owners that Mr Peck or his successor in title would receive a transfer of the Peck portion into the property known as 40 Heytesbury (the Peck lot). Peck or his successor in title was correspondingly obliged to transfer out of the Peck lot and into the Executive lot the 3 square metres of land comprising the Executive portion.

46 The first-named second defendant, David McPhee, was a licensed real estate representative. In 1992, he and his wife were living at a property known as 8 Lessor Street, West Leederville. Mr McPhee had unfortunately experienced a period of ill health and this had affected his earning capacity. The R & I Bank was pressing him to discharge an outstanding liability and as a consequence he was obliged to place his Lessor Street property on the market.

47 Mr McPhee eventually contracted to sell the Lessor Street property to a purchaser by the name of Pozzi. It was against this background that he and his wife began looking for another residential dwelling. Mr Galbraith from the Paramount Estate Agency introduced Mr McPhee to the Peck lot at 40 Heytesbury Road.

48 One of the principals in the Paramount Estate Agency and its related firm, Paramount Settlements, was Gordon Andrew Poulton. The evidence given by Mr Poulton at the trial indicated that, soon after the Paramount Estate Agency received instructions to act on behalf of Mr Peck as the vendor of 40 Heytesbury Road, searches were undertaken which revealed that there was a degree of complexity concerning the title to the property. This was due to the Messina encroachments. It seems that Mr Galbraith was aware of this situation at the time he showed the property to Mr McPhee.

49 It will be necessary to return to this aspect of the matter in more detail in due course. For the time being, however, for the sake of an orderly narrative, it will be sufficient to refer to that part of the evidence given at the trial in which Mr McPhee accepted that there was some reference to a degree of difficulty concerning the title. His understanding was, having inspected the property with Mr Galbraith, that what he saw was what he would get and that any technical difficulties would be sorted out at settlement. It seems to be clear from the evidence that what Mr McPhee saw at the rear of the Peck lot at that time was the carport and related walls allowing vehicular access to the Peck lot from the lane at the rear of the property.

50 According to Mr McPhee, the conversation with Galbraith about this aspect of the matter troubled him to some extent, with the result that he returned to the property for a second inspection. He said in evidence that it was on this occasion, prior to any contract being entered into, that he met Mr Peck for the first time and had a conversation with him about the matter in the upstairs bedroom of the subject property. According to Mr McPhee, Mr Peck repeated what had been already put to Mr McPhee by Galbraith, namely, that what Mr McPhee saw was what he would get. Thereafter, Mr McPhee proceeded on the assumption that he would get a legal title to the land physically comprising the Peck residence, being the land lying within the common walls and dividing walls of the property.

51 The tenor of Mr McPhee's evidence was that he was not informed about the third agreement or the resurvey, or given any detailed description of where the boundary lines were or how exactly the matter would be sorted out. He simply relied upon the representation that it could be and would be sorted out. I note in passing that Mr Peck did not have any clear recollection of this meeting, but seemed to accept in his evidence that it may have taken place and, because he had nothing to hide, that he may have made assertions of the kind attributed to him.

52 On 12 April 1992, Mr Galbraith prepared a printed form "Contract for Sale of Land by Offer and Acceptance" for the sale of "40 Heytesbury Road, Subiaco". After some negotiation as to price, this form was eventually signed by Mr Peck as vendor and the McPhees as purchasers on the basis that the purchase price for the property was $227,500, with settlement to be effected on 30 June 1992. The blank spaces on the form were completed by Mr Galbraith in handwriting, including the description of the property. It is material to note, however, that unlike the rest of the form, the title particulars concerning the Peck lot are typed in as 1674/023. Mr McPhee gave evidence to the effect that the title details were not on the printed form at the time he signed the document.

53 By signing the form, the purchasers appointed Paramount Settlements to act as settlement agent in respect of the transaction. In due course, Mr Peck appointed Paramount Settlements to act on his behalf also. Mr Poulton said in evidence that it was not unusual for a settlement agency to act for both parties and such an arrangement was permitted under the Settlement Agents Act 1981. A supplementary settlement authority was taken obtained the McPhees on 12 June 1992 and from Mr Peck on 18 June 1992. These documents contained consents for Paramount Settlements to act for all parties.

54 Mr McPhee had structured the arrangements so that the settlement on the sale of his property at 8 Lessor Street would coincide with settlement on the purchase of the Peck lot at 40 Heytesbury Road. In the period following execution of the two contracts, however, a problem arose concerning the former transaction. It seems that the purchaser of 8 Lessor Street, Mr Pozzi, discovered that Mr McPhee was a licensed real estate representative and had failed to disclose this fact. Accordingly, he insisted upon a reduction in the purchase price and this placed additional financial pressure upon Mr McPhee. According to Mr McPhee, this matter and his general state of ill health meant that he was in a rather agitated frame of mind in the period prior to settlement.

55 Mr McPhee had also made arrangements to obtain finance via the mortgage broker, Graham Sansom. These arrangements led eventually, upon the transfer of the Peck lot to Mr McPhee at settlement, to the Peck/McPhee lot becoming subject to a first mortgage in favour of four Sansom clients, Messrs Shovelton, Crothers, Smart and Michael, and a second mortgage to C.R.S. Pty Ltd, being a lending company controlled by Mr Sansom himself. Mr Michael was a partner in the law firm Michael Whyte & Co and it was that firm, under instruction from Sansom and the mortgagees, which prepared the mortgage documents.

56 In the absence of evidence from Mr Galbraith, and having regard to the evidence of Mr McPhee concerning preparation of the offer and acceptance for the Peck lot, it is not clear when exactly the typed certificate of title description 1674/023 found its way onto the document.

57 The evidence of Mr Poulton suggests that the title description appeared on the form at some stage between the signing of the offer and acceptance on 12 April 1992 and settlement which was eventually effected on 22 June 1992. The tenor of Mr Poulton's evidence was that the searches he conducted before settlement revealed that the Peck lot known as 40 Heytesbury Road was essentially the subject of certificate of title 1674/023. He had, however, noted that the title in question bore the pencilled annotation mentioned earlier "D67836 ... D67835". Being familiar with the Titles Office practice, this had taken him to the two diagrams in question. They were in order for dealings, but subject to the further annotation "two owners" signifying that the co-operation of the owners affected by the boundary adjustment in each case would be required before new titles could be applied for and issued.

58 Mr Poulton recognised that the title to the Peck lot known as 40 Heytesbury Road was not encompassed exactly by the boundaries depicted on certificate of title 1674/023 because it was apparent from an endorsement on the relevant diagram, namely, "certificate in which land is vested", that a fragment of the land occupied by the vendor Peck lay within certificate of title 1680/047 (the Svenson lot). It was apparent also, by reference to diagram 67835, that a fragment of the land within the Peck title (being the fragment known in these proceedings as the Executive portion) should properly be regarded as part of the neighbouring land owned by Executive Seminars.

59 Mr Poulton obtained some legal advice from his solicitors as to this state of affairs. He concluded that settlement could only proceed if all parties were fully informed as to the nature of the issue and agreed to proceed upon the basis that the matter would be attended to after settlement. The alternative was to delay settlement while the relevant registered proprietors, namely, Svenson, Peck and Executive, combined to apply for new titles accurately reflecting the boundaries depicted on the approved diagrams, and executed the relevant transfers. In that regard, it will be recalled that although Brenda Svenson had by now transferred the property on the corner to Glance, she, nonetheless, was still the registered proprietor of that fragment of her former land known in these proceedings as the Peck portion which should have been transferred into the Peck lot pursuant to the resurvey and the third agreement.

60 Mr Poulton recognised that the application for an issue of new titles would take time and settlement would inevitably be delayed. By this time, he was conscious that Mr McPhee was under pressure from various quarters. Indeed, according to Mr Poulton, Mr McPhee had been in touch with him and called at his office on a number of occasions. It therefore seems that Mr Poulton decided to proceed with the first course of action.

61 The tenor of Mr Poulton's evidence was that he took various steps to acquaint the parties with the nature of the problem and to obtain their consent to proceed upon the basis that what seemed to be a comparatively minor matter of encroachment by dividing walls would be sorted out after settlement. It was possibly against this background that the typed title description 1674/023 was then placed upon the offer and acceptance so as to identify the land destined to be the subject of the formal transfer, and thus the land the subject of the mortgage arrangements made by Mr McPhee. There was no evidence before me that at this stage the mortgagee's solicitors noticed anything untoward about the situation and it seems likely that they simply proceeded on the assumption that the land to be the subject of the transfer and related securities was the land in 1674/023 because this was the technical description appearing on the relevant offer and acceptance, a copy of which had been delivered to them.

62 Mr Poulton said in evidence that he was an experienced land settlement agent. Had there been any hint from any of those with an interest in the transaction that they were not prepared to proceed upon the basis of the matter being sorted out after settlement, then he would not have allowed the settlement to proceed. He was fully aware that contractually the land to be conveyed to Mr McPhee as purchaser was the land lying within the walls of the property known as 40 Heytesbury Road and that the title to be conveyed to the purchaser should reflect boundaries coinciding with the walls and other physical boundaries of the property the subject of the sale.

63 Mr Poulton said in evidence that on a day prior to settlement when Mr McPhee and his wife came to his office, he stood with them at the front counter and explained the position concerning the titles and diagrams. In the course of that explanation, he told them that a 3-metre sliver of land formerly forming part of the neighbouring Svenson land had to be moved into the title comprising the Peck lot and a 3 metre fragment of land presently included within the title to the Peck lot would have to be moved out of that lot into the neighbouring land owned by Executive so as to remedy the situation created by the encroaching boundary walls. Mr Poulton understood that because Mr McPhee was under pressure, he was agreeable to this matter being attended to after settlement.

64 Mr McPhee agreed in the course of his evidence at trial that he did stand with Mr Poulton at the counter of his office on the day the mortgage documents were signed, but he described Mr Poulton's evidence as to the title issue being explained to him as a "fabrication". According to Mr McPhee, no explanation of this kind was given to him by Mr Poulton or by anyone else prior to settlement. Mr Galbraith and Mr Peck had made some mention of a title problem at the time he was inspecting the property, but his understanding at all times was that what he saw was what he would get and this would all be fixed up in time for settlement. His case rested firmly on the proposition that he did not hear anything more about the matter until 12 months after settlement in mid-1993, in circumstances I will come to in a moment, and even then he received no clear explanation as to what the entitlements of the various owners were or what his obligation was thought to be in respect of the so-called Executive portion.

65 Mr Poulton said in evidence that he wrote and hand delivered to Mr Peck a letter dated 12 June 1992 which reads as follows:

"RE: PECK TO McPHEE

40 Heytesbury Road, Subiaco

___________________________________________

We refer to our discussions at your residence early evening 10 June 1992 and confirm as follows:

1. in our view you should have previously liaised with the parties involved with unregistered Diagrams 67835 and 67836 regarding registration formalities at the Office of Titles;

2. in our further view you should liaise immediately with the other involved parties and obtain the instructions necessary for us to prepare the Application Forms and effect Registration;

3. in the absence of any such instructions we will only proceed with your formalities in respect of the above dealing on the basis that you indemnify us against any future claims, demands, actions and suits or the like of whatsoever nature and if this arrangement is unsatisfactory to you then you must appoint a substitute Settlement Agent or Solicitor to represent you.

Finally we will also approach the Purchasers regarding them dealing with the other parties with the view of resolving the matter post Settlement,

Kind regards,

for PARAMOUNT SETTLEMENTS

Signed

GORDON A POULTON"

66 This letter commences by referring to a discussion between Mr Poulton and Mr Peck at Mr Peck's residence early evening 10 June 1992. Mr Peck said in evidence that he did discuss the matter of the issue of new titles verbally with Paramount Settlements, but he could not recall receiving the letter of 12 June 1992.

67 Mr Poulton's evidence included reference to a letter to Mr Peck dated 17 June 1992. This mentioned a visit on early evening 10 June 1992 and enclosed water assessments, a vendor settlement statement and photocopies of "our searches in respect of certificate of title volume 1674 folio 023 and unregistered diagrams 67835 and 67836".

68 Mr Poulton produced also a letter dated 16 June 1992 to Mr and Mrs McPhee enclosing a purchaser settlement statement and photocopies of "our searches in respect of certificate of title volume 1674 folio 023 and unregistered diagrams 67835 and 67836".

69 There seems therefore to be some contemporaneous evidence before the Court that the presence of the diagrams reflecting the Fisher resurvey was placed before the parties to the transaction prior to settlement. A question remains, however, as to what extent the parties appreciated the significance of these diagrams.

70 Mr McPhee did not recall receiving the relevant letter or having the subject diagrams drawn to his attention. He went on to say: "I wouldn't have seen unregistered diagrams and if I did see it, I wouldn't have known what they were talking about." It is material to note that Mr Poulton does not claim to have delivered to the McPhees a letter of the kind delivered to the vendor in which it is suggested that there were some difficulties concerning the title, but of a kind that could be resolved by agreement post settlement, even though the McPhees, as the purchasers, were the parties principally affected. A doubt also arises as to whether the matter could have been sorted out easily after settlement, because co-operation would be required not only by the registered proprietors, but also by the various mortgagees.

71 It seems that no attempt was made before settlement to find out whether the registered proprietors, Svenson and Allen, were likely to be co-operative or how the matter was regarded by the mortgagees. One interpretation open on the evidence is that as settlement approached, Mr Poulton realised that the vendor, Mr Peck, simply was not in a position to convey title to the Peck lot within the time prescribed on the offer and acceptance drawn up by his estate agency, and with or without the knowledge of Mr Peck, simply decided to proceed with a conveyance of the land the subject of the title description typed on the printed form, but without fully and effectively acquainting the purchasers with the complexities of the situation. It is significant that after settlement no-one took any steps to rectify the situation. This might suggest that the purchasers were unaware, because they had not been properly informed, that a problem existed.

72 The purchaser settlement statement reflected a discount of 33.3 per cent in respect of the settlement administration fees. Mr Poulton was asked in the course of cross-examination by Mr McPhee whether this discount was allowed to the purchaser because Mr Poulton was aware there were problems with the title and was offering an inducement to the purchaser to proceed with settlement so that matters would run smoothly and the settlement agent would not be at risk of being deprived of his remuneration if the settlement fell through. Mr Poulton denied these allegations. He said that a discount of that kind was being offered to his clients generally in 1992 for commercial reasons.

73 Mr Peck's evidence was to the effect that after the resurvey was undertaken by Mr Fisher on behalf of the three owners in 1985, he (Peck) had generally understood that the legal formalities had been attended to and he was not aware of any complications concerning the matter. He indicated in his evidence at trial that if he had received the letter from Poulton dated 12 June 1992, in which reference is made to "resolving the matter post settlement", or if he had been alerted to the matters of the kind mentioned in that letter, he would have taken whatever steps were necessary to ensure that the arrangements made many years earlier whereby the Peck portion was to be transferred into the Peck title and the Executive portion was to be transferred into the Executive title were carried into effect. According to Mr Peck, in June 1992 he simply proceeded on the assumption that Mr Poulton of Paramount Settlements would do, and did do, whatever was necessary in order to convey the Peck lot known as 40 Heytesbury Road to Mr McPhee in order to complete the sale to McPhee.

74 Mr Peck said further that the settlement proceeded without any complications so far as he was aware. He had no understanding of the mechanism whereby new titles would issue. He left the matter in the hands of the settlement agent.

75 It was common ground at the trial of the action that in due course the McPhee to Pozzi sale in respect of the McPhee property at 8 Lessor Street and the Peck to McPhee sale of the Peck lot at 40 Heytesbury Road were effected, albeit that the title conveyed to the purchasers in the latter case did not in fact correspond to the land actually occupied by the vendor. Settlement of the Peck to McPhee transaction took place on 22 June 1992.

76 It was also common ground at the hearing that the land the subject of the transfer in the latter case was the land the subject of certificate of title 1674/023 from which it follows, having regard to the previous history of the matter, that the title transferred to McPhee did not include the Peck portion, but did include the Executive portion. The mortgages granted by McPhee were registered as encumbrances affecting the title just mentioned.

77 In the period following settlement, as I have already noted, no party took any step of the kind alluded to by Mr Poulton in his evidence, that is to say, an endeavour to bring the three registered proprietors together with a view to applications being lodged for issue of new titles which would bring the three titles referable to the three lots in question into conformity with the approved Fisher diagrams. There was no evidence adduced at trial to suggest that Mr Allen of Executive was informed of any discussions bearing upon the realignment of boundaries issue, although he was aware that the property next door to him had been sold by Peck.

78 At this stage, relations between Mr Peck as the vendor and Mr and Mrs McPhee as the purchasers remained amicable. It was common ground at the trial of the action that shortly after the settlement the McPhees joined Mr Peck and his wife for a social drink at their new house in Union Street and on that occasion there was no discussion about the titles or any other contentious issue. Mr McPhee said in evidence at the trial that at this stage he was simply unaware that there was any outstanding issue.

79 In the months following settlement, Mr McPhee was still subject to various financial pressures. He was out of work. The reduction in the price received from Pozzi had complicated his financial planning and he remained liable to the R & I Bank for his outstanding debt and to the first and second mortgagees who had advanced funds to him via Mr Sansom so that the settlement could proceed. Accordingly, in early 1993, he made an attempt to sell 40 Heytesbury Road by auction. When this failed to produce any result, he was eventually able to negotiate a sale of the property by private contract to a Mrs Edgecombe. Once the contract was signed, he engaged Envoy Settlements to attend to the settlement. According to Mr McPhee, he first became aware of a discrepancy concerning the boundaries on the title at this stage when the matter was raised with him by Envoy Settlements.

80 It seems that some preliminary advice about the matter was then obtained from a firm of solicitors called Chalmers and Co, but they had a conflict of interest and were unable to proceed further. According to Mr McPhee, he then went to the mortgage broker, Mr Sansom, and was told to go back to Michael Whyte & Co, being the firm of solicitors who had acted for the mortgagees at the time of the Peck/McPhee transaction in the expectation that they would be able to sort out the matter.

81 The principals of Michael Whyte & Co included the solicitor, Mr Peter Michael, who was also one of the first mortgagees in his capacity as an executor of the Smart estate. Mr McPhee was referred to an employee of the firm with experience in problems concerning title, namely, Mr Frank Borrello.

82 Mr Borrello gave evidence at the trial of the action as a witness presented by the plaintiff. He opened a file on the matter in July 1993 and handled the matter until its conclusion.

83 According to Mr Borrello, Mr McPhee told him that there was something not complete at settlement and this prompted Mr Borrello to search the relevant titles. The pencilled annotations "D67836" and "D67835" at the top of certificate of title 1674/023 on the title to 40 Heytesbury Road led him to the relevant diagrams and he quickly concluded that the boundaries depicted on certificate of title 1674/023 did not correspond with the physical boundaries of the land, this being evident from the resurvey the subject of the approved Fisher diagram. It was apparent to him that, as matters stood, the McPhees were not in a position to convey a full and proper title to the new purchasers of 40 Heytesbury Road (the Peck lot).

84 Mr Borrello then searched the relevant transfer documents and noted that Mr Allen held a power of attorney on behalf of Brenda Svenson. He concluded that the immediate objective of vesting in the McPhees a registered title to the entirety of the land actually comprising 40 Heytesbury Road could be achieved by arranging for Mr Allen, as attorney for Brenda Svenson, to transfer the Peck portion to McPhee.

85 Mr Borrello did not see it as his role to fix up the title situation generally, although it was apparent to him from the diagrams that Mr Allen had the same problem and the nature of the resurvey indicated that the Executive portion which lay within the boundaries depicted on certificate of title 1674/023 should probably be transferred to Mr Allen's company, Executive Seminars. As far as Mr Borrello was concerned, he was acting simply for Mr McPhee, not for the mortgagees (even though Michael Whyte & Co had acted for the mortgagees originally) and it was upon that basis, on his evidence, that he took the various steps that would eventually enable McPhee to convey to Mrs Edgecombe a registered title representing the entirety of the land known as 40 Heytesbury Road.

86 Mr Borrello contacted Mr Allen at his office in West Perth and told him that in accordance with diagram 67836 it was necessary to transfer a fragment of land from the former Svenson property to McPhee (the fragment known in these proceedings as the Peck portion). He recalled telling Mr Allen that because McPhee had the problem, and because he (Allen) was next door and his land was the subject of diagram 66735, he had the same problem and he needed to get it fixed up.

87 Mr Borrello went on to say in the course of his evidence:

"I did not tell him [Allen] that if he signed the statutory declaration and the transfer using Svenson's power of attorney, that I would solve his problem for him without any cost. I may have dropped a hint to Brian Allen that I could also assist him with his problem and I believe that I left him with my card. I did not offer Brian Allen any money for the fragment of land from the Svenson property because after reviewing all of the documents I knew that was what was meant to happen. Just as the sliver of land from the McPhee property should have been transferred to Executive's property pursuant to the arrangement which diagram 67834, 67835 and 67836 reflected."

88 During the course of his evidence-in-chief, Mr Borrello said further that "Mr McPhee told me that builder had made a mistake and built the walls not in accordance with the northerly boundaries." He said also, "Mr McPhee explained to me that the sliver of land which is contained in lot 1 on diagram 66735 needed to be amalgamated with his lot."

"At the time that I acted for Mr McPhee I explained to him what the intention of diagram 67834, 67835 and 67836 was and he understood that small pieces of land were required to be transferred from Svenson's property to his property and from his property to Executive Seminars' property ... I only acted on Mr McPhee's title, which is 1674/023 and the subject of diagram number 67836. I knew from looking at all three diagrams that Mr Allen had the same problem and therefore, when he signed the transfer to remedy Mr McPhee's problem, under the power of attorney he had from Mrs Svenson, I mentioned to him that he needed to go through a like process. It appears that was never done."

90 Mr Allen also gave evidence at the trial of the action bearing upon the events in mid-1993. He was aware that Mr McPhee had attempted to sell his property by auction, without success, but he was not aware that any issue had arisen concerning the titles. It was then that Mr McPhee came to Mr Allen's house and said that he had sold his property. McPhee's manner was agitated and belligerent. He said that there was a problem with the title and that Adrian Peck and Mr Allen had been in some sort of conspiracy against him. Mr Allen said in evidence that he refuted this suggestion and then explained to Mr McPhee the history of the boundary problems and the agreement that had been made between Svenson, Peck and Executive to overcome the problems. He could not understand Mr McPhee's concerns as he believed the boundary problem had been sorted out pursuant to the agreement.

91 I digress briefly to note that Mr McPhee in his evidence agreed that he met with Mr Allen in his home at this time, but presented to the Court a different version of what transpired. According to him, he told Mr Allen he could not figure out what had happened and Mr Allen simply said that he would look into it. The meeting was brief because Mr Allen "put down" his wife when she started to speak. On his account, that was the first and last time Mr McPhee spoke to Mr Allen.

92 According to Mr Allen, shortly after the meeting at Mr Allen's home, he received a telephone call from Mr Borrello, who explained that the McPhees were having trouble in settling the sale of their property because of problems with the title. Mr Borrello referred to the Fisher resurvey and the diagrams and asked if Mr Allen would be willing to sign a document to facilitate the transfer of the small piece of Svenson's land to the McPhees in order to comply with the new diagram. Mr Allen agreed to do so pursuant to the Svenson power of attorney because this was what had been agreed originally.

93 When Mr Allen went to Mr Borrello's office a few days later, he was presented with a transfer to effect the conveyance of a small piece of land from Brenda Svenson's name to the McPhees and a statutory declaration confirming that diagram 67836 showed the correct boundaries and that he held a power of attorney on behalf of Brenda Svenson.

94 Mr Allen said in evidence that he assumed that the purpose of the statutory declaration was to record and give effect to the agreement entered into between Svenson, Peck and Executive. In fact, the statutory declaration refers only to the Peck portion and does not say expressly that the Executive portion was to be transferred out of the Peck/McPhee title and into the Executive title, either immediately or in due course. Nonetheless, a reference in the statutory declaration to be signed by Mr Allen to the Peck portion being the "result of a re-alignment of boundaries contained in diagram 67834" was bound to suggest to Mr Allen that Mr Borrello's documents were aimed at carrying into effect the fiduciary arrangements comprising the third agreement.

95 The transfer document also was consistent with such a view. The consideration for the transfer was said to be "the desire by the transferor to transfer the within described land to the transferee in order to effect the correct alignment of the western boundary of lot 4 contained in certificate of title 1674/023 as is now surveyed in diagram 67836 and for the sum of one dollar ($1)". No explicit reference is made to any of the previous agreements between three original landowners.

96 Mr Allen told Mr Borrello that he did not want any payment, but was told that a nominal payment of one dollar was necessary in order to make the transaction legally effective. According to Mr Allen, he also indicated to Mr Borrello that, although he did not wish to hold up the McPhees, in view of the fact that they had a settlement to complete, he wished to know whether he needed to seek independent legal advice. To this question, according to Mr Allen, Mr Borrello replied: "No, I will fix your title for you."

97 Against that background, according to Mr Allen, he proceeded to sign the statutory declaration and the transfer pursuant to Brenda Svenson's power of attorney. He said in evidence that until that time, he was unaware of any problem with his title because in 1985 Peck had told him that new titles could be applied for when the properties were sold. He had simply assumed that when Peck sold his property he had done all that was necessary to transfer the sliver of land in his property to Executive in accordance with the third agreement.

98 Mr Borrello did not directly refute or comment upon the evidence given by Mr Allen to the effect that he, Borrello, had suggested that there was no need for independent legal advice because "I will fix your title for you." It was apparent, however, from the tenor of Mr Borrello's evidence that he was being scrupulously careful not to offer expressly any comment or inducement to the effect that if Mr Allen co-operated and signed the papers, McPhee or any successor in title or other party would take steps to ensure that the Executive portion was conveyed to Mr Allen's company. When Mr Borrello was asked in cross-examination whether he offered any inducement to Mr Allen "to get the power of attorney to act for the transfer of that land", he replied: "No, I did not." He went on to say that he did not offer Mr Allen any inducements to sign for the land.

99 This exchange then occurred between Mr Borrello and Mr McPhee as cross-examiner:

"Was there any need to offer him any inducements?---No. I believe once I explained to Mr Allen the situation he appeared to me quite cooperative and executed the documents when presented to him.

This is why I ask you those questions, Frank. I am standing here because I have been accused of incorrigible behaviour and you led Mr Allen to believe that - by what you said, he was expecting transfer of that land to him, or the remaining 3 square metres?---At the time, no, I did not bring that up as part of an exchange; no.

When you say 'at the time,' did you bring it up at all?---No. What I mean is, I didn't say part of the signing of this document would enable us to transfer your parcel to him, no.

You mention that further on down there, but that was a separate issue altogether. If you mentioned to him that you could, as you do so later on in your statement - that you could help to remedy his problem - was there any reason why he couldn't take up that offer at the time, to save this confusion?---Well, the only comment I do recall was saying that he would have a similar problem with his parcels of land and that I might be in a position to fix it up if need be, but bear in mind I was concentrating on your matter at the time.

My matter alone?---Yes."

100 The documents executed by Mr Allen achieved the desired result of enabling the McPhees to transfer a full title to the purchaser, Mrs Edgecombe, for the property known as 40 Heytesbury Road. In due course a new certificate of title 1967/496 dated 22 July 1993 was issued to the purchaser. This left the fragment of land known as the Executive portion still vested in the McPhees, although it seems that in the period following the settlement they did not attach any particular importance to that fact.

101 Mr McPhee applied the proceeds of the sale to the acquisition of a new property and to his other financial concerns. Michael Whyte & Co, as the employer of Mr Borrello, rendered an account to Mr McPhee for $1,250 upon the basis that the services undertaken to remedy the title problem were undertaken exclusively on behalf of Mr McPhee as the relevant client of the firm. This account remained unpaid for a considerable period of time, notwithstanding requests for payment, and was eventually written off by Mr Michael on behalf of Michael Whyte & Co. It was apparently written off on the basis that it could not be recovered, although Mr Michael confirmed in evidence that Mr McPhee's failure to pay the bill did not give rise to any animosity.

102 It seems that no steps were taken by Mr Allen or by any other party to effect a transfer of the Executive portion to Executive in the period following the McPhee/Edgecombe settlement. It is apparent from a letter dated 18 June 1993 from Mr Burns as manager of the R & I Bank's central collections unit that Mr McPhee's personal loan to the bank remained outstanding.

103 The evidence given at trial suggests that as the pressure upon him mounted Mr McPhee was forced to review his financial assets. In doing so, it struck him that as a consequence of the building encroachments and the Fisher resurvey some years earlier, he had somehow become the registered proprietor of a small 3 metre sliver of land at the rear of 40 Heytesbury Road (being the fragment of land known in these proceedings as the Executive portion), which formed part of the Executive/Allen carport and driveway.

104 At this moment in time, as a consequence of the McPhee/Edgecombe settlement, the Executive portion was the balance remaining in certificate of title volume 1674/023, the greater part of such title having been cancelled as a consequence of the transfer to Edgecombe and the issue of a new title. Mr McPhee was of the view that he had acquired this land honestly, without being involved in any sharp practice, and, if anything, he had been the unsuspecting victim of some rather ambiguous events that had taken place at the time he purchased the Peck lot, and that as a result of these events he had been put to a great deal of inconvenience and expense.

105 It was against this background that Mr McPhee approached the law firm Mildenhall to act on his behalf. By letter dated 2 May 1994, Mr McPhee's legal advisers wrote to Mr Allen to say that they acted for the McPhees as "the owners of a small parcel of land at the rear of your property being lot 9 on diagram 67835". They went on to say that their clients were seeking expressions of interest in relation to a sale of the land and they wanted to know whether Mr Allen was interested.

106 Mr Allen said in evidence that he could not attend to the matter immediately because he was grief-stricken following the recent death of his father. Later, however, on 24 May 1994, he telephoned the law firm and spoke to a Mr Nizzola and sought an explanation because he did not understand the nature of the proposal.

107 This conversation did not produce any result. Mr Nizzola then proceeded to prepare a proof of evidence of David McPhee dated 15 June 1994. It is apparent from various handwritten annotations on the document that this proof of evidence was checked by Mr McPhee and the presence of his signature on the document suggests that Mr McPhee was prepared to adopt the proof of evidence as a true account of his involvement with the matter in hand. Mr McPhee agreed that this was so under cross-examination at the trial of the action.

108 The McPhee proof of evidence outlines the history of the matter, including reference to the Fisher resurvey and the notion that there was to be a transfer "of that small portion of the encroaching land needing to be assigned from Svenson to Peck and from Peck to Allen along with an application from each of Peck and Allen for a new certificate. A new certificate would then be issued to correctly identify the boundaries. This would result in a new certificate of title being issued to each of Peck and Allen correctly recording the boundaries of their land, Allen's title would increase by a small portion taken from Peck, and Peck's increase by a similar portion taken from Svenson."

109 The proof of evidence went on to note that no application for new titles was made, with the result that no new titles were issued. It is apparent from the handwritten annotations that Mr McPhee was dissatisfied with the typed description of the circumstances in which he contracted to purchase the Peck land. Under cross-examination, Mr McPhee agreed that he wanted an alteration to the proof of evidence to be made to the effect that Paul Galbraith made and "half-explained" the problem to Mr and Mrs McPhee as far as the new title was concerned. His annotation to the proof says: "I didn't know anything of it. Galbraith never went into the detail but said it was to be fixed on settlement. I made the point in company of Suzanne and Galbraith that the 'bank' (Sansom) wouldn't accept an improper title anyway."

110 The proof of evidence goes on to say that Paul Galbraith told Mr and Mrs McPhee at the time that he attended on them at their West Leederville home when drawing up the offer and acceptance that no lot number was available because the title was not complete. "There was a bit of a mix up when the units were built. The owners had it resurveyed. Don't worry about it but what you see at Heytesbury is what you will get. It will be adjusted before settlement."

111 The proof of evidence goes on to say that approximately three weeks before settlement, the McPhees visited the property and asked Peck "what was the business with the title." Peck said words to the effect that "when the units were built he could not get his car into the garage. This is when he first discovered that there was something wrong with the boundaries and consequently they, being the unit holders, had the titles resurveyed and all the titles were subsequently fixed." According to the proof of evidence, Mr and Mrs McPhee acted in reliance on what was said by Galbraith and Peck and believed that the titles had been fixed and all was in order as far as settlement was concerned.

112 The McPhee proof of evidence went on to refer to subsequent events, including the sale of the Peck/McPhee property to Edgecombe and the involvement of Mr Borrello. The proof of evidence said further that because of the discrepancy in the original titles, and as Allen had not sought (nor had the McPhees transferred to him) the portion of land required for Allen to complete his title, " ... we are currently the owner of a separate title which reflects the small portion of land held by them which Allen requires to perfect his title. We have however offered to sell this small portion to Allen, but he has not replied to us."

113 The proof of evidence goes on to suggest that Paul Galbraith, Paramount Settlements and the vendor Peck were at fault because they were aware of the defects in the title and did not inform the McPhees at the time. Significantly, Mr McPhee's proof of evidence does not allege any fault or unconscionable conduct on the part of Mr Allen or his company, Executive Seminars.

114 The proof of evidence asserts that the delay in the settlement and the financial pressure and uncertainty caused substantial distress to Suzanne McPhee. The loss of opportunity to buy a block of land at St John's Wood could be quantified at $40,000. It is said that the purchaser of the McPhee property at 8 Lessor Street, Mr Pozzi, took advantage of the situation to discount the price he was obliged to pay by $5,000. There were also some additional borrowing costs in having to cover the $5,000 shortfall and legal fees of $1,250 to Michael Whyte & Co had been incurred.

115 Shortly after the preparation of the McPhee proof of evidence, Mr and Mrs McPhee, apparently acting on their own behalf, lodged at the Titles Office a handwritten application for a new title in respect of part of lot 4 on diagram 66735, being the balance of the land remaining in certificate of title 1674/023.

116 Mr Gray from the Land Titles Office gave evidence concerning this application and a handwritten note he had made on the relevant form. Being some years away from the event, he could not recall the exact terms of the telephone conversation, but accepted that his contemporaneous note probably reflected the essence of it. His note suggests that there was a discussion about incorporating the small fragment of land into the adjoining diagram.

"Telephoned Mr McPhee and advised him of the matters associated with incorporating this land into adjoining diag.

He advised of difficulties in completing this and reiterated he needs a balance CT."

118 As a consequence of this application, a new certificate of title, 2007/994, in respect of the 3 square metre fragment of land known in these proceedings as the Executive portion was issued to Mr and Mrs McPhee on the basis that they were the registered proprietors of the subject land. This title was issued to the McPhees on 28 July 1994.

119 It was against this background that a meeting was convened at the offices of Mildenhall on 31 August 1994 to discuss the situation with those present being Mr Allen, his cousin, Wayne Moeller, who was a legal practitioner, Mr McPhee and Mr McPhee's solicitor, Mr Nizzola.

120 Mr Allen said in evidence that at the meeting Mr McPhee made it clear that he wished to sell the piece of land to Executive. The price would depend "on the information I gave him about an alleged conspiracy between Mr Peck and myself." Mr Allen told those present at the meeting that an allegation of that kind was nonsense and went on to say that the resurvey had been done nine years previously so it was hardly likely that there was a conspiracy. He said further that if there had been a conspiracy, he (Allen) would hardly have signed a statutory declaration and a land transfer to facilitate McPhee gaining title to the Svenson piece of land so that McPhee could settle on the sale of his land. Mr Allen added that he was prepared to pay one dollar to effect transfer of the Executive portion into Executive's title in accordance with the original agreement which Mr McPhee had adopted and benefited from, this sum being the same amount that had been paid to Mr Allen when he transferred the Peck portion into the Peck/McPhee title.

121 Mr McPhee gave a different account of the meeting. He contended in evidence that Mr Allen made various unacceptable remarks about the nature of the dispute between the parties. Nonetheless, it is quite apparent, even on Mr McPhee's somewhat melodramatic account of the meeting, that the matter under discussion was whether Mr Allen was prepared to pay a significant amount to Mr McPhee in order to obtain title to the fragment of the land in question, and that Mr Allen refused to do so. This is borne out by a letter dated 2 September 1994 from Mildenhall to Mr Allen in which the solicitors seek to refute any suggestion that the McPhees might be seeking to extort money in relation to the disputed land. The letter refers also to an earlier request that Mr Allen remove any property belonging to him which was wrongfully encroaching upon the McPhees' land.

122 It is apparent from other correspondence taking place at about this time that Mr McPhee was still under pressure from the R & I Bank, now trading as BankWest. In a letter dated 12 August 1994, Mildenhall raised various matters that were obviously aimed at seeking to dissuade the bank from proceeding further against Mr McPhee. In that context, reference was made to the bank being implicated in the settlement of "an incorrect and insufficient title". Mr McPhee also wrote various letters to the bank seeking to stave off recovery action.

123 At a later stage, in or about November 1997, Mr McPhee was apparently successful in obtaining a loan in the sum of $25,000 from the third defendant in these proceedings, Susan Lesley Walker, and delivered the duplicate certificate of title to the Executive portion to her as security for the loan. Mr McPhee said in evidence that at the time of obtaining this loan, he explained to her how it came about that he had obtained title to a small fragment of land. There is some basis for assuming, then, that the third defendant was put on notice that the adjoining landowner, Executive, claimed an interest in the Executive portion; hence, its refusal to pay any significant price for the disputed fragment. She advanced the sum of about $10,000 initially and received the duplicate certificate of title in exchange for the cheque.

124 I note in passing that on its pleadings the plaintiff does not admit that the third defendant loaned the McPhees the sum of $25,000, or any such sum and does not admit that the third defendant holds the title deed as security for any loan. The third defendant was represented by counsel prior to the trial of the action, but did not adduce any evidence, and indicated by counsel that she would simply abide any ruling made by the Court.

125 Mr Allen said in evidence that he finally became convinced that he had to take action to protect his company's position and he caused the writ in this action to be lodged on 17 April 1998. On 3 July 1998, he lodged a caveat against the land the subject of the litigation, that is to say, the Executive portion, in order to protect his company's position.

126 Mr Allen confirmed in evidence that the land depicted in certificate of title 2007/994 is occupied by the dividing wall between Executive's property and the adjoining property formerly owned by the McPhees. The wall provides structural support for the garage roof to Executive's property. A portion of the land is also part of the driveway to Executive's property. The wall and driveway have been used exclusively and without interruption by Executive since their construction in late 1984.

127 The plaintiff presented evidence at the trial of the action bearing upon the value of the Executive portion and the effect of the same upon the value of the plaintiff's property.

128 Mr Stuart McKeown gave evidence that he is a registered builder who made an inspection of the relevant land for the purpose of a specific investigation report. He noted that at the rear of the Executive property, being lot 38 Heytesbury Road, where it adjoins the left-hand unit at the entry to the carports from a rear lane, an area of land has been created of 3 square metres, being 765mm at the lane end and reducing to approximately 40mm in a side boundary distance of approximately 11 metres with a bend in the length. He noted that this piece of land has been given its own title and is referred to a part-lot 4. Based upon his instructions, his understanding was that this fragment of land was owned by another person who was applying pressure to relocate part of the client's carport wall and related structure established on this part-lot 4 known in these proceedings as the Executive portion.

129 He noted that there were two neighbouring carports made of structural and timber steelwork, brickwork and with a metal span roof. They are enclosed with remote control roller doors and there is brick-paving on the ground. The lane provides access, which at times is tight for manoeuvring a vehicle, and the carports are angled to assist entry and reversing. They are approximately 6 metres long and angled at around 4 metres wide.

130 He went on to say that if the wall on this boundary was to be moved across by 765mm, it would likely render the entry to that side carport too narrow to be effective in the current design. To have any sort of arrangement that could be functional for access and exiting by vehicles, a fresh design would be necessary which would involve reducing and relocating the store area. It was on this basis that he made certain estimates.

131 Mr McKeown considered that what was necessary in order to achieve the moving of the controversial wall, and to endeavour to gain a workable design for vehicle access would be demolition of the wall on part-lot 4 while endeavouring to retain and not damage the neighbouring wall, demolition and removal of both carports, demolition and removal of the storeroom, the redesigning of a new workable configuration, having regard to the surrounding constraints and the construction of new carports and storeroom in terms of the new design. Upon this basis, his estimation of the cost required to effect the work in question was $30,000.

132 The plaintiff also adduced evidence from a licensed valuer, Mr Peter Kreutzer. In his estimation, the value of the Executive lot known as 38 Heytesbury Road with the disputed 3 square metre portion being amalgamated with or forming part of the property was $460,000. In order to arrive at the "as is" value of the property he proceeded from the premise that if the property were to be purchased, it would be subject to the brick boundary wall and carport being moved to the correct boundary. Accordingly, from the value of $460,000 he had deducted the cost of undertaking the necessary work, being the sum of $30,000 (having regard to the McKeown estimate). Also to be deducted would be interest and other factors. Thus, the "as is" value of the Executive land would be $415,000. In his estimation, the value of the 3 square metre portion was the sum of $2,400.

133 In summary, then, the plaintiff contends that when one compares the "as is" value of the property of $415,000 with the value of the property with the Executive portion amalgamated of $460,000, the consequence of the Executive portion being withheld from Executive is a loss of $45,000, representing the difference between the two figures.

134 Mr Kreutzer went on to say in his written report dated 3 May 2001 that the 3 metre square portion of land in practical effect has no value to the current registered proprietors, Mr and Mrs McPhee, as the land has no utility. Nonetheless, for the purpose of the proceedings, he valued the portion on a pro rata basis based on sales of small vacant lots within Subiaco which reflect a rate of $800 per square metre and thereby arrived at the figure of $2,400 as a value which might notionally be attributed to the land presently registered in the names of Mr and Mrs McPhee. The implication was that if they were deprived of the Executive portion as a consequence of any order made by the Court, then, at best, the loss in question amounted to no more than $2,400.

135 The plaintiff commenced legal proceedings against Mr Peck as first defendant, Mr and Mrs McPhee as second defendants and the Registrar of Titles. The first defendant issued notices of contribution which had the effect of bringing in Paramount Settlements as an interested party and setting up a claim for relief against the second defendants and the Registrar of Titles. An order was made by Master Bredmeyer in chambers whereby the question of the liability of the third parties to indemnify or make contribution to the first defendant was to be tried at or immediately after the trial of the action as the Judge directed.

136 In the period leading up to the trial, further orders and directions were sought bearing upon the cross-claims, during the course of which I was informed that an accommodation had been reached between the plaintiff, the first defendant and the third parties as a result of which the claim against the first defendant was to be discontinued. This meant that the cross-claims against the third parties would fall away.

137 After some debate, and upon further reflection, it appeared to be common ground between the parties that in an action of this kind where it might not be possible to predict with confidence the nature of the relief to be granted by the Court if the plaintiff's claim and/or the cross-claim succeeded it could be undesirable for the claim to be discontinued in the manner proposed. In that regard, the parties took account of the reasoning of the High Court in Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 in which the High Court held that a constructive trust should not be imposed if, in all the circumstances of the case, there was an appropriate equitable remedy which fell short of the imposition of a trust or the requirement that title to a portion of land be transferred to one of the parties. Accordingly, by consent, orders were made whereby the first defendant and the Registrar of Titles remained as parties to the action but were not required to play any active part at the trial.

138 When it became apparent that the duplicate certificate of title to the Executive portion might have been delivered by Mr McPhee to Susan Walker as security for a loan, orders were made for her to be joined as a party to the action and to be served with amended pleadings. The consequence of these orders was that Susan Lesley Walker became the third defendant and the Registrar of Titles became the fourth defendant. As I have already indicated, the third defendant conveyed to the Court by counsel that she did not wish to be heard and would simply abide any ruling of the Court.

139 The Registrar of Titles, as fourth defendant, was allowed leave to withdraw, but on the basis that he would have an opportunity to be heard before any final orders were made carrying into effect the ruling of the Court. It therefore emerges that I am only required to rule upon the matters in controversy between the plaintiff and the second defendants, although, in the course of doing so, it may be necessary to make findings bearing upon the actions and obligations of other parties.

140 It is against this background that I turn to the plaintiff's statement of claim in its final form with a view to identifying the matters in issue.

141 The plaintiff by its statement of claim sets out the history of the matter in a summary form. It pleads that in breach of the second agreement, on or about 22 June 1992 Peck transferred the Peck lot to the McPhees without transferring the Executive portion to Executive.

142 The plaintiff contends pursuant to s 122 or alternatively s 123 of the Property Law Act 1969 that it is just and equitable for the Court to make an order against the second defendants vesting in the plaintiff and estate in fee simple in the Executive portion, or creating in favour of the plaintiff an easement over the Executive portion, or giving the plaintiff the right to retain possession of the same, and with a declaration that any such order or declaration be free from any mortgage or other encumbrance affecting the Peck lot.

143 The plaintiff seeks further against the second defendants a declaration that the plaintiff is entitled in adverse possession to remain in possession of the Executive portion and an order that the plaintiff be registered as proprietor the Executive portion.

144 The plaintiff also seeks relief in equity, being a declaration that the second defendants are estopped from denying that the plaintiff is entitled to a transfer of the Executive portion. Further, the plaintiff seeks a declaration that the second defendants hold the land in trust for the plaintiff. These declarations, in each case, are to be supplemented by an order that the second defendants transfer to the plaintiff the Executive portion. The plaintiff seeks an order in the alternative that compensation for breach of trust be provided by the second defendants to the plaintiff. It will be useful to look at the claims for equitable relief in more detail.

145 The plaintiff pleads in pars 21 to 26 that the McPhees are estopped from denying that Executive is entitled to a transfer of the Executive portion in that on or about 16 July 1993, the McPhees caused Allen to assume that if he caused the Peck portion to be transferred to the McPhees, the McPhees would transfer to Executive the Executive portion as a result of which Allen relied upon the assumption to his detriment.

146 The plaintiff relies on the matters pleaded in pars 27 to 31 in asserting that the McPhees became trustees of the Executive portion for and on behalf of Executive and it is unconscionable for the McPhees to deny Executive the right to a transfer of the Executive portion. The matters relied on include a plea that at the time the McPhees sought from Allen the transfer of the Peck portion they were aware of the nature and effect of the third agreement and were also aware that the Peck lot was subject to dealings by diagrams 67835 and 67836. Various particulars of knowledge are provided in that regard, including the information given to the McPhees by Mr Poulton and the endorsement of diagrams number 67835 and 67836 on certificate of title 1674/023.

147 The plaintiff says further, or in the alternative, that on or about 16 July 1993 the McPhees and Executive formed a common intention whereby if Allen assisted the McPhees in having the Peck portion transferred to them, the McPhees would transfer the Executive portion to Executive. On or about 16 July 1993, in the reasonable belief that by so doing the Executive portion would be transferred to Executive, Allen signed the transfer transferring the Peck portion to the McPhees and swore a statutory declaration in support.

148 The plaintiff goes on to assert that if the third defendant (Susan Walker) holds the relevant title deed as security for a loan to the McPhees (which is not admitted), the plaintiff avers that such security was not taken bona fide and without notice of the plaintiff's prior interest. The plaintiff claims against the third defendant a declaration that any interest held by the third defendant over the title deed is postponed to that of the plaintiff and an order that the defendant deliver up possession of the title deed to the plaintiff.

149 The second defendants were not represented at the hearing and the document relied upon as the statement of defence of the second defendants does not purport to be signed by counsel or by a legal practitioner. In essence, the defence document takes issue with a number of matters set out in the plaintiff's summary of material facts and denies that the plaintiff is entitled to the relief claimed or to any relief.

150 More particularly, the second defendants say that if, which is denied, Frank Borrello was acting as agent for the second defendants, he had no authority of the second defendants to say, as alleged by the plaintiff, that if Allen was to sign a transfer of the Peck portion to the McPhees, he would arrange for the Executive portion to be transferred to Executive. The second defendants plead that it was in 1993, when the second defendants entered into a contract to sell the Peck lot to Edgecombe, that they became aware of a defect in the title in respect of the Peck lot. This came about when Edgecombe refused to proceed with settlement until the Peck portion was transferred to the second defendants.

151 The second defendants say further that at no time were the second defendants informed by Frank Borrello, Allen, the first defendant or any other person, or were otherwise aware of the misalignment comprising the Messina encroachments or the existence, nature and effect of the third agreement.

152 The second defendants admit that on or about 12 April 1992, Peck entered into a contract to sell the Peck lot to the McPhees, but otherwise the second defendants put the plaintiff to proof of every aspect of the allegations raised by the plaintiff. I must now turn to the legal principles and evidence bearing upon each of the issues raised by the pleading.

Property Law Act

153 Sections 122 and 123 of the Property Law Act 1969 allow for relief in circumstances where one property owner erects a building on the adjoining property of another. Section 122 can be brought into play where the encroaching building was not erected as the result of gross negligence. Section 123 is available where the building was erected because of a mistake as to any boundary.

154 I note in passing that these statutory provisions are remedial and as such are to be construed liberally.

155 Section 18 of the Interpretation Act 1984 provides that an interpretation of a provision of a written law, a construction that will promote the purpose or object underlying the written law (whether that purpose or object is expressly stated in the written law or not) shall be preferred to a construction that would not promote that purpose or object.

156 The prescription contained in s 18 of the Interpretation Act is reinforced by the rule of construction that beneficial and remedial legislation is to be given a liberal interpretation rather than one which is literal or technical. Nevertheless, the task remains one of statutory construction. Thus, a court is not at liberty to give it a construction that is unreasonable or unnatural: IW v City of Perth [1997] HCA 30; (1997) 191 CLR 1 at 12.

157 Section 122(1) of the Property Law Act 1969 provides that where any building on land encroaches on a part of adjoining land, whether the building was erected by the owner of the first-mentioned land or by any of his predecessors in title, the encroaching owner may apply to the court for an order in accordance with this section.

158 By s 122(2), if it is proved to the satisfaction of the court that the encroachment was not intentional and did not arise from gross negligence, or, where the building was not erected by the encroaching owner, if in the opinion of the court it is just and equitable in the circumstances that relief should be granted to the encroaching owner or any other person, the court may if it thinks fit make an order (a) vesting in the encroaching owner any estate or interest in any part of the adjoining land; (b) creating in favour of the encroaching owner any easement over any part of the adjoining land; or (c) giving the encroaching owner or any other person the right to retain possession of any part of the adjoining land.

159 Where the court makes an order under this section, the court may declare any estate or interest so vested to be free from any mortgage or other encumbrance affecting the adjoining land, or vary, to such extent as it considers necessary in the circumstances, any mortgage, lease or contract affecting or relating to that piece of land.

160 By s 122(4), an order may be made subject to such terms and conditions as the court thinks fit, whether as to the payment by the encroaching owner or any other person of any sums of money, or the execution by the encroaching owner of any mortgage, lease, easement, contract or other instrument, or otherwise. Every person having an estate or interest in the adjoining land of the encroaching owner is entitled to be heard in relation to any application for an order.

161 Section 122(6) provides that the court shall not make an order under this section without the prior consent of the Western Australian Planning Commission established under the Western Australian Planning Commission Act 1985 and the local government of the district in which the land to which the order will relate lies.

162 Section 123 deals with relief in cases of mistake as to boundaries or identity of land. By s 123(1), where a person who has or had an estate in any piece of land has erected a building on any other piece of land, if the building has been so erected because of a mistake as to any boundary, that person may apply to the court to make an order in accordance with the section.

163 By s 123(2), if in the opinion of the court it is just and equitable in the circumstances that relief should be granted to the applicant or any other person, the court may if it thinks fit make an order (a) vesting the piece of land wrongly built upon in the person specified in the order; (b) allowing any person specified in the order to remove the building from the piece of land wrongly built upon; (c) ... (d) giving the person who erected the building the right to possession of the piece of land wrongly built upon for such period and on such terms and conditions as the court may specify in the order. Where the court makes an order, it may declare any estate in the piece of land wrongly built upon to be free of encumbrances and the order may be subject to such terms and conditions as the court thinks fit. Any person with an interest in the matter is entitled to be heard. Again, the court shall not make an order without the prior consent of the planning body.

Findings concerning the Property Law Act issues

164 In the present case, I have little difficulty in finding that the Executive improvements comprising that part of the Executive walls, carport and driveway as are established upon the Executive portion encroach upon the adjoining land, that is to say, the land formerly comprised in certificate of title 1674/023 known as 40 Heytesbury Road or the Peck lot. I find also that the encroachment was not intentional and did not arise from gross negligence. It is apparent from the evidence that the encroachment occurred because of a mistake made by the builder Messina and was of a comparatively minor kind.

165 Messina readily admitted his error and it is apparent from the actions of the original owners in 1984 when the mistake was discovered that there were no recriminations or allegations of gross negligence. They simply put in place a co-operative arrangement to have the land resurveyed with a view to remedying the error. The nature and extent of the encroachment was described by the surveyor, Mr Fisher. Further, and in any event, there was no evidence before the court to the contrary which might suggest that the encroachment was intentional or did arise from gross negligence.

166 I am therefore persuaded that the conditions precedent to a grant of relief pursuant to s 122 of the Property Law Act have been established by the plaintiff to the satisfaction of the Court.

167 I am required by s 122(2) to determine whether it is just and equitable in the circumstances that relief of the kind contended for should be granted to Executive as the encroaching owner. The relief sought is essentially that there be an order vesting an estate in fee simple in the Executive portion free of encumbrances, although the prayer for relief in the pleading also allows for the provision of a lesser form of relief in the form of an easement or an order for possession.

168 In Bunney v State of South Australia [2000] SASC 141, Debelle J, in dealing with similar legislation, held that the court has a very wide discretion when determining what orders are to be made. The purpose of the legislation is to provide a fair means of adjusting rights where an encroachment has occurred. The Act is remedial in character. It may be appropriate for the court to order a transfer of land without awarding compensation. That usually occurs when the land transfer has represented an insignificant part of the land held respectively by the encroaching owner and the adjoining owner. He also reviewed a number of other considerations bearing upon the manner in which the remedial discretion should be exercised.

169 In the circumstances of the present case, one immediately notices that the land comprising the Executive portion is a small fragment of land which serves a useful purpose if it be regarded as part of the estate of Executive, but cannot be put to any practical use by the second defendants as the present registered proprietors of the portion. There is no evidence before the Court to suggest that the neighbouring owner, Mrs Edgecombe, would be in any way inconvenienced in her daily activities if title to the sliver of land was vested in Executive as her neighbour. Moreover, it is an undisputed fact that Executive, and thus Mr and Mrs Allen, have been in continuous and peaceful possession of the Executive portion since their domestic residence was completed 17 years ago in 1984.

170 In addition to these considerations, I find, having regard to the evidence of Mr McKeown and the licensed valuer, Mr Kreutzer, that the value of the Executive portion considered in isolation is very small, being the sum of $2,400. I am satisfied on the balance of probabilities and so find, having regard to the same expert evidence, that if the portion is not vested in Executive, then that party will have suffered a loss of $45,000 representing the difference between the value of the Executive property if the portion be amalgamated with it and the value of the property without the portion. These figures add weight to the plaintiff's contention that the portion should be transferred to Executive.

171 Nonetheless, it is important to look closely at the conduct of the respective parties, because s 122(2) requires an opinion to be formed as to what is just and equitable in the circumstances.

172 I find as a fact, and say it unequivocally, that there has been no impropriety on the part of Mr Allen and his wife at any stage. The encroachment was not due to any personal default on their part and when it came to light, Mr Allen immediately co-operated with the other owners in a constructive manner by arranging for the land to be resurveyed. With the benefit of hindsight, it could be said that he and his fellow owners made an error of judgment in not ensuring that new titles coinciding with the approved diagrams were issued immediately. However, if it be an error of judgment, it was an entirely innocent error on Mr Allen's part as he left the remedial action to others. The error, if any, does not reflect adversely upon the quality of Mr Allen's actions. The indications are that the builder Messina (and possibly Mr Peck) were responsible for no action being taken to complete the third agreement in the manner contemplated by the parties.

173 Mr Allen played no part in the Peck to McPhee sale in mid-1992 and when a problem concerning the title was brought to his attention 12 months later by Mr McPhee and Mr Borrello, at the time of the McPhee to Edgecombe sale, Mr Allen took steps to ensure that Mr McPhee obtained title to the land he occupied by signing the transfer and statutory declaration to that effect prepared by Mr Borrello.

174 I find as a fact on the evidence that when Mr McPhee came to Mr Allen's home in the period leading up to the McPhee to Edgecombe settlement, Mr Allen explained the history of the matter to his neighbour. I say this because Mr Allen presented as a balanced and reliable witness, while Mr McPhee was somewhat temperamental and less precise in his description of events.

175 I am willing to believe that Mr McPhee was in a state of agitation at the time of the meeting and may not have fully absorbed what was being put to him. I consider, however, that, when one takes account of his own previous knowledge as a result of the events in 1992, he must have been aware that there was a problem with the title. Mr Allen subsequently signed the necessary papers in order to carry into effect the previously made arrangements he had described to Mr McPhee. It follows from these observations that Mr McPhee's allegations of a conspiracy were without any foundation, and thus a degree of annoyance on Mr Allen's part at the Mildenhall meeting in August 1994 was understandable.

176 When all these considerations are brought together, it emerges that Mr Allen's conduct generally is beyond reproach.

177 When one turns to Mr McPhee, a somewhat different picture emerges. It appears from the McPhee proof of evidence that at the time of his inspection of the Peck lot in mid-1992 mention was made of a discrepancy concerning the boundary. He admitted in his evidence at the trial of the action that this was put to him by the agent Galbraith and also by Mr Peck. I find that the nature of the discrepancy was explained to him in general terms and that thereafter he proceeded on the assumption that he was entitled to have conveyed to him a legal title "to what he saw", that is to say, the land lying within the visible or physical boundaries of the Peck lot. This was what he was prepared to pay for. It follows that in the period leading up to settlement on 22 July 1992 he was not interested in acquiring the small sliver of land the subject of the Executive encroachment. He understood that this was to be conveyed to the neighbouring owner.

178 I accept, and so find, that Mr McPhee was led to believe initially that the problem would be sorted out at settlement, and that he left it to Paramount Settlements to do whatever was required. The fact remains, however, that he personally was not promised and had no wish to acquire any land lying outside the physical or visible boundaries of the property he had inspected at 40 Heytesbury Road.

179 It must also be recognised, however, that at this stage there was no fault on McPhee's side. He had been put on notice that a problem of some sort existed, but he understood it could be sorted out. He was not at fault himself, but the information given to him has a bearing upon whether he can be characterised as a bona fide purchaser for value without notice of Executive's claim to a prior equitable estate in the Executive portion as a consequence of the fiduciary arrangements comprising the third agreement. I find that he did have notice of Executive's prior claim to the Executive portion. Further, and in any event, because he only wished to get "what he saw" Mr McPhee did not intend to purchase the Executive portion.

180 A difficult issue emerges from the evidence as to whether Mr McPhee was later told, at a time closer to settlement, that the problem had not in fact been sorted out, and as to whether his consent was obtained to leaving the matter to be dealt with after settlement.

181 Mr Poulton says that his title searches revealed the problem and the likelihood of delay if an attempt were made to sort it out before settlement. Letters were adduced in evidence suggesting that he raised the issue with Mr Peck and placed the diagram searches before Mr McPhee. These letters lend some support to Mr Poulton's evidence that on the occasion when Mr McPhee and his wife attended at the Paramount Settlements office to sign the mortgage documents, they agreed with Mr Poulton that the matter was to be sorted out after settlement.

182 I have already expressed certain reservations about the reliability of Mr McPhee as a witness. Mr Poulton, on the other hand, was generally precise in his descriptions, and it must be kept in mind that what was being talked about were two comparatively small encroachments and a problem of a comparatively minor order. Accordingly, on balance, I incline to the view that Mr McPhee was told about the title discrepancy and was willing to let the settlement proceed upon the basis that the problem would be sorted out later. It must be acknowledged that there was no untoward conduct by Mr McPhee, but to my mind, he cannot be characterised as a bona fide purchaser for value of the Executive portion without notice of any prior claim to the subject land. He had been told that he was entitled to the Peck portion upon the basis that what he saw was what he would get, and he had been put on notice by Galbraith, Poulton and Peck that the encroaching walls known as the Executive portion should be regarded as belonging to the neighbouring owners, Mr and Mrs Allen. This finding is substantiated by the manner in which Mr McPhee amended the Mildenhall proof of evidence mentioned earlier.

183 I am prepared to accept that Mr McPhee paid little attention to what he had been told at the time the Peck to McPhee settlement took effect. He may not have fully appreciated the implications of the title discrepancies. Nonetheless, when the evidence is viewed objectively, it emerges that he was put on notice and cannot be characterised as a bona fide purchaser for value without notice of any prior claim by Executive to an estate in fee simple in the Executive portion.

184 A different picture begins to emerge, however, when one turns to subsequent events. Twelve months later, when Envoy Settlements alerted Mr McPhee to the fact that the title issue could obstruct the sale to Edgecombe, it seems that suspicions began to form in Mr McPhee's mind which caused him to act in an increasingly erratic manner. I have already noted, and now confirm as a finding, that at this stage Mr McPhee was informed by Mr Allen of the history of the matter. Mr McPhee was thereby put on notice that in the event of the Peck portion being transferred to McPhee, this would bring with it a reasonable expectation on Mr Allen's part that in due course the Executive portion would be transferred to Executive in the manner contemplated by the third agreement, for this was an important feature of the history of the matter.

185 It follows that, against this background, I have little difficulty in finding that Mr Allen signed the transfer and statutory declaration prepared by Mr Borrello on the assumption that in due course the Executive portion would be conveyed to Executive in a similar manner. I will come back in due course to the further question of whether Mr McPhee, or his agent Mr Borrello, can be said to have played a part in creating or fostering the assumption just mentioned in a way which might give rise to legal or equitable consequences. Nonetheless, the direct result of Mr Borrello's intervention was that ultimately Mr McPhee did get what he originally saw. He eventually obtained title to what he had contracted to buy and to what he understood he was paying for.

186 To this point, it can be said that Mr McPhee had not acted in an improper manner. He was simply someone caught up in a rather complicated set of circumstances. The evidence reveals, however, that throughout 1993 and 1994 he was still subject to various financial pressures and it is clear from the evidence that this caused him to act in an increasingly insistent and opportunistic manner.

187 When it became apparent to Mr McPhee that quite by chance he had finished up as the registered proprietor of the Executive portion, he began to use this circumstance as a means of seeking to obtain money from Mr Allen. To use his own words, Mr McPhee was aware that the Executive portion vested in him was a "windfall", but he was still determined to obtain money for it, even though it was quite apparent that the sliver of land belonged naturally to the Executive lot.

188 It is true that in having to sort out the title issue Mr McPhee had instructed solicitors and run the risk of incurring legal expenses. It is clear from the evidence, however, that in the end result he was not obliged to and did not pay the Michael Whyte & Co account of $1,250. Thus, it cannot be said that he was out-of-pocket in that regard. There is no persuasive evidence before the Court that he lost a commercial opportunity to buy another property in the manner depicted in the McPhee proof of evidence or that the reduction in the Pozzi price was due to the present controversy. Accordingly, I give no weight to those aspects of the matter.

189 When all these considerations are drawn together in weighing up what is just and equitable in the circumstances of the present case, one notices that, on the one hand, Mr Allen acted with propriety throughout. On the other hand, Mr McPhee was put on notice at any early stage that there could be a problem with the title, and that the Executive portion should be regarded as belonging to the neighbouring owners, Mr and Mrs Allen. Ultimately, Mr McPhee obtained title to what he believed he was paying for and did not incur any out-of-pocket expenses. There may have been some fault on Mr Poulton's part in failing to ensure that his clients, the McPhees, as purchasers, obtained a proper title to the Peck lot with no loose ends left trailing. It may be that this failure to tie up the loose ends, before or after settlement, caused the McPhees considerable anguish (and possibly financial loss) at a later stage, but that is not the issue presently before me. I must deal with the plaintiff's claim to the Executive portion.

190 The value and size of the subject land is small when viewed in isolation and it is clear that it serves no practical purpose in the hands of Mr McPhee, but has a real financial and practical value to Executive. In the absence of any fault on the part of Mr Allen, and in circumstances where the present registered proprietor had notice of a prior claim to the subject land pursuant to the third agreement, it is just and equitable that Executive obtain title to the land. Accordingly, having regard to the factors just mentioned and the criteria set out in s 122 of the Property Law Act, I consider that the plaintiff should obtain the relief principally sought, that is to say, an order vesting the Executive portion in Executive and without provision for compensation to Mr McPhee as the registered proprietor.

191 I have already noted that arrangements were made previously for the other interested parties, including the Registrar of Titles, to be heard before any final order was made. Further, and in any event, a precautionary procedure of that kind seems to be required by the statutory provision itself. The likelihood is that because the diagrams were previously approved, the planning bodies and the Registrar of Titles will have no objection to an order being made for the land to be transferred to Executive, but I will defer any final order in that regard until the relevant parties have had an opportunity to consider these reasons for judgment and to be heard, if necessary.

192 The finding just made appears to alleviate the need to consider the application of s 123 of the Property Law Act to the circumstances of the present case. However, for the sake of completeness, I consider that the plaintiff is entitled to obtain relief pursuant to that statutory provision also.

193 I have already found that the building comprising the encroachment occurred as the result of a mistake. When one comes to the forming of an opinion as to whether the provision of relief is just and equitable, the considerations I have mentioned earlier apply with equal force.

194 For the sake of completeness, however, in case I be wrong in the conclusion I have arrived at concerning the issues raised under the Property Law Act, I will proceed to deal with the other issues raised by the pleadings.

195 The concept of indefeasibility of title whereby the estate of the registered proprietor is to be regarded as paramount finds expression in s 68 and s 134 of the Transfer of Land Act 1893. This concept is subject to a number of exceptions, however, one of which is that the land which shall be included in any certificate of title or registered instrument shall be deemed to be subject to any rights subsisting under any adverse possession of the land.

196 Sections 4 and 5 of the Limitation Act 1935 enable the right of action by an adverse possessor to be brought 12 years after the adverse possessor has been in possession of the subject land. The person claiming adverse possession must demonstrate both factual possession and the requisite intention to possess.

197 In Petkov & Ors v Lucerne Nominees Pty Ltd (1992) 7 WAR 163 Murray J noted that adverse possession is an exception to the indefeasibility of title under s 68 of the Transfer of Land Act. He held that the 12-year limit imposed upon the registered proprietor under s 4 of the Limitation Act 1935 on a right of action against an adverse possessor is not limited to the period of possession of the party asserting adverse title, that is, it included that of predecessors in title.

198 He said further that the party asserting adverse possession must show a possession in fact that has been continuous and exclusive. This must be accomplished by a conscious intention to possess the land to the exclusion of all other parties. The facts of each case will be decisive.

199 The plaintiff contends in the circumstances of the present case that Executive has been in continuous and exclusive possession of the Executive portion of land since 1984 and as such satisfies the conditions to a claim for adverse possession.

200 Put shortly, then, the Transfer of Land Act and the principles of indefeasibility envisage that a registered proprietor of land will hold the title to this land free of all encumbrances save those noted on the register. However, as one of the exceptions to indefeasibility allowed by s 68, if a neighbour trespasses upon the land in question and takes possession of it by building in a manner which encroaches upon the adjoining land, then, at the expiration of 12 years, the effect of the Limitation Act 1935 is that the true owner loses his right to complain of the trespass. Thus, even though the encroacher's title is imperfect in the abstract (because he obtained the land by wrongful act), at the end of 12 years he is able to defeat any competing claim and is deemed to be the owner.

201 It is apparent, however, that time will not begin to run until someone is in "adverse possession", that is to say, the possession must be adverse and not by consent of the true owner. Possession is not "adverse" where it is by permission of the owner as, for example, where possession of land is taken pursuant to a lease or licence.

202 A question arises in the circumstances of the present case as to whether the agreements made between the original owners should be regarded as a form of licence. In other words, Executive cannot say that its encroachment amounted to an adverse possession of the land because the possession was allowed to continue in the expectation that the title difficulties would be sorted out and for the time being there was no need for Mr Peck as the original title holder to treat or regard Executive as a trespasser.

203 There is also a further issue as to whether the adverse possession, if any, continued for a 12-year period before the true owner asserted his claim to the land. It is apparent from the evidence that Mr McPhee took steps to assert his title in 1994 before 12 years from the original encroachment had expired.

204 In my view, the presence of the third agreement and related events precludes the plaintiff from succeeding in a claim to obtain title to the Executive portion upon the basis of adverse possession. In my view, the encroachment was allowed to remain by a consensual arrangement between the parties and cannot therefore be characterised as "adverse" in the manner required by the principles of common law. It follows that the plaintiff is not entitled to succeed on this ground.

205 I have already noted in reviewing the pleadings that the plaintiff asserts in par 26 of its claim that the McPhees are estopped from denying that Executive is entitled to a transfer of the Executive portion. A declaration is sought in that regard and an order that the portion be transferred to Executive. It will be useful to look at the equitable principles bearing upon this issue.

206 In Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, Mason CJ and Wilson J noted that for many years there was a reluctance to allow promissory estoppel to become a vehicle for the positive enforcement of a representation by a party that he would do something in the future. It was thought to be a defensive equity. Generally speaking, they said, a plaintiff cannot enforce a voluntary promise because the promisee may be expected to appreciate that, to render it binding, it must form part of a binding contract. They went on to accept, however, that in some circumstances promissory estoppel may extend to the enforcement of a right not previously in existence when the defendant has encouraged in the plaintiff a belief that it will be granted and has acquiesced in action taken by the plaintiff in that belief. What gave rise to the need for the court to intervene was the defendant's unconscionable attempt to go back on the assumptions which were the foundation of their dealings.

207 Mason CJ and Wilson J, espousing the majority view, summarised their reasoning in this way at 404:

"One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it': per Dixon J in Grundt v Great Boulder Pty Goldmines Ltd [1937] HCA 58; (1937) 59 CLR 641. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption."

208 It is apparent from this passage and the reasoning of other members of the High Court in Walton's case that the purpose of the doctrine of estoppel is to preclude parties relying on strict rights where to do so would be unconscionable. It is also apparent from later decisions of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394 and Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 that the assumption being referred to in this line of reasoning may be one as to a legal as well as to a factual state of affairs. In other words, a representation as to the effect of a legal agreement or the adequacy of arrangements made between the parties can give rise to an estoppel.

209 When one applies these principles to the circumstances of the present case, one notices immediately that there is an evidentiary issue as to whether any representation or promise was made to Mr Allen on behalf of Executive that if he signed documents to effect the transfer of the Peck portion to McPhee, the Executive portion would then be transferred to Executive, this being described in the pleading as "the assumption" held by Mr Allen. The crucial question is whether Mr McPhee by his own words or conduct or by the conduct of his agent, Mr Borrello, caused Mr Allen to adopt the assumption.

210 I find that Mr Borrello was acting exclusively as an agent for Mr McPhee and with a broad authority to do whatever was necessary in talking to Mr Allen to ensure that Mr Allen transferred the Peck portion to the McPhees so that they could complete the sale to Edgecombe. This finding, however, does not necessarily answer the question of whether Mr Borrello's conversations with Mr Allen were sufficient to cause Allen to adopt the assumption, or putting it another way, to echo the words of Mason CJ and Wilson J in Walton's case, whether Mr Borrello played such a part in Mr Allen adopting or proceeding pursuant to the assumption that it would be unfair or unjust to leave the McPhees free to ignore the assumption.

211 In his closing address, counsel for the plaintiff seemed to recognise that there was a conflict of evidence as to whether Mr Borrello represented to Mr Allen that the Executive portion would be transferred to him. Mr Allen contended that Mr Borrello said expressly that he would fix Mr Allen's problem. Mr Borrello's evidence was to the contrary. Mr Borrello did admit that he conveyed to Mr Allen that the latter had a problem of the same kind and he hinted that the problem could be fixed in the same manner. Mr Borrello agreed that he did not suggest that Mr Allen take independent legal advice.

212 I have little difficulty in finding, as I do, that at the time Mr Allen signed the relevant transfer and statutory declaration he undoubtedly believed that Mr McPhee was willing to and would transfer the Executive portion to him if requested to do so. There can be no doubt, as matters developed, that Mr Allen acted to his detriment in signing the papers in question. Pursuant to his power of attorney, he relinquished the title to a piece of land in Svenson's name and thereby deprived himself of the means of requiring that, as a quid pro quo, a similar fragment of land - the Executive portion - be transferred to Executive so as to carry into effect the fiduciary arrangements established by the third agreement.

213 I have greater difficulty in determining whether Mr McPhee's agent, Mr Borrello, played a sufficient part in causing Mr Allen to adopt the assumption he held that the Executive portion would be transferred to him in due course if he signed the Borrello papers. In the final analysis, however, I am satisfied on the balance of probabilities that Mr Borrello did cause Mr Allen to adopt the assumption. This was done by various hints and suggestions including the assertion of Mr Borrello that he would fix Mr Allen's problem. These suggestions undoubtedly left Mr Allen with the impression that his execution of the Borrello documents was a further step towards the third agreement being carried into effect. In my view, the language used in the transfer and supporting statutory declaration, when considered in conjunction with the various conversational exchanges, was calculated to and did in fact lead Mr Allen to believe that the Executive portion would be transferred to his company in due course. By his words and actions, Mr Borrello made a representation to that effect.

214 Against this background, I consider that Mr McPhee did act in an unconscionable manner in subsequently setting up his registered title to the Executive portion as a means of defeating Mr Allen's claim to the Executive portion. It follows that, pursuant to the principles enunciated by the High Court in Walton's case, the plaintiff is entitled to relief of the kind sought.

215 I have already noted, in referring to Giumelli's case, that equitable relief of this kind should be commensurate to the other interests likely to be affected. For the reasons previously given, however, in relation to the issues under the Property Law Act, it is obviously just and equitable that the Executive portion, which has been occupied by Executive for many years, should be vested in the plaintiff company and without compensation being allowed to the McPhees.

216 I draw this part of the judgment to a close by adding that, in my view, the rules concerning indefeasibility of title do not bar the plaintiff's remedy.

217 It is true that Mr and Mrs McPhee are the registered proprietors of the Executive portion, and that the title to the land in question is apparently free of encumbrances. I recognise, as mentioned earlier, that ss 68 and 134 of the Transfer of Land Act give effect to the principle of indefeasibility which is the foundation of the Torrens systems of title so that subject only to exceptional circumstances concerning matters such as fraud or adverse possession, a person dealing with the registered proprietor is entitled to assume that the relevant title is not affected or diminished by unregistered claims or interests. Nonetheless, the decided cases make it clear that the indefeasibility provisions do not preclude a claim to an estate or interest in land against a registered proprietor arising out of the acts of a registered proprietor himself: Breskvar v Wall (1971) 126 CLR 376 at 384.

218 Further, the Privy Council in Frazer v Walker [1967] 1 AC 569 made it clear at 585 of the judgment that the principle of indefeasibility "in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant."

219 It follows that in the circumstances of the present case, where the plaintiff has been found to be entitled to relief in equity as a consequence of unconscionable conduct on the part of the second defendants in the course of their dealings with Mr Allen as a representative of the plaintiff company, being conduct giving rise to an estoppel of the kind pleaded, the rules concerning indefeasibility do not preclude relief.

220 The plaintiff also seeks a declaration that the second defendants hold the land in trust for the plaintiff.

221 Section 34(1) of the Property Law Act 1969 provides that no interest in land is capable of being created or disposed of except by a writing signed by the person creating or conveying the interest, or by his agent thereunto lawfully authorised in writing or by operation of law.

222 Section 34(2) provides that this section does not affect the creation or operation of resulting, implied or constructive trusts.

223 The only document in existence which might possibly be regarded as creating an interest in the land in question as between the respective owners is the document executed by the original owners in June 1984, referred to in the pleadings as the second agreement, whereby it was agreed that the original title should be divided into three separate titles and with each new title being allocated to Svenson, Peck and Executive in the manner agreed between the parties.

224 A question then arises as to whether this agreement as subsequently varied by the third agreement gave rise to a constructive trust which had the effect of vesting an equitable estate in the Executive portion in Executive upon completion of the Fisher resurvey or, in the alternative, whether fiduciary arrangements of the kind reflected in the second and third agreements provide an avenue for the enforcement of such a trust in the event of one of the parties to the arrangements, or a successor in title, acting unconscionably. These questions bring with them a further issue as to whether Mr McPhee obtained title to the subject sliver of land with actual or constructive notice of the Executive's claim to a prior equitable estate in the Executive portion as a consequence of the fiduciary arrangements comprising the third agreement, with the result that a claim in equity to the same can be enforced against the second defendants.

225 Before turning to the issues presented on the pleadings, I must look briefly at the principles of equity bearing upon a claim of this kind.

226 A constructive trust has been described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principles. It is said to prevent a person from asserting a legal right in circumstances where such an assertion would constitute unconscionable conduct.

227 In Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 Deane J noted at 614 that the principal operation of the constructive trust doctrine has been in the area of breach of fiduciary duty, but it can arise in other circumstances.

228 Unjust enrichment has been described as the basis for constructive trust in Canada, but this approach was rejected by Deane J in Muschinski v Dodds (supra). Only Toohey J in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 at 152 considered the imposition of a constructive trust to prevent unjust enrichment to be no less principled than to prevent unconscionable conduct. Even if an unjust enrichment model were preferred, a constructive trust will be imposed only where the enrichment has no juridical basis: Pettkus v Becker (1980) 117 DLR (3d) 257 at 273.

229 I note also that in Giumelli v Giumelli (1996) 17 WAR 159, Ipp J of the Full Court in this State proceeded on the basis at 175 that unconscionability was the critical issue. Where unconscionability has been established and the circumstances otherwise justify the declaration of a constructive trust, non-compliance with statutory requirements of writing will not prevent equity from imposing such a trust. See Muschinski v Dodds (supra); Stowe & Anor v Stowe (1995) 15 WAR 363. This view of the matter was affirmed by the High Court in Giumelli v Giumelli [1999] HCA 10, although an appeal against the decision of the Full Court succeeded as to the extent of the relief granted to the plaintiff in that case.

230 In Stowe & Anor v Stowe (supra) the Full Court accepted that a constructive trust may be utilised to enforce an actual common of the parties inferred as a matter of fact, but not an imputed intention which the parties never had, but would have had if the parties had applied their minds to the matter.

231 This approach was affirmed by the Full Court in Sorna Pty Ltd v Flint [2000] WASCA 22. In that case, Murray J said at 572 that it is open to a party to seek to rely upon a trust arising by implication from the common intention of the parties by the application of the central principle that equity will allow a trust in such circumstances where it would otherwise be unconscionable to allow the holder of the legal title to retain sole legal and beneficial ownership of the property in question. In that sense, the term "constructive trust" is not being used in the sense of "a remedial institution" which equity imposes regardless of actual or presumed agreement or intention. He relied upon Stowe & Anor v Stowe (supra) and Maharaj v Chand [1986] AC 898 at 907.

232 In the circumstances of the present case, it was open to the plaintiff to assert that this was a case of unjust enrichment. Mr McPhee himself seemed to accept that he had obtained a "windfall". He had not joined with the original owners or any of them in a partnership or joint endeavour to effect a certain purpose concerning the land and it is therefore questionable whether there was any juridical basis for his enrichment other than the transfer of the land to him.

233 Further, Mr McPhee had ever only intended to pay for the land he saw upon a visual inspection. I have already found that the property inspected did not include the Executive portion because that lay on the Executive side of the dividing wall. Nonetheless, counsel for the plaintiff seemed to accept that on the current state of the decided cases it was not sufficient for the plaintiff to rely upon unjust enrichment only. I am of a similar view. I will proceed accordingly with a view to making a determination as to whether there was some element of unconscionable conduct involved in Mr McPhee's assertion of legal title to the Executive portion as a means of defeating the plaintiff's claim.

234 I have already indicated that in my view Mr Poulton did explain the situation concerning the title to Mr McPhee prior to settlement on 22 June 1992 and that this explanation added to what had already been conveyed to Mr McPhee by Galbraith and Peck. That being so, it cannot be said that Mr McPhee acquired the Executive portion as a bona fide purchaser for value without notice of Executive's claim to a prior equitable interest in the subject land. He was on notice. Further, at that stage, he had, in essence, agreed to co-operate in arrangements whereby the Executive portion would ultimately be transferred to Executive. He authorised Mr Poulton to do whatever was necessary to ensure that Mr McPhee got what he saw, that is to say, the property known as 40 Heytesbury Road which meant, in effect, receiving the Peck portion and transferring the Executive portion to the neighbouring owner. I accept Mr Poulton's evidence that he would not have proceeded to settlement unless he was satisfied that both parties were agreeable to the arrangements envisaged by the third agreement being carried into effect after settlement.

235 It is at this point, however, that I must return to the principles concerning indefeasibility of title. I have already noted in regard to the estoppel issue that these principles do not preclude a claim to an interest in land arising out of the acts of the registered proprietor himself and that fraud is one of the exceptions to indefeasibility. Section 134 and the decided cases make it clear, however, that there is no fraud on the part of the registered proprietor in merely acquiring title with notice of an existing unregistered interest or in taking a transfer with knowledge that its registration will defeat such an interest: Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101. A question therefore arises in the circumstances of the present case as to whether any equitable interest in the Executive portion vested in Executive as a consequence of the pre-existing fiduciary arrangements ceased to be enforceable when the Peck title which included the Executive portion was transferred to the McPhees, notwithstanding that Mr McPhee, on my finding, had actual notice of Executive's prior equitable interest in the subject land.

236 I consider that a trust interest of the kind contended for in the present case can be enforced, notwithstanding the presence of a registered title, if the conduct complained of goes beyond mere notice of a prior unregistered interest and amounts to fraud within the meaning of ss 68 and 164 of the Transfer of Land Act.

237 In Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604, for example, the High Court held that where a registered proprietor took a transfer or obtained title to the subject land knowing of and accepting an obligation to carry into effect an earlier contractual arrangement affecting the land, the registered proprietor took the land subject to a constructive trust in favour of the party entitled under the earlier arrangement.

238 Mason CJ and Dawson J noted that pursuant to s 68 and s 134 of the Transfer of Land Act "fraud" is an exception to indefeasibility. They were of the view that in regard to this exception to indefeasibility, there was no difference between a false undertaking which included the execution of a transfer and an undertaking honestly given which induced the execution of a transfer and was subsequently repudiated for the purpose of defeating a prior interest. Repudiation was fraudulent because it had the object of destroying the unregistered interest notwithstanding that its preservation was the foundation or assumption underlying the execution of the transfer.

239 To my mind, reasoning of this kind is applicable to my findings in the present case. Initially, Mr McPhee was only concerned to ensure that what he saw was what he got. It was explained to him that a third party was thought to be entitled to the Executive portion, being a sliver of land lying outside the visible boundaries of what he saw. It was pursuant to this understanding that transfers and other documents were executed that had the effect, eventually, of vesting in Mr McPhee a registered title to the land he saw, that is to say, the residential property known as 40 Heytesbury Road, but also, as a side effect, title to the Executive portion. When, at a later stage, he decided to repudiate the understanding which had enabled him to obtain title to 40 Heytesbury road, the reasoning of the High Court in Bahr v Nicolay (supra) suggests that, if not before, a constructive trust was then constituted in favour of the plaintiff, this being a consequence of the second defendant's unconscionable conduct, and a matter sufficient to bring the case within one of the acknowledged exceptions to indefeasibility.

240 Further, and in any event, even if I be wrong in such a view, the circumstances in which Mr McPhee subsequently acquired title to the Peck portion give rise to an enforceable constructive trust. In my view, for the reasons previously given, Mr McPhee by his agent Mr Borrello played a part in causing Mr Allen to adopt the assumption that the Executive portion would be transferred to Executive. It was on this basis that Mr McPhee was able to obtain a complete title to the land known as 40 Heytesbury Road, being the land subsequently conveyed to Edgecombe.

241 In those circumstances it would be unconscionable for Mr McPhee to have allowed Mr Allen to proceed as he did, and then to refuse to convey title to the Executive portion to the plaintiff company in the manner envisaged by the third agreement. The McPhees were not parties to that agreement, but the history of the matter had been explained to Mr McPhee by Mr Allen. In my view, both Mr McPhee and his agent, Mr Borrello, were aware that at the time Mr Allen signed the transfer and statutory declaration concerning the Peck portion he was acting on the assumption that this was a step towards completing the third agreement.

242 It is true that Mr Allen was not acting to his detriment in the sense of conveying out of his own estate land that was registered in his name, for, in fact, in signing the transfer and related statutory declaration, Mr Allen was only acting as attorney on behalf of Svenson. Nonetheless, the practical effect of the discussion was that Mr Allen was deprived of his ability to insist that the third agreement be carried into effect and was left with the problem of the encroachment and the possibility that the improvements apparently forming part of his property might have to be demolished at some expense to himself. Accordingly, I consider that the plaintiff is entitled to succeed on this ground.

243 It follows from earlier discussion that, as a further alternative, the plaintiff asserts in pars 29 and 30 of the claim that the McPhees and Executive formed a common intention whereby if Allen assisted the McPhees in having the Peck portion transferred to them, the McPhees would transfer the Executive portion to Executive. The decided cases indicate that a constructive trust can arise in such circumstances.

244 Again, this depends upon the view one takes of the actions of Mr Borrello in arranging for the relevant documents to be signed. For the reasons previously given, I consider that there was a common intention that the Executive portion would be transferred to Executive in due course and that Mr McPhee has subsequently acted unconscionably in refusing to give effect to that common intention. Accordingly, relief will be afforded to the plaintiff on this ground also.

245 I consider that the plaintiff is principally entitled to relief pursuant to s 122 of the Property Law Act 1969 in respect of the encroachment described in these proceedings as the Executive portion, being the sliver of land presently vested in Mr and Mrs McPhee, the subject of certificate of title 2007 folio 994.

246 Having regard to the pleadings, and the powers allowed to the court by the statutory provision just mentioned, I presently consider that the appropriate form of relief is for the second defendants to be required to execute such documents as will effect a transfer of the Executive portion into the name of the plaintiff company free of encumbrances and without provision for any compensation to be paid to the defendants or to any other party.

247 It follows that the Executive portion is to be regarded as free of any charge or interest in the same purporting to be held by the third defendant, Susan Lesley Walker, and the third defendant will be required to deliver to the solicitors for the plaintiff the duplicate certificate of title if such a document be in her possession. Subject to further submissions, I am prepared to make whatever declaratory orders are required to give effect to these rulings, for s 24(7) of the Supreme Court Act 1935 allows for remedies to be provided so that, as far as possible, all matters in controversy between the parties may be finally determined.

248 The proposed orders are subject to the various defendants and their legal advisers being afforded an opportunity to consider the reasons for judgment and to be heard as to the nature of the relief proposed and as to the form of any orders required to carry the judgment into effect. I therefore give a specific direction that the handing-down of these reasons is not to be regarded as the date on which the judgment of the court takes effect. I will hear from the parties as to the orders and directions which are presently required in order to allow the further hearing to take place. I anticipate that, in due course, counsel for the plaintiff will return with a draft minute of the orders to be made.

249 Further, and in any event, I consider that the plaintiff is entitled to relief of the kind just described upon the basis that the defendants are estopped from denying that Executive is entitled to a transfer of the Executive portion, or, alternatively, that the second defendants hold the subject land upon a constructive trust in favour of the plaintiff.