Plaintiff v Defendants

2 The mortgagor, who is also the present registered proprietor of the land, defaulted under the mortgage. As a result, the mortgagee (the present plaintiff) on 1 February 2007 obtained from this court judgment for possession of the land and for the sum of $875,348.01 as moneys owing by the then defendant, Mr Cristian Gheorghiu to the plaintiff. Successive appeals from that judgment have been unsuccessful.

3 On 23 February 2007 the first defendant, who is or was the wife of the mortgagor, Cristian Gheorghiu, lodged a Caveat No.AE917049A over the property. By it she claims an estate in fee simple over the land pursuant to a constructive trust.

4 The plaintiff now seeks an order for the removal of the caveat. It issued the present proceeding by way of originating motion in the form of Form 5C in the Rules of the Supreme Court. By summons issued on 28 September 2007 the plaintiff seeks the relief claimed in the originating motion and an order that the requirements of Rules 5.03(1) and 8.02 be dispensed with. I make those latter orders.

5 The plaintiff is clearly a person affected by the caveat. It therefore has the right to bring a proceeding pursuant to s.90(3) of the Transfer of Land Act for the caveat's removal. Section 90 of the Act provides, in effect, that every caveat lodged pursuant to Division 1 of Part V of the Act shall lapse as to any land affected by any transfer or dealing (other than those set out by way of exception) upon the expiration of 30 days after notice given by the Registrar to the caveator that a transfer or dealing had been lodged for registration.

6 By s.90(3), any person who is adversely affected by any such caveat may bring proceedings in the court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit.

7 In my opinion, the plaintiff is entitled to the principal relief which it seeks by its originating motion. The first question is whether there is a serious issue to be tried on the question of whether the caveator has a caveatable interest. Here it seems to me that the "indefeasibility" provisions of the Transfer of Land Act which establish in Victoria the Torrens System of title by registration to land must be given effect. The relevant provisions of the Transfer of Land Act of course bind this court as they bind all courts and indeed all relevant persons in this jurisdiction.

8 The provisions of the Transfer of Land Act most directly relevant to the situation that obtains here are to be found in Part III of the Act under the heading, "The Register" and in particular under the heading, "Effect of Registration" which appears above s.40 of the Act. The effect of s.40 is that no instrument until registered shall be effectual to create, vary, extinguish or pass any estate or interest in or over any land under the operation of the Act; but upon registration, the estate or interest shall be created, varied, extinguished or pass in the manner and subject to the conditions specified in the relevant instrument or in the Act.

9 Section 41 then proceeds to give effect to the proposition that a certificate issued by the Registrar of Titles pursuant to the Act shall be conclusive evidence of the title to which that certificate refers.

10 The section provides amongst other things, in effect, that the register shall be received in all courts as evidence of the particulars recorded in it and shall be conclusive evidence that the person named in the relevant folio as the proprietor or as having any estate or interest in the land is possessed of that estate or interest as described in the register.

11 Consistently with the scheme of the Act s.42 then provides, in effect, that - notwithstanding the existence in any other person of any estate or interest which but for the Act might be held to be paramount or have priority - the registered proprietor of land shall, except in the case of fraud and other specified instances, hold such land subject only to such encumbrances as are recorded on the relevant folio of the register and absolutely free from all other encumbrances.

12 In this case the first defendant seeks to put before the court what can fairly be described as another encumbrance. She asserts that by an arrangement between her then husband, the registered proprietor, and a company over which her husband and perhaps the first defendant herself had some control, she was made a beneficiary of an interest in the land in question.

13 She claims that her interest was made known to a Mr Claudio Zanelli who, again as she claims, was an agent of the plaintiff and whose knowledge can be, for that reason, attributed to the plaintiff. She claims that Mr Zanelli was aware of the arrangements pursuant to which she became beneficially entitled to an interest in fee simple in the land in question and that, as I have indicated, his knowledge is to be deemed to be that of the plaintiff.

14 Even accepting that the facts as put forward by the first defendant will to be proved in accordance with the appropriate burden of proof and to the appropriate standard (the balance of probabilities) it seems to me that the first defendant's position would not be materially and relevantly improved.

15 That, it seems to me, is the effect of s.43 of the Transfer of Land Act. By that section it is provided, in effect, that no person taking or proposing to take a transfer from or proposing to deal with the registered proprietor of any land shall be required or in any manner concerned to enquire or to ascertain the circumstances or the consideration for which the proprietor was registered.

16 More particularly the section also provides, in effect, that no person dealing with the registered proprietor shall be affected by notice, actual or constructive, of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not, of itself, be imputed as fraud.

17 As I understand the first defendant's position the only fraud alleged against the plaintiff is the knowledge of the person alleged to be the plaintiff's agent. It is knowledge of that kind (that is, that the first defendant asserts a beneficial but unregistered interest in the land) which, it seems to me, falls squarely within the terms of s.43 as I have paraphrased those terms. That being the case, it seems to me that I have no option but in obedience to the law to hold that the interest of the plaintiff as registered mortgagee must prevail over any interest which the first defendant might have in the land in question.

18 It was urged upon me by Mr Gray for the first defendant, who I think said as much on her behalf as could be said, that a ruling of the kind which I have indicated I propose to make would offend against those principles which have been developed by the court (and in particular by the High Court) in such cases as Garcia v National Australia Bank[1], and the Commercial Bank of Australia v Amadio[2] and a third case, Yerkey v Jones[3].

19 None of those cases, however, were, as is this case, one which involved a dealing between the money lender/mortgagee and the registered proprietor of the land as mortgagor where the party who sought to upset the dealing had a mere unregistered interest in the land.

20 Those cases can, in my opinion, be distinguished. That being the case, and for the reasons I have otherwise expressed, it is in my opinion sufficiently clear as to be said to be not now a serious issue to be tried that the plaintiff is entitled to exercise its rights as mortgagee. Those rights include the right to have an interest such as that put forward by the first defendant, and sought to be protected by her caveat, being held to defer to the interest of the plaintiff which, pursuant to the scheme of the Torrens System, has, in my opinion, priority. I will therefore grant the relief which the plaintiff seeks by its originating motion and order that the second defendant, the Registrar of Titles, remove Caveat No.AE917049A from Certificate of Title Volume 10506 Folio 284.

[1] [1998] HCA 48; (1998) 194 CLR 395.

[2] [1983] HCA 14; (1983) 151 CLR 447.

[3] [1939] HCA 3; (1939) 63 CLR 649.