[1991] FCA 186; 29 FCR 219

Real Property Act 1886 (S.A.) - indefeasibility of title - registered mortgage - signature of mortgagor forged - mortgagee taking forged instrument bona fide for valuable consideration - whether title of mortgagee immune from adverse claim by the person whose signature had been forged.

Real Property Act 1886 (S.A.), s.69

Wicklow Enterprises Pty Ltd v. Doysal Pty Ltd and Anor (1987) 45 SASR 247

Frazer v. Walker and Ors (1967) 1 AC 569

Breskvar and Anor v. Wall and Ors (1971) 126 CLR 376

Palais Parking Station Pty Ltd v. Shea (1980) 24 SASR 425

Wacando v. The Commonwealth and Anor [1981] HCA 60; (1981) 148 CLR 1

Commissioner of Taxation (Cth) v. Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 56 ALJR 240

TCN Channel Nine Pty Ltd and Ors v. Australian Mutual Provident Society [1982] FCA 169; (1982) 42 ALR 496

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This Court has embarked on hearing a number of related matters which include, beside the present action, an application under the Bankruptcy Act 1966 to annul the bankruptcy of the respondent Rogers ("Mr Rogers") which resulted from the acceptance by the Registrar of a debtor's petition filed by him, and several applications under the Family Law Act 1975 concerning matters of property and maintenance between the applicant ("Mrs Rogers") and Mr Rogers which have been transferred to this Court under the cross-vesting legislation.

2. In this action the Court has heard argument on a discrete point of law arising under s.69 of the Real Property Act 1886 (S.A.) which it is agreed should be decided as a separate question ahead of other issues.

3. The following facts are common ground between the applicant and the first respondent ("Resi-Statewide"). Mr and Mrs Rogers, prior to their divorce, were the registered proprietors as joint tenants of the whole of the land comprised in Certificate of Title Register Book Volume 3957 Folio 29 ("the property") being the house property at 7 Dalpura Grove, Aberfoyle Park in the State of South Australia. The Certificate of Title is issued under the provisions of the Real Property Act 1886 (S.A.). The property was their matrimonial home. As at December 1988 there were two registered mortgages granted by them to Westpac Banking Corporation. The amounts outstanding under the mortgages totalled $63,292.01.

4. In December 1988 Mr Rogers, apparently purporting to act on behalf of Mrs Rogers as well as on his own behalf, applied to Resi-Statewide for a loan of an amount exceeding the sum due to Westpac Banking Corporation. Resi-Statewide approved a loan in the sum of $83,000. Settlement occurred on 22 December 1988. The Westpac Banking Corporation mortgages were paid out of the loan, and discharges thereof registered. Resi-Statewide then became registered on the Certificate of Title as first mortgagee.

5. The arrangements for this refinancing were made by Mr Rogers without Mrs Rogers' knowledge or consent. At settlement a memorandum of mortgage in terms required by Resi-Statewide purporting to be duly executed as required by the Real Property Act by Mr and Mrs Rogers was proffered to Resi-Statewide which relied on it as a genuine document. It is agreed between Mrs Rogers and Resi-Statewide, for the purposes of the present application, that the memorandum of mortgage was not executed by Mrs Rogers. Her signature had been forged.

6. Default in payments due to Resi-Statewide under the terms of the loan by it has occurred. Mrs Rogers seeks to restrain the sale of her interest in the property. She contends that as her signature on the memorandum of mortgage is a forgery, the title of Resi-Statewide, as against her interest in the property, is void. Her contention turns on s.69 of the Real Property Act which relevantly provides:

"69. The title of every registered proprietor of land shall,

subject to such encumbrances, liens, estates, or interests as may

be notified on the original certificate of such land, be absolute

and indefeasible, subject only to the following qualifications:-

1. In the case of fraud, in which case any person defrauded

shall have all rights and remedies that he would have had if

the land were not under the provisions of this Act:

Provided that nothing included in this subsection shall

affect the title of a registered proprietor who has taken

bona fide for valuable consideration, or any person bona

fide claiming through or under him:

11. In the case of a certificate or other instrument of title

obtained by forgery or by means of an insufficient power of

attorney or from a person under some legal disability, in

which case the certificate or other instrument of title

shall be void: Provided that the title of a registered

proprietor who has taken bona fide for valuable

consideration shall not be affected by reason that a

certificate or other instrument of title was obtained by any

person through whom he claims title from a person under

disability, or by any of the means aforesaid:

..."

It is agreed between Mrs Rogers and Resi-Statewide that Resi-Statewide took the memorandum of mortgage bona fide for valuable consideration within the meaning of the proviso in para.69.II. However it is submitted by Mr Blue, counsel for Mrs Rogers, that the proviso creates only "deferred indefeasibility" of title, that is to say the proviso does not give immunity from adverse claims to a bona fide purchaser for value who claims title by the registration of a forged instrument; immunity is given only to a bona fide purchaser for value who subsequently claims through a person who obtained title by such registration. As Resi-Statewide obtained title as registered mortgagee directly by a forged instrument and not "through" a person who claimed title by means of the forgery, the proviso in para.69.II has no application.

7. The construction of para.69.II contended for on Mrs Rogers' behalf was advanced by the plaintiff in Wicklow Enterprises Pty Ltd v. Doysal Pty Ltd and Anor (1987) 45 SASR 247. The argument was rejected. O'Loughlin J. noted that the concept of "deferred indefeasibility" had been rejected as one generally applicable under legislation based on the Torrens system in a line of cases culminating in Frazer v. Walker (1967) 1 AC 569 and Breskvar v. Wall (1971) 126 CLR 376, which decisions had been applied in South Australia to the Real Property Act 1886 in Palais Parking Station Pty Ltd v. Shea (1980) 24 SASR 425. However the rejection of the argument was based not on the principles enunciated in those cases, but on the construction of para.69.II itself. After setting out para.69.II O'Loughlin J. said, at pp 260-261:

"The words which give rise to the proposal that the principle of

'deferred indefeasibility' remains in s 69 II are: 'was obtained

by any person through whom he claims title.' The argument is that

the person (A) who obtains title from a person under disability or

by forgery or by means of an insufficient power of attorney has

purportedly acquired a title which is void and that even though he

had taken his title bona fide for valuable consideration from B, A

could not withstand an attack by B; only C who acquired bona fide

for valuable consideration from A could withstand such an attack.

In my opinion, the present argument can best be considered by

reproducing the proviso to the placitum in the following manner:

'Provided that the title of a registered proprietor who has

taken bona fide for valuable consideration shall not be

affected by reason that a certificate or other instrument of

title was obtained:

(a) By any person through whom he claims title from a

person under some legal disability; or

(b) By any of the means aforesaid (namely by forgery or by

means of an insufficient power of attorney).'

An examination of par (a) shows that the registered proprietor

whose title is under attack remains safe when he has acquired it

from an intermediary ('any person through whom he claims') even

though the intermediary acquired it 'from a person under some

legal disability'. But there is no reference to such an

intermediary in par (b); the registered proprietor remains safe

from attack even though he has acquired his title by means of

forgery or by means of an insufficient power of attorney (assuming

always that he has taken bona fide for valuable consideration).

In other words it would seem to me that the placitum has, by

virtue of the express words which it has used, pursued the

principle of 'deferred indefeasibility' where a certificate or

other instrument of title has been obtained from a person under

some legal disability but that in all other respects the principle

of 'immediate indefeasibility' remains - and in particular, it

remains in cases of forgery."

8. It is submitted that this Court should not follow the above reasoning in Wicklow Enterprises Pty Ltd v. Doysal Pty Ltd. First, it is submitted that the construction placed on para.69.II was not essential to the decision. In my opinion this submission is correct, as it was found that the instruments in question were neither forgeries nor ones executed by a person under some legal disability. Then it is submitted that if regard is had to the history of para.69.II it is clear that para.69.II is to read in another way. This history was not brought to the attention of O'Loughlin J. Paragraph 69.II was introduced into the legislation as part of a general consolidation of The Real Property Act in 1886. There had earlier been a Royal Commission, appointed in December 1872 to inquire into and report upon the law relating (inter alia) to Real Property, whose report considered the question of indefeasibility of title obtained by forgery. This history has since been made known in an article by Prof. A.P. Moore "Interpretation of the Real Property Act" [1988] AdelLawRw 10; (1988) 11 Adelaide Law Review 405. See also J.E. Hogg "The Australian Torrens System" 1905 at pp 55-62.

9. The alternative reading of the proviso to para.69.II for which the applicant contends is as follows:

Provided that the title of a registered proprietor who has taken

bona fide for valuable consideration shall not be affected by

reason that a certificate of title or other instrument of title

was obtained by any person through whom he claims title

a) from a person under a disability, or

b) by any of the means aforesaid (that is by forgery or by

means of an insufficient power of attorney.)

Whereas the construction placed on the proviso by O'Loughlin J. leads to deferred indefeasibility under para.69.II only in the case of an instrument of title obtained from a person under some disability, the alternative construction would lead to deferred indefeasibility in any case where the instrument of title was rendered void by the earlier provisions of para.69.II.

10. As Prof. Moore observes in his article, the explanation given by the Attorney-General of the day in the second reading speech on the Bill which introduced para.69.II into the 1886 legislation lends support to the construction for which the applicant now contends. The Attorney-General's speech makes no direct reference to the Report of the Royal Commission published in 1873 which had recommended an amendment to the Real Property Act, 1861 to insert a provision along the lines of para.69.II, (see J.E. Hogg "The Australian Torrens System" at pp 57-58) but the following passage from the speech reflects the opinion of the Royal Commissioners. The Attorney-General said (S.A. Parliamentary Debates (1886) (141-142):

"The substantial clause of the Bill was the clause which defined

the exceptional cases in which titles would not be indefeasible.

This was clause 70, and it was practically the same as when

submitted last session. Subsection 1 of this clause, which dealt

with cases of fraud, was only altered by the substitution of the

words 'nothing included in this subsection' for the words 'any

fraud,' which appeared in the previous Bill. Sub-section 2

related to titles obtained by forgery or legal disability. A man

who obtained a title by means of forgery would have a title which

could be defeated by the person whose name was forged. This was

right, because the person whose signature was forged had no means

of protecting himself, whilst the person who took the forged

signature had the opportunity of satisfying himself of its

genuineness. Any certificate under those circumstances would not

convey the title. It was necessary to protect innocent persons

who had no means of tracing deception, and therefore any one

purchasing bona fide from the person who held a forged certificate

would have his title upheld notwithstanding the forgery. Under

this subsection there would be no certificate of title which might

not be ultimately challenged either immediately or in the remote

future, if it were transmitted by means of a forged instrument.

Therefore he thought they had taken the proper course to protect

any honest man who accepted a title having no reason to suppose

there was any thing wrong with it."

11. It is permissible to have regard to the second reading speech to identify the mischief which the amendment was to remedy: Wacando v. The Commonwealth [1981] HCA 60; (1981) 148 CLR 1 at 25, Commissioner of Taxation (Cth) v. Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 56 ALJR 240 at 247 and TCN Channel Nine Pty Ltd v. Australian Mutual Provident Society [1982] FCA 169; (1982) 42 ALR 496. The mischief identified by the speech was the lack of protection in the case of title obtained by forgery or legal disability available under the legislation as it then stood to innocent persons who had no means of protecting themselves by tracing the deception, it being considered not right that the title of such people should be defeated in favour of those taking forged, or invalidly executed instruments, who had the opportunity of checking the genuineness of them. To cure this mischief, it could be expected that remedial legislation would qualify the indefeasibility of title which the recipient of a void instrument would otherwise obtain upon registration in each of the cases identified in para.69.II. Section 22 of the Acts Interpretation Act 1915 (S.A.) provides:

"(1) Subject to subsection (2), where a provision of an Act is

reasonably open to more than one construction, a

construction that would promote the purpose or object of the

Act (whether or not that purpose or object is expressly

stated in the Act) must be preferred to a construction that

would not promote that purpose or object.

(2) This section does not operate to create or extend any

criminal liability."

On the footing that the proviso to para.69.II is capable of more than one construction, the construction contended for by the applicant would, in my view, best promote the purpose or object for which the provision was enacted.

12. The submissions of counsel for Resi-Statewide placed emphasis on the reasoning in Frazer v. Walker and in Breskvar v. Wall which establishes the general principle that under the Torrens system a registered proprietor who acquires title under an instrument which is void for any reason whatever obtains on registration an indefeasible title. I do not consider these decisions resolve the present question of construction in favour of Resi-Statewide, as para.69.II is an express exception to the general principle which did not appear in the legislation then under consideration. The close similarity between the facts in Frazer v. Walker, and in the present case, is to be noted, but whether the resulting legal position of the parties is the same or different turns on the provisions of the applicable legislation.

13. The objects of the Real Property Act are set out in s.10 which reads:

"The objects of this Act are to simplify the title to land, to

authorize and facilitate, to the extent to which this Act allows,

the division and ownership of land in units approved for separate

occupation in accordance with this Act, and to facilitate dealing

therewith, and to secure indefeasibility of title to all

registered proprietors, except in certain cases specified in this

Act."

The objects recognise that the indefeasibility of title to be secured by the Act is to be subject to exceptions. The primary sections which give effect to the object of securing indefeasibility of title are ss.69, 70 and 80. Nine express qualifications to the concept of indefeasibility are set out in s.69, and there are further saving provisions expressed in s.71. Another express qualification appears in s.251. It will be noted that in both Frazer v. Walker, at 583, and in Breskvar v. Wall at 384-385, 397, 400, 405 and 412 the statements of general principle are expressed to be subject to the statutory exceptions which appeared in the relevant Acts. As Walsh J. observed in the latter decision, at p 405:

"The important statements of principle which the Judicial

Committee made (in Frazer v. Walker) as to the immunity from

attack of a registered title were made subject to exceptions for

which the Act then being considered specifically provides."

Furthermore it was recognised that apart from the express statutory exceptions, the principle of indefeasibility in no way denied the right of a plaintiff to bring against a registered proprietor a claim in personam : Frazer v. Walker at 585, and see Palais Parking Station Pty Ltd v. Shea at 428.

14. Reference has already been made to the mischief to which para.69.II was directed. In the re-enactment of s.69 in the consolidating Act of 1886 it will be noted that cases of fraud were dealt with in para.69.I separately from forged instruments which are included in para.69.II along with instruments obtained by means of an insufficient power of attorney or from a person under a disability. If the intention of the legislature had been to confer a title immune from adverse claims upon a bona fide purchaser for value who gained registration by an instrument of title obtained by forgery, it would have been expedient to have included the case of forgery in para.69.I, rather than in para.69.II where the concept of deferred indefeasibility is introduced. The inclusion in para.69.II of three classes of case where, under the general law, the instrument of title would be void, suggests that the legislature intended to treat each of those classes in a similar way. This is so particularly as s.69 lists separately other cases which attract particular qualifications to the concept of indefeasibility. Clearly enough the provision of para.69.II read down to the proviso treat the three classes of case in the same way. No reason appears why under the proviso the consequences of instruments of title being void should differ, according to which of the three classes of void instrument a particular instrument belongs. Furthermore I consider it would be strange if the legislature intended to introduce the concept of deferred indefeasibility in the case of an instrument of title obtained from a person under some disability, but not in the case of an instrument of title obtained by means of an insufficient power of attorney.

15. In my opinion the construction of para.69.II contended for by the applicant is the correct one. It is also the construction which had received the support of academic writers before the decision in Wicklow Enterprises Pty Ltd v. Doysal Pty Ltd: see J.E. Hogg "Registration of Title to Land throughout the Empire" (1920) at pp 143-146; D. Kerr "The Principles of the Australian Lands Titles (Torrens) System (1927) at p 171; D.J. Whalan, "The Torrens System in Australia" (1982), p 308 f.n. 85; E.I. Sykes "The Law of Securities" (1986) pp 296 f.n.72 and 304. Although a decision of a judge of the Supreme Court of South Australia touching the construction of a South Australian Act must be treated by a judge of this Court as persuasive, I consider I should depart from the construction given to para.69.II in Wicklow Enterprises Pty Ltd v. Doysal Pty Ltd as the observations of the judge on the point of construction were obiter, and as the extrinsic Parliamentary material which identifies the mischief to which the words in question were directed was not brought to the attention of the judge.

16. In my opinion the registered interest of Resi-Statewide as mortgagee of the property is not immune from the adverse claim of Mrs Rogers. The claim of Mrs Rogers falls within the exception to indefeasibility of title provided in para.69.II, and Resi-Statewide is not a party entitled to the protection afforded by the proviso thereto.

17. I propose to publish these reasons, and list the matter for further hearing as to the orders which should be made.