State of Queensland v Morecroft & Anor [2024] QCA 11

SUPREME COURT OF QUEENSLAND

CITATION: State of Queensland v Morecroft & Anor [2024] QCA 11

PARTIES: STATE OF QUEENSLAND / (appellant) / v / JESS ERNEST MORECROFT / (first respondent) / JACQUELINE RITA HAINES / (second respondent)

FILE NO/S: Appeal No 6188 of 2023 / SC No 10465 of 2018

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane – [2023] QSC 4 (Crowley J)

DELIVERED ON: 9 February 2024

DELIVERED AT: Brisbane

HEARING DATE: 11 October 2023

JUDGES: Morrison and Boddice JJA and Applegarth J

ORDERS: 1.The appeal is dismissed.2.The appellant pay the respondents’ costs of and incidental to the appeal.

CATCHWORDS: REAL PROPERTY – TORRENS TITLE – INDEFEASIBILITY OF TITLE – EXCEPTIONS TO INDEFEASIBILITY – FRAUD OR FORGERY – AGAINST REGISTERED PROPRIETOR – where the respondents purchased a property from registered mortgagees exercising a power of sale – where the son of the registered owner of the property had forged his mother’s signature on the mortgage – where the purchasers were oblivious to the alleged fraud at the time they contracted to purchase the property – where the purchasers paid the purchase price and lodged transfer documents for registration – where before the transfer was able to be registered so as to give the purchasers legal title, the Registrar of Titles lodged a caveat – whether the purchasers acquired an equitable interest in the property – whether an “interest in a lot” in s 188 of the Land Title Act 1994 (Qld) (“LTA”) includes an equitable interest / REAL PROPERTY – TORRENS TITLE – ASSURANCE FUNDS, COMPENSATION AND REMEDIES FOR DEPRIVATION – DEPRIVATION OF INTEREST IN LAND – where the respondents purchased a property from registered mortgagees exercising a power of sale – where the son of the registered owner of the property had forged his mother’s signature on the mortgage – where the purchasers were oblivious to the alleged fraud at the time they contracted to purchase the property – where the purchasers paid the purchase price and lodged transfer documents for registration – where before the transfer was able to be registered so as to give the purchasers legal title, the Registrar of Titles lodged a caveat – where the primary judge found that the mortgagees had not complied with ss 11A, 11A(2) of the LTA and therefore did not obtain indefeasibility for their registered interest – where the court ordered that registration of the mortgage be cancelled – where the purchasers, being unable to be registered, sought compensation from the State – whether the purchasers were “deprived of an interest in a lot because of” the fraud of another person and therefore entitled to be compensated under s 188 of the LTA / Acts Interpretation Act 1954 (Qld), schedule 1, s 4, s 14A, s 32A / Land Title Act 1994 (Qld), s 11A, s 11A(2), s 11B, s 11B(2), s 181, s 183, s 184(2), s 188, s 188B(2), s 189, s 189(1)(a), s 190(1) / Land Title Bill 1994 (Qld) / Real Property Act 1862 (NSW), s 117 / Real Property Act 1900 (NSW), s 126, s 129 / Real Property Act 1861 (Qld), s 135 / Transfer of Land Act 1890 (Vic) / Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41, cited / Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683; [2017] NSWCA 99, cited / Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46, cited / Barry v Heider (1914) 19 CLR 197; [1914] HCA 79, cited / Black v Garnock (2007) 230 CLR 438; [2007] HCA 31, cited / Breskvar v Wall (1971) 126 CLR 376; [1971] HCA 70, cited / Brown v Heffer (1967) 116 CLR 344; [1966] HCA 40, cited / Butler v Fairclough (1917) 23 CLR 78; [1917] HCA 9, cited / Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 268 CLR 524; [2019] HCA 20, cited / Chan v Cresdon Pty Ltd (1989) 168 CLR 242; [1989] HCA 63, cited / Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 45 NSWLR 639, cited / Davis v Perry O'Brien Engineering Pty Ltd [2023] QSC 243, cited / Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572; [2001] NSWSC 495, cited / Environment Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22; [1998] UKHL 5, cited / Esso Australia Pty Ltd v Australian Workers’ Union (2017) 263 CLR 551; [2017] HCA 54, cited / Ex parte Saunders (1900) 21 LR (NSW) 291; [1900] NSWLawRp 85, cited / Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55, cited / Finucane v Registrar of Titles [1902] St R Qd 75, cited / Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd (2015) 89 NSWLR 237; [2015] NSWCA 100, cited / Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 229 CLR 545; [2006] HCA 3, cited / Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd (2012) 45 WAR 29; [2012] WASCA 216, cited / Heid v Connell Investments Pty Ltd (1987) 9 NSWLR 628, cited / I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41, cited / Igarashi v APC International Pty Ltd [1996] 1 Qd R 267; [1995] QCA 43, cited / Issa v Owens & Ors [2023] QSC 4, cited / Jerome v Kelly (Inspector of Taxes) [2004] 1 WLR 1409; [2004] UKHL 25, cited / Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164; [1987] HCA 20, cited / Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11, cited / March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12, cited / Mort v Bradley [1916] SALR 129; [1916] SALawRp 11, cited / New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act (2016) 260 CLR 232; [2016] HCA 50, cited / Olde English Tiles Australia Pty Ltd v Transport for New South Wales (2022) 108 NSWLR 503; [2022] NSWCA 108, cited / Papworth v Williams (1899) 20 LR (NSW) 280, cited / Re Jorss’ Caveat [1982] Qd R 458, cited / Re Oil Tool Sales Pty Ltd; Classified Pre-Mixed Concrete Pty Ltd [1966] QWN 11, cited / Registrar-General v Behn (1981) 148 CLR 562; [1981] HCA 36, cited / Registrar-General v Harris (1998) 45 NSWLR 404, cited / Registrar of Titles v Crowle (1947) 75 CLR 191; [1947] HCA 23, cited / Registrar of Titles (WA) v Franzon (1975) 132 CLR 611; [1975] HCA 41, cited / Robinson v Registrar-General (1982) 2 BPR 9634, cited / Sekiya v APC International Ltd [1994] QSC 113, cited / Spencer v Commonwealth (1907) 5 CLR 418; [1907] HCA 82, cited / Stern v McArthur (1988) 165 CLR 489; [1988] HCA 51, cited / Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57, cited / Thompson v Goold & Co [1910] AC 409; [1910] UKLawRpAC 27, cited / Tolley & Co Ltd v Byrne (1902) 28 VLR 95; [1902] VicLawRp 58, cited / Westpac Banking Corporation v Jamieson [2016] 1 Qd R 495; [2015] QCA 50, cited / Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers Appointed) (In liq) (2013) 251 CLR 592; [2013] HCA 51, cited / Zhu v Treasurer (NSW) (2004) 218 CLR 530; [2004] HCA 56, cited

COUNSEL: D D Keane KC, with J K Carter, for the appellant / L F Kelly KC, with D M Turner, for the respondents

SOLICITORS: G R Cooper, Crown Solicitor for the appellant / Shand Taylor Lawyers for the respondents

1. MORRISON JA: I agree with the reasons of Applegarth J and the orders his Honour proposes.

2. BODDICE JA: I agree with Applegarth J.

3. APPLEGARTH J: The respondents to this appeal (“the Purchasers”) are the victims of a fraud perpetrated by the son of the registered owner of a property. The son forged his mother’s signature on a mortgage. The borrower defaulted, the mortgagees entered possession, auctioned the property and sold it to the Purchasers. The Purchasers were oblivious to the alleged fraud at the time they contracted to purchase the property. They paid the purchase price and lodged transfer documents for registration. Before the transfer was able to be registered so as to give the Purchasers legal title, the Registrar of Titles lodged a caveat.

4. The registered proprietor, Ms Issa, commenced proceedings against the mortgagees, the Purchasers, the Registrar of Titles and the State of Queensland. Her son, James Karbotli, was joined as first third party.

5. A critical issue at the trial was whether Ms Issa had signed the mortgage and other documents in favour of the original mortgagees.

6. Mr Karbotli denied perpetrating any fraud. His case was that his mother willingly and knowingly signed the mortgage. The primary judge found against him. Ms Issa’s signature on the mortgage had been forged.

7. The then solicitor for Mr Karbotli did not have any face-to-face dealings with Ms Issa in relation to the $1 million loan secured over the property. He purported to witness her signature when he had not done so. He admitted having had a “brain snap” in signing certain certificates, having been assured by Mr Karbotli that his mother had signed the documents.

8. The original mortgagees, the first to sixth defendants, had transferred the mortgage to the first to seventh defendants (“the Mortgagees”).

9. The son’s fraud would have had no consequence for the indefeasibility of the original mortgagees’ title and, in turn, the title of the Mortgagees, had they taken reasonable steps to ensure that Ms Issa executed the mortgage. However, the primary judge found that the original mortgagees failed to take reasonable steps to ensure that Ms Issa executed the mortgage, as required by s 11A(2) of the Land Title Act 1994 (Qld) (“LTA”).¹ As for the mortgage transfer, the Mortgagees failed to take reasonable steps to ensure that Ms Issa had executed the mortgage, as required by s 11B(2), before the mortgage transfer was lodged for registration.

10. In the result, having failed to prove compliance with ss 11A(2) or 11B(2), neither the original mortgagees nor the Mortgagees obtained indefeasibility for their registered interest.

The State’s appeal

15. The State appeals against the order made pursuant to s 188B(2) of the LTA that it pay compensation to the Purchasers in the amount of $2,700,000.

16. It contends that the primary judge erred in finding that:the Purchasers acquired an equitable interest in the property;“interest” and/or “interest in a lot” in s 188 of the LTA includes an equitable interest;the Purchasers were “deprived of an interest in a lot”;the Purchasers were deprived of an interest in a lot “because of” the fraud of another person; andthe quantum of compensation to which the Purchasers were entitled was to be assessed by reference to the value of the property.

17. The sixth ground of appeal is that an order for compensation to be paid by the State cannot be considered to be “just”. This ground depends upon the State’s success on one of its earlier grounds.

The Purchasers’ response

18. The Purchasers respond to each of these contentions. In essence, they contend that:they obtained an interest in the land that is enforceable against third parties, being one of the “equities” enforceable by equitable remedies, they completed the purchase, they were awaiting registration of their interest, and had an equitable interest in the property;the State takes a narrow and wrong view of authorities about the availability of specific performance, since specific performance in this context includes the protection by injunction or otherwise of rights acquired under a contract;the State’s contention that the Purchasers were not deprived of an interest because, as matters transpired, the mortgagees were found to not have the benefit of indefeasibility, does not withstand analysis;in this and in other respects, the State relies on the fraud in order to defeat the Purchasers’ claim to compensation for fraud;the Purchasers were deprived of their interest “because” of the fraud since, as the primary judge found, “the root cause of the Purchasers being deprived of their [interests in the land] is the fraud by Mr Karbotli”.⁶ This common sense conclusion is unaffected by other contributing causes, such as the mortgagees’ failure to take reasonable steps to ensure that Ms Issa executed the mortgage;compensation was correctly awarded by reference to the value of the land for which the Purchasers were about to be registered as owners, and would have been registered but for the Registrar’s caveat.

19. For the reasons that follow, the Purchasers’ contentions should be accepted and the appeal dismissed.

Ground One: Did the Purchasers acquire an equitable interest?

20. The State accepts the general principle that a purchaser under a contract for the sale of land has a right to have the contract specifically performed. As Sir Frederick Jordan stated, “that reflects the approach of equity that where, under a contract, a purchaser has provided a valuable consideration, equity will recognise an interest in the subject matter”.⁷ The State distinguishes, however, between a “mere claim” to specific performance (and therefore a mere claim to an equitable interest) and a right to specific performance. According to the State, an equitable interest will only be recognised to the extent that the purchaser is able to demonstrate that a court of equity would decree specific performance.

21. It argues that the registered interests of the original mortgagees and the Mortgagees were defeasible, the mortgage never conferred any interest on them, and they had no interest to convey or transfer to the Purchasers. In the circumstances, a decree of specific performance would be futile because its performance would be impossible. On this argument, the Purchasers acquired no equitable interest.

22. In response, the Purchasers point to ample authority that in the present context of evaluating the equitable interest of a purchaser, “specific performance” is not limited to a final decree in equity to enforce an executory contract by compelling the execution of a document to complete it. As Sir Frederick Jordan wrote, specific performance extends to “the protection by injunction or otherwise of rights acquired under a contract which defines the rights of the parties”.⁸

23. In Chan v Cresdon Pty Ltd,⁹ Mason CJ, Brennan, Deane and McHugh JJ held that references in earlier cases to specific performance should be understood in the sense explained by Sir Frederick Jordan, and subsequently adopted by Deane and Dawson JJ in Stern v McArthur.¹⁰

24. Recent intermediate appellate decisions confirm that the purchaser under an executory contract for the sale of land has four “equities”. As Emmett JA (with whom Macfarlan and Gleeson JJA agreed) stated in Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd,¹¹ the first equity is that:

“… the purchaser has an interest in the land that is enforceable against third parties and that can take priority over holders of competing interests.”

This equity constitutes in rem rights over the land the subject of the contract.¹²

25. Golden Mile has been cited with approval in subsequent decisions of the New South Wales Court of Appeal.¹³

26. The State is forced to argue that Golden Mile and the intermediate appellate courts’ decisions that have followed it are plainly wrong. It contends that they are contrary to High Court authority, particularly Tanwar Enterprises Pty Ltd v Cauchi.¹⁴ However, the State is unable to point to any decision of the High Court which states that its decision in Chan that specific performance should be understood in the sense referred to by Sir Frederick Jordan is wrong and should be overruled.

27. Before turning to the authorities, it is appropriate to engage with the State’s essential submission that the Purchasers acquired no rights that would be protected by equitable remedies because the mortgage was void.

28. The mortgage that Mr Karbotli obtained was void. However, one must distinguish between the mortgage and the contract of purchase that was entered into between the Mortgagees and the Purchasers. The contract was not void. It was valid and binding and the Purchasers were entitled to seek damages for its breach. More importantly for present purposes, it was capable of performance and was performed by the Purchasers. The Mortgagees also performed it by equipping the Purchasers with a registerable transfer, as required by the contract.

29. The Purchasers had no need for a decree of specific performance that required the Mortgagees to furnish them with a registerable transfer. Had it not been for the Registrar’s caveat, the transfer would have been registered. The Purchasers thereupon would have obtained an indefeasible title. As Barwick CJ (with whom Windeyer, Owen and Gibbs JJ agreed) stated in Breskvar v Wall:¹⁵

“… a registration which results from a void instrument is effective according to the terms of the registration.”

30. The relevant provisions of the LTA and the governing authorities are carefully and comprehensively essayed in the decision of the primary judge, and there is no need to quote them at length. As the primary judge observed, s 183 of the LTA, which must be read in conjunction with s 181, provides a statutory right to have a transfer instrument registered.¹⁶ Section 181 provides that an instrument does not transfer or create an interest in a lot “at law” until it is registered.

31. In the circumstances that prevailed in this matter, the Mortgagees’ registered title was not indefeasible because of Mr Karbotli’s fraud and the Mortgagees’ inability to prove reasonable steps under s 11B. As registered mortgagees, the Mortgagees still were able to convey an indefeasible title under a void instrument that came to be registered. Had the transfer been registered, the Purchasers would have obtained an indefeasible title and an interest in the lot at law.

32. Prior to registration, their rights as Purchasers under a contract were capable of being protected by equitable remedies, such as a prohibitory injunction.

33. The example given in the Purchasers’ submissions is a good one. Had the Mortgagees, having sold the property to the Purchasers, advertised it for sale or otherwise threatened to sell the property to a third party, the Purchasers might have sought and obtained a prohibitory injunction to restrain the Mortgagees from doing so, or from making or completing a contract with another purchaser. The equity being enforced by that equitable remedy would have been the first of the four equities referred to in Golden Mile.

34. Therefore, unless the authorities support the State’s submission that Golden Mile and other authorities are plainly wrong, the Purchasers had an equitable interest in the land.

35. The primary judge found that the Purchasers “acquired an equitable interest in 30 Francis Street” when they entered into the purchase contract.¹⁷ As the Purchasers’ submissions point out, their equitable interest could hardly have diminished or disappeared after that point. They paid the purchase price and otherwise performed their obligations under the contract. Their contractual rights against the Mortgagees might have been protected by equitable remedies such as an injunction. Their equitable interest in the land might have been protected by a caveat.

The authorities

36. As noted, the State submits that Golden Mile and other authorities that have followed it are plainly wrong in concluding that a purchaser has an equitable interest in the land that reflects the extent to which equitable remedies, including injunctions, are available to protect the purchaser’s contractual rights. The State’s submission rests on two main propositions:Golden Mile cannot be reconciled with Tanwar; andChan has been overridden by a statement in Zhu v Treasurer (NSW)¹⁸ that, “it is possible to protect one’s contractual rights by injunction even though they create no proprietary right”, and is not supported by later High Court authorities.

37. The Purchasers respond to the effect that:Golden Mile adopts settled principles that an equitable interest in land reflects the extent to which equitable remedies are available to protect contractual rights;Chan has not been overruled by Tanwar or any other High Court authority;The argument that the position stated in Chan and Golden Mile involves circularity is not correct, and is not supported by a statement about circularity in a different context in Tanwar;Neither Tanwar nor any other decisions of the High Court decides that the interest of a purchaser under a contract for the sale of land is commensurate only with a final decree of specific performance.

38. The State’s submissions depend on this Court accepting an invitation to find that a number of cases and the learned authors of Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies are wrong. The parties favoured the Court with extensive citations of authorities but it is unnecessary to refer to each of those cases.

Golden Mile and the authorities that have followed it

39. Golden Mile contains an extensive and learned discussion about the nature of a purchaser’s equitable interest in land after entry into a contract and the four “equities” or rights that form part of the purchaser’s interest. The analysis accords with authority and the discussion in Meagher, Gummow & Lehane that the purchaser’s rights “are not a single response to a single event”, but form a plural response because “various distinct equities arise at different stages as the contract is performed”.¹⁹ As Emmett JA (with whom Macfarlan and Gleeson JJA agreed) stated in Golden Mile:²⁰

“Once a contract for sale of land has been entered into, beneficial ownership is, in a sense, split between the seller and buyer on the provisional assumption that specific performance is available and that the contract will in due course be completed, if necessary by a court ordering specific performance.²¹ As the contract proceeds to completion, the equitable interests can be viewed as passing to the buyer in stages, as title is made and accepted and as the purchase price is paid in full.²² In order to consider whether specific performance, or any other equitable remedy, would be ordered at a time prior to completion of such a contract, it is necessary to understand the respective rights of the vendor and the purchaser.”

40. Emmett JA then described the purchaser’s interest as comprising four separate rights or “equities”. The first was that the purchaser has an interest in the land that is enforceable against third parties and that can take priority over holders of competing interests. The first and fourth of the rights were described as “in rem rights over the land the subject of the contract”. Emmett JA stated:²³

“Importantly, whether or not these ‘equities’ arise, and the extent to which they may be enforced, depends on the time at which the enquiry is made, that is, for example, immediately after formation of the contract, or at a later point when the purchaser is ready, willing and able to tender the purchase price, or at a point after payment of the purchase price.²⁴ Before completion, the purchaser has an equitable interest in the land that reflects the extent to which equitable remedies are available to protect the purchaser’s contractual rights.²⁵ The fact that the point may not yet have arrived that the purchaser can obtain a decree of specific performance does not mean that the purchaser is not entitled to other equitable remedies: the purchaser could, for example, obtain negative injunctions to enforce any of the four ‘equities’ referred to above.²⁶” (Emphasis added).

41. Golden Mile was applied by the New South Wales Court of Appeal in Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd.²⁷ It was concerned with a contract of sale to purchase certain land and the subsequent grant by the purchaser of a call option to acquire the subject land. There was no dispute that as purchaser the relevant entity had an equitable interest in the land prior to completion, and that its equitable interest was of the kind considered in Golden Mile, which accorded with the analysis undertaken by the learned authors of Meagher, Gummow & Lehane.²⁸ The relevant equities or rights included an equity or right that was enforceable against third parties. Ward JA (as the President then was, with whom McColl and Gleeson JJA agreed) stated that what had to be demonstrated was that “the contract is of a type which is capable in due course of being the subject of a decree of specific performance”, not the matters that would be necessary to be shown for such an order ultimately to be made.²⁹

42. The purchaser’s interests were to be understood as being “commensurate with the equitable relief to which the purchaser may be entitled”. Ward JA noted³⁰ that this description of the purchaser’s interests had been subject to criticism by one member of the New South Wales Court of Appeal in Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd,³¹ and had been “noted but not resolved” in Tanwar. The analysis in Golden Mile was accepted.

43. In the more recent decision in Olde English, a five-member bench of the New South Wales Court of Appeal applied with apparent approval the analysis undertaken in Golden Mile of the rights of a purchaser under a contract for the sale of land. Basten AJA (with whom the other members of the Court agreed) quoted with approval from passages in Golden Mile in support of the conclusion that the definition of “interest” in that statutory context was such as to cover “the rights of a purchaser in an uncompleted contract for the sale of land, even if it cannot yet be said that the purchaser would be entitled to a decree of specific performance”.³²

Tanwar

44. Tanwar concerned a purchaser of land that was unable to complete on the date fixed for completion because of a delay in obtaining finance. The vendor issued a notice of termination. The purchaser sought specific performance on the basis that the contracts had not been validly terminated and, in the alternative, upon the basis of relief against forfeiture. The High Court ruled that the contracts had been validly terminated. It also ruled that relief against forfeiture was not available in the circumstances.

45. The essential issue was whether there had been an unconscientious use by the vendors of their legal right to terminate upon Tanwar’s failure to complete in accordance with the essential time stipulation.

46. In their analysis of that issue, Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ considered whether there was a doctrinal basis for treating as determinative of the appeal certain subsidiary questions that were derived from a passage in Legione v Hateley.³³ In addressing that doctrinal issue a question arose as to the interest in the land enjoyed by Tanwar as purchaser and whether any such interest attracted the exercise of the jurisdiction to relieve against forfeiture.³⁴ The Court considered authorities and also the view of Sir Frederick Jordan, earlier quoted, that the term “specific performance” may mean not merely specific performance in the primary sense of compelling the execution of an assurance to complete an agreement, but also the protection by injunction, or otherwise, of rights acquired under a contract which defines the rights of the parties. The Court noted that doubt had been cast upon the generality of Sir Frederick Jordan’s statement by Meagher JA in Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd. The joint judgment in Tanwar continued:³⁵

“It is sufficient for present purposes to observe that, where the issue as in Tanwar’s appeal, concerns alleged unconscientious reliance by vendors upon their contractual right to terminate, it does not assist to found the equity of the purchaser upon the protection of rights to injunctive relief acquired under a contract the termination of which has taken place.”

47. This passage echoed an earlier observation concerning the availability of specific performance:³⁶

“That availability is the very question in issue where there has been a termination by the vendor for failure to complete as required by the essential stipulation. Reliance upon the ‘interest’ therefore does not assist; it is bedevilled by circularity.”

48. The Court in Tanwar was identifying a problem of “circularity” in a specific context. The contract had been terminated. There was no entitlement to a grant of specific performance once the contracts had been terminated. Tanwar required relief against forfeiture, and to claim that it had an equitable interest because the remedy of specific performance was available to it involved circular reasoning. It was erroneous, in the circumstances, to assume the availability of specific performance when that was the question in issue.

49. That different considerations applied whilst the contracts were on foot is apparent. After observing that it did not assist to found the equity upon the protection of rights to injunctive relief acquired under a contract that had been terminated, the Court continued:³⁷

“Whilst the contracts here were on foot, breaches thereof by the vendors would have been restrained.”

50. Tanwar noted the doubts that had been expressed by Meagher JA about the width of the language used by Sir Frederick Jordan. Meagher JA had expressed reservations about the width of the language with regard to the transfer of purely equitable property. Meagher JA thought that the broad language also might be interpreted to mean that a contract of sale of land to which a minister’s consent is required would effect a total assignment of the beneficial interest in the land, a proposition that was contrary to authority including Brown v Heffer.³⁸ While noting that doubts had been expressed about the width of the language adopted by Sir Frederick Jordan, the Court in Tanwar did not overrule High Court authorities which had adopted it, including Chan.

51. The Court in Tanwar adopted what was said by Gaudron J in Stern v McArthur³⁹ that the “interest” of the purchaser is commensurate with the availability of specific performance.⁴⁰ It did not overrule earlier High Court authority to the effect that the purchaser has an equitable interest in the land that reflects the extent to which equitable remedies are available to protect the purchaser’s contractual rights. Those authorities included the judgment of Deane J in Kern Corporation Ltd v Walter Reid Trading Pty Ltd,⁴¹ which was adopted a year later in Stern v McArthur.

The circularity argument

52. Tanwar’s case about its interest under a contract that had been terminated involved a problem of circularity. The same cannot be said in relation to other cases in which a contract remains on foot and the purchaser has performed its obligations.

53. As noted, the learned authors of Meagher, Gummow & Lehane identify four “equities” or rights which form part of the purchaser’s interest. This analysis was adopted in Golden Mile and the authorities that have followed it. The nature of those rights and the equitable remedies that are available to protect them depend upon the circumstances. Meagher, Gummow & Lehane analysed the issue in a passage that warrants being quoted, despite its length:⁴²

“Depending on the course of events, at earlier stages after contract but before completion the limits in the remedies available to the purchaser mean that even if the purchaser can be described as having ‘beneficial ownership’, it is beneficial, or equitable, ownership of a relatively slight kind. The purchaser can alienate the interest, or seek to assert its priority over the interest of another purchaser. But the purchaser at that stage has no right to the beneficial enjoyment of the land itself or its income. The purchaser cannot be said at that stage to have ‘full beneficial ownership’.

The times at which each of these equities arises may differ. The extent to which each may be enforced may differ. At a particular time some may be enforceable only by negative injunction. At other times they may be enforceable by a positive remedy like specific performance. Thus immediately after the contract, the purchaser may be able to restrain the completion of a contract made by the vendor with another purchaser, pending argument about, and depending on the court’s view as to, such questions as whether the contract sued on was in truth made, and priorities between the two purchasers. That stands in contrast with the position which arises when the purchaser, being ready, willing and able to complete by paying the purchase price, obtains a decree of specific performance. The position is a fortiori when the purchaser has already paid the purchase price, for at that stage the purchaser may be described as ‘absolute beneficial owner’, and the vendor as a ‘bare trustee’.”

54. The learned authors explain that it is not circular to say that the “interest” of the purchaser is commensurate with the availability of specific performance.⁴³ A distinction exists between the type of specific enforceability which a purchaser has to show in order to vindicate a right in the period between contract and conveyance, and the type of specific enforceability which a purchaser has to show in order to obtain an order that there be a conveyance, that is, a decree of specific performance. The authors explain that the expression “specific enforceability” has two meanings for two different purposes.

55. Their analysis was adopted in Golden Mile. This includes the enforcement of one of the four “equities” at an early stage, for example, for the purpose of assessing what rights the purchaser acquires on entry into the contract. Meagher, Gummow & Lehane observes that at those earlier stages “provisional assumptions will be made in the purchaser’s favour that in due course the purchaser will be able to establish what is needed to obtain a decree of specific performance and negate what might prevent it”.⁴⁴ The fact that in due course it turns out that an application for a decree of specific performance fails for some reason, does not affect the existence of the purchaser’s four “equities” up to that point. The example is given of a purchaser who may not be ready, willing and able to perform before the contractual date for completion, who may be seeking to vindicate one of the equities at an earlier time. At that earlier stage, a provisional assumption is made in the purchaser’s favour that in due course it will be able to establish what is needed to obtain a decree of specific performance.

56. In such a case, the purchaser’s interest may be protected by equitable remedies, including an injunction. The fact that the purchaser cannot at that point obtain a decree of specific performance does not mean that it is not entitled to other equitable remedies to protect its “equities” or rights, and therefore has an equitable interest. The “equities” or rights of a purchaser under a contract that remains on foot, but has yet to be completed, stand in marked contrast with those of a purchaser, like Tanwar, under contracts that had been terminated. They do not give rise to a problem of circularity.

Can Golden Mile stand with Tanwar?

57. The State’s argument that Golden Mile cannot stand with Tanwar relies upon the proposition that Tanwar ruled that a purchaser’s equitable interest is commensurate only with the availability of a decree of specific performance, and does not exist because of the availability of another equitable remedy. In my view, this submission should not be accepted because Tanwar did not overrule earlier authorities that used the expression “equitable remedies” or used the term “specific performance” to include equitable remedies in addition to a decree of specific performance. Tanwar confirmed “that the ‘interest’ of the purchaser is commensurate with the availability of specific performance”.⁴⁵ It did not refer simply to “a decree of specific performance”.

58. The passages in Golden Mile that I have earlier quoted are derived from authority and the analysis undertaken by the learned authors of Meagher, Gummow & Lehane. They do not depend upon circular reasoning and they are not inconsistent with Tanwar. Golden Mile is authority for the proposition that, prior to completion of the contract, the purchaser has an equitable interest in the land that reflects the extent to which equitable remedies are available to protect the purchaser’s contractual rights. These might include at a particular stage “equities” or rights that are enforceable only by negative injunction, rather than a decree of specific performance.

59. The State has not demonstrated that Golden Mile and the later decisions of the New South Wales Court of Appeal that cited it are irreconcilable with Tanwar.

Have later High Court authorities overridden Chan?

60. The State submits that the approach adopted in Chan does not command the support of a majority of the High Court. It cites two decisions: Zhu⁴⁶ and Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth.⁴⁷

61. Notably, the State does not point to any decision of the High Court which rules that Chan is wrong and should be overruled. If Chan and the decisions that it adopted were wrong, one might have expected the High Court to say so.

62. The State relies on the decision in Zhu for the proposition that “it is possible to protect one’s contractual rights by injunction even though they create no proprietary right”.⁴⁸ There is no dispute about the correctness of that proposition, and therefore it is unnecessary to dwell on the facts of Zhu. It concerned a defence of justification for the tort of interference with contract. In the passage relied upon, the Court was concerned with the type of right that would be capable of supporting injunctive relief to restrain another party from exercising the contractual rights subjected to interference. The proposition that I have quoted from Zhu was derived from the judgment of Windeyer J in Brown v Heffer.⁴⁹ In Brown v Heffer the Minister’s consent was required for a transaction to be effective. The relevant right was the purchaser’s right to have the vendor do nothing to his prejudice.

63. The State points to the views of McLure P (with whom Newnes JA and Le Miere J agreed) in Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd.⁵⁰ The issue concerned the terms of a joint venture agreement and whether the exercise of an option created a security interest such as a charge, lien or encumbrance. It also concerned conditions requiring ministerial consent. In that context, McLure P considered Brown v Heffer and other cases. McLure P noted that Windeyer J’s analysis in Brown v Heffer had been recently approved in Zhu and followed that line of authority in concluding that a protective, injunctive right pending the provision (or refusal) of third-party consents was not an encumbrance within the scope of s 11.01 of the joint venture agreement.

“[A] purchaser’s proprietary rights to, and ability to benefit from, land under a contract of sale are commensurate with the purchaser’s power to obtain specific performance of the contract of sale.”

A number of authorities were cited in support of that proposition, including Stern v McArthur⁵⁸ and Tanwar.⁵⁹ In Stern v McArthur⁶⁰ Deane and Dawson JJ stated that specific performance should be understood in the sense referred to by Sir Frederick Jordan. This statement was followed by Mason CJ, Brennan, Deane and McHugh JJ in Chan.

69. Keane J in Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers Appointed) (In liq)⁶¹ referred to Chan with apparent approval.

70. The State’s contention that a majority of the High Court has “overridden” Chan and, by implication, earlier authorities such as Stern v McArthur is not sustained.

Conclusion about the authorities

71. The State’s submissions in reply acknowledge that the Purchasers, upon entry into the contract, might have sought and obtained a prohibitory injunction to restrain the Mortgagees from making or completing a contract with another purchaser. In reliance upon an observation in Zhu they characterise this as simply protecting one’s contractual rights by injunction in circumstances in which the rights do not create an equitable interest.

72. Golden Mile is based upon authorities and the analysis undertaken by the learned authors of Meagher, Gummow & Lehane that support the proposition that, prior to completion, a purchaser has an equitable interest in the land that reflects the extent to which equitable remedies are available to protect the purchaser’s contractual rights. The fact that a stage may not have been reached by which the purchaser is entitled to obtain a decree of specific performance does not mean that the purchaser is not entitled to seek other equitable remedies, including a negative injunction to protect one of its “equities” or rights.

73. The State has not established that Golden Mile is plainly wrong. In my view, it should be followed.

Conclusion on first ground of appeal

74. The primary judge did not err in finding that the Purchasers acquired an equitable interest in the property.

Ground Two: Does “interest” in s 188 of the LTA include an equitable interest?

75. The State’s second ground of appeal concerns an issue of statutory interpretation: the meaning of “interest” and “interest in a lot” in s 188. Section 188 applies if a person is deprived of a lot, or an “interest in a lot”, because of one of the matters stated in s 188(1). The first is “the fraud of another person”.

76. The primary judge concluded that an “interest in a lot” under the LTA may include an equitable interest and that the definition of “interest” in Schedule 1 of the Acts Interpretation Act 1954 (Qld) (“AIA”) applied to s 188 of the LTA.⁶²

77. This conclusion was supported by the decision of Windeyer J in Diemasters Pty Ltd v Meadowcorp Pty Ltd⁶³ in relation to provisions of the Real Property Act 1900 (NSW) that were not materially different to s 188 of the LTA.⁶⁴

78. The State seeks to resist the conclusion that the word “interest” in the LTA (which the LTA does not itself define) has the meaning given to it by the AIA, and thereby includes an equitable interest. It contends that:the LTA manifests an intention to displace the AIA definition for the purpose of s 188;the LTA adopts a different meaning to “interest in a lot” in s 122 concerning a caveat to “interest in a lot” in s 188;authorities that have accepted that an unregistered, equitable interest is subject to compensation provisions are wrong;the text, context and purpose of s 188 is best achieved by reading the word “interest” as if it read “registered interest”, and the words “interest in a lot” as if they read “interest in a lot at law”.

79. In reply, the Purchasers submit that:there is no evident legislative intent to displace the AIA definition, especially in the case of carefully drafted legislation that had the benefit of detailed consideration by the Queensland Law Reform Commission (“QLRC”) about equitable interests;there is no sound basis to give “interest in a lot” different meanings in ss 122 and 188, and to thereby distinguish between the positions of adversely affected, innocent parties;the specific exclusion in s 189(1)(a) of an entitlement to compensation for certain equitable interests (those of beneficiaries in respect of a breach of trust or fiduciary duty) would be unnecessary if “interest” in s 188 did not include any equitable interest;if the legislature had intended to confine s 188 to a “registered interest” or “interest in a lot at law”, those words might easily have been used in the section; andto discard the definition would produce arbitrary and apparently unintended consequences for the victims of fraud and other persons who are deprived of an interest in a lot in one of the circumstances stated in s 188(1). It would make compensation for victims of fraud depend on happenstance and timing issues.

Statutory text and context

80. Section 188 applies if the claimant is “deprived of a lot, or an interest in a lot” because of, among other things, the fraud of another person. Under s 188(2), the claimant is entitled to compensation from the State for the deprivation. Section 188B provides that a claimant may apply to the Supreme Court for an order for compensation to be paid by the State, and the Court may make the order it considers just.

81. The term “interest in a lot” is used in s 122 which provides a caveat may be lodged by “a person claiming an interest in a lot”. There is no doubt that “interest in a lot” in s 122 includes an equitable interest as purchaser. Rather than seek an injunction to protect its rights, a purchaser may lodge a caveat to protect its interest.⁶⁵ The Act’s provisions about caveats are a statutory form of injunction pending completion.⁶⁶

82. Section 183 provides that a person to whom an interest is to be transferred or in whom an interest has been created has a right to have the instrument transferring or creating the interest registered if the instrument has been executed, the person lodges the instrument and any documents required by the Registrar to effect registration of it, and the person has otherwise complied with the Act in relation to registration. Section 181 provides that an instrument does not transfer or create “an interest in a lot at law” until it is registered.

83. The reference to “an interest in a lot at law” is important. As stated in Chan in the context of the equivalent provision of the Real Property Act 1861 (Qld), the section provides that until registration, no instrument of transfer shall be effectual to pass an estate or interest in the land, but notwithstanding this provision, unregistered instruments may confer equitable estates and interests.⁶⁷ The Court went on to observe that the relevant provision does not void contracts or render them inoperative. It stated:⁶⁸

“So an antecedent agreement will be effective, in accordance with the principles of equity, to bring into existence an equitable estate or interest in the land. But it is that antecedent agreement, evidenced by the unregistered instrument, not the instrument itself, which creates the equitable estate or interest.”

Principles of statutory interpretation

84. The task of statutory construction begins with a consideration of the text itself.⁶⁹ The statutory text may require consideration of its context.⁷⁰ But understanding context “has utility if, and in so far as, it assists in fixing the meaning of the statutory text”.⁷¹ The context includes “the general purpose and policy of a provision, in particular the mischief it is seeking to remedy”.⁷²

85. The interpretation that will best achieve the purpose of the Act is to be preferred to any other interpretation.⁷³

86. Beneficial legislation is to be construed beneficially. This is a manifestation of the more general principle that all legislation is to be construed purposively.⁷⁴

87. The application of the AIA may be displaced, wholly or partly, by a contrary intention appearing in an Act.⁷⁵ Definitions in or applicable to an Act apply except so far as the context or subject matter otherwise indicates or requires.⁷⁶

88. It is a sound rule of construction to give the same meaning to the same words appearing in different parts of a statute, unless there is a reason to do otherwise.⁷⁷

89. It is a strong thing to read into an Act of Parliament words that are not there, and in the absence of clear necessity it is a wrong thing to do.⁷⁸ It is well-accepted that a court may read words into a provision where that is necessary to ensure that the provision does not lead to an absurd result or manifestly contradict its apparent purpose, as a result of a fault in expression.⁷⁹

“The Court’s ability to construe a statutory provision in a manner that departs from the natural and ordinary meaning of the terms of the provision in the context in which they appear is limited to construing the provision according to the meaning which, despite its terms, it is plain that Parliament intended it to have.”

91. Finally, as Edelman J observed in Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union:⁸¹

“Words of a statute are not a secret code for lawyers. They are enacted to be read and understood by reasonable, informed people using their everyday tools of language.”

Issues arising from the application of these principles

92. The parties’ submissions on the issue of statutory interpretation raise a number of questions. They include:

If Parliament intended to displace the AIA definition, why did a carefully-developed piece of legislation about land law not contain its own definition of “interest”?

If Parliament intended to use “interest” in s 188 to mean “registered interest” and “interest in a lot” to mean “interest in a lot at law” (a phrase used in s 181), why did it not simply say so?

If “interest” and “interest in a lot” do not include an equitable interest, why is the exclusion from compensation of certain equitable interests in s 189(1)(a) necessary?

Why should “interest in a lot” mean one thing in s 122 and another in s 188?

What purpose, evident from the words of the Act or extrinsic material, requires words to be read into s 188 in order to achieve that purpose?

Why should a provision that compensates the victim of fraud not have its terms interpreted according to their ordinary meaning, so as to achieve its beneficial, remedial purpose?

Would the exclusion of an equitable interest of the kind held by a purchaser produce arbitrary, capricious or apparently unintended results for innocent victims of fraud?

The legislation

93. The State’s argument that the Parliament intended to displace the AIA definition of “interest” when that word is used in s 188 falls to be assessed against the background to the legislation, the absence of a definition of “interest” in the LTA itself, and the terms of the LTA.

94. The LTA was originally enacted in 1994. It was to consolidate and reform the law about the registration of freehold land and interests in freehold land.⁸² The legislation was based largely on draft legislation prepared by the QLRC.

95. The original LTA contained a compensation provision (s 173) that contained the same language as s 188(1) now does. It used a phrase “an interest in a lot”. At all times the AIA has defined “interest” in the same terms. It includes an equitable interest.

96. This legislative history is noteworthy because the legislature decided not to define “interest” in the LTA when it might have. Whereas the original LTA omitted and replaced a number of definitions found in the AIA, the definition of “interest” was not amended.

97. The QLRC considered authorities which concluded that “interest” includes an equitable interest. It also considered provisions in earlier legislation that allowed indemnification from the former Assurance Fund in s 42 of the Real Property Act 1861 (Qld). Predecessors to the current s 189(1)(a) of the LTA had excluded indemnification for a breach of trust and, after 1981, the exclusion expressly applied to a breach of any trust, whether express, implied or constructive.⁸³

98. A justification for exclusion when the deprivation of an interest is because of a breach of trust or fiduciary duty is that the beneficiary of a trust, whether express, implied or constructive, can pursue rights against the trustee or fiduciary.⁸⁴ In its Working Paper the QLRC referred to certain authorities and some ambiguity as to whether the proviso to indemnification was limited to express trusts. On one possible view, the proviso might apply to exclude all claims based on deprivation of an equitable interest. The QLRC recommended that the legislation continue to prohibit recovery in respect of deprivation of an equitable interest arising under an express, implied or constructive trust. It also recommended that it be made clear that the provision applied to beneficiaries of estates in the course of administration. The QLRC appreciated a distinction between beneficiaries under a trust (express, implied or constructive) and other equitable interests. Australian law does not treat a vendor under a contract for the sale of land as a trustee.

Context

100. Section 32A of the AIA provides that definitions in or applicable to an Act apply except so far as the context or subject matter otherwise indicates or requires. This provision and general principles governing statutory interpretation direct attention to s 188’s context.

101. The State notes that Part 9 of the LTA in which s 188 appears deals with the registration of instruments and its effect.

102. Section 181 deals with registration. It provides that an instrument does not transfer or create “an interest in a lot at law” until it is registered. The State argues that the reference to “interest in a lot” in s 188 should be read as meaning “interest in a lot at law” because it is concerned with the consequences of registration in circumstances in which the interest that is transferred or created upon registration is an interest in a lot at law.

103. The State also relies upon the fact that s 184(2) provides that a registered proprietor “is not affected by actual or constructive notice of an unregistered interest affecting the lot”. An “unregistered interest” includes an equitable interest. The State rejects the proposition that the reference to an “unregistered interest” suggests that the word “interest” in s 188(1) includes both registered and unregistered interests. Instead, it submits that whereas s 184(2) refers to an interest “affecting” a lot, s 188(1) refers to “an interest in a lot”. The term “interest” in s 188 is submitted to “economically” describe a registered interest because only a registered interest can be an interest “in” a lot.

104. The State is correct that the interest that is transferred or created upon registration is an interest at law. This is not to deny, however, that an equitable interest exists prior to registration. It does not explain why a compensation provision should not be interpreted according to its terms for the benefit of a claimant who is deprived of an equitable interest in a case like this.

105. The State’s contextual argument about ss 181 and 188 is unpersuasive. The presence of the words “at law” in s 181 in the phrase “an interest in a lot at law” and their absence in s 188 do not suggest that the different phrases in each section have the same meaning. They are different phrases in a carefully drafted, technical statute. One provision is concerned to declare that an instrument does not transfer or create an interest in a lot “at law” until it is registered. The other provision is concerned with compensation for a claimant who is deprived of “an interest in a lot” because of fraud or other circumstances.

106. The fact that ss 181 and 188 both appear in Part 9 of the Act is an insufficient basis to conclude that the reference in s 188 to an “interest in a lot” is a reference to “an interest in a lot at law”, being the words that appear in a different subdivision of Part 9. Section 188 appears in Subdivision C which is concerned with compensation for deprivation of a lot or an interest in a lot.

If “interest in a lot” does not include an equitable interest, why is the exclusion in s 189(a) necessary?

113. Provisions have long existed to prohibit recovery of compensation where an equitable interest arises under an express, implied or constructive trust. Earlier legislation prohibited recovery from the Assurance Fund in relation to an express trust. Following the introduction of s 135 of the Real Property Act 1861 (Qld), the exclusion applied to express, implied and constructive trusts. The QLRC recommended the continuation of the exclusion and drafted a provision that is essentially the same as the current s 189(1)(a) of the LTA. It is unnecessary to detail this legislative history because the State accepts the Purchasers’ submission that “s 189(1)(a) of the LTA has no wider application than its predecessor provisions, and is therefore confined to situations of breach of trust or breach of fiduciary duty”. Section 189(1)(a) clarifies that such a breach includes “a breach of duty arising in the administration of the estate of a deceased person”.

114. As Christensen, Dixon and Wallace observe, a reason for the exclusion is that the beneficiary of a trust or fiduciary duty can pursue that person’s rights against the trustee or fiduciary for breach of trust or breach of duty.⁸⁸ Likewise, a new trustee might pursue on behalf of the beneficiaries a former trustee for breach.

115. Against that background, the Purchasers submit that the evident intent of the legislature may be gleaned from the terms of the compensation provision itself. It compensates for equitable interests, except to the extent excluded by s 189(1). Expressed differently, if s 188 did not include equitable interests, the exclusion in s 189(1)(a) would be unnecessary.

116. In response, the State contends that s 188(1) does not include an equitable interest because the nature of an equitable interest is, in truth, a right in personam. It cites Maitland’s 1910 observation that equitable estates and interests “are rights in personam but they have a misleading resemblance to rights in rem”.⁸⁹ The State submits that, despite the common use of the term “equitable estates and interest”, the right of a purchaser is merely the right to approach a court of equity for a decree of specific performance, ordering the vendor to cause the legal title in the subject land to be registered in the purchaser’s name. It is not an interest “in” the lot. The State argues that the rights recognised by courts of equity in which the expression “equitable interests” are used are rights to seek relief against another person, typically directing the person to do or not to do something. Equity is said to recognise a commensurate interest in property the subject of that right, not as a means of creating a proprietary interest in that property, but merely as an adjunct to the relief otherwise available to the plaintiff. These remedies co-exist with the Torrens legislation. Accordingly, when the refers to “an interest in a lot” it is referring to an interest at law, not an equitable interest.

Does “interest in a lot” have a different meaning in ss 122 and 188?

119. One aspect of interpreting words in their context is the proposition that it is “a sound rule of construction to give the same meaning to the same words appearing in different parts of a statute unless there is reason to do otherwise”.⁹⁰ Sometimes a change in language may be forced by context, for example, where an amending Act amends more than one piece of legislation.⁹¹ The presumption that words are used consistently in the same Act will be more readily abandoned if the context in which a word appears in one place in an Act compels some other than the ordinary meaning to be placed upon it.⁹² The difficulty in maintaining consistency arises in a large and frequently amended Act. However, where an Act has been carefully drafted and the relevant provisions remain unamended this feature does not exist.

120. The State must explain why the words “an interest in a lot” in a section about caveats (s 122(1)(a)) should have a different meaning to the same words in a section about compensation (s 188(1)). The issue arises in the context of a carefully drafted statute in which the relevant provisions have been relocated, but not amended. The State must meet the Purchasers’ argument that both sections use the words “interest” as including equitable interest because both apply to protect interests, including equitable interest.

121. The State carefully develops an argument that the two sections are fundamentally different. When a caveator seeks to prevent a caveat lapsing or opposes an application for the removal of a caveat, the Court’s task is said to be “forward-looking” in determining only whether the caveator has an “interest in a lot” sufficient to support the caveat. It does not determine the existence of the interest. By contrast, the task of the Court in deciding whether to make a compensation order under s 188B(2) is said to be “backward-looking”. The party seeking compensation must do more than claim an interest, it must prove that the interest existed in order to claim compensation for its deprivation.

122. The State contends that the meaning of “interest in a lot” should have a different meaning in s 122 than in s 188 because the provisions have different objects and purposes.

123. The Purchasers respond that the suggested point of distinction is elusive and illogical. Such a distinction cannot be sustained by way of statutory construction or by reference to a policy that informs the compensatory provision. The Purchasers also rely on authorities that allow compensation for deprivation of an equitable interest, including the authority upon which the primary judge relied.

Are the authorities wrong?

133. The State submits that the authority upon which the primary judge relied, Diemasters Pty Ltd v Meadowcorp Pty Ltd,⁹⁵ and certain earlier authority upon which it relied, including Robinson v Registrar-General,⁹⁶ do not assist.

134. The authorities are submitted to be in error in concluding that “interest” for the purposes of the New South Wales compensation legislation includes an equitable interest. Robinson, which the State describes as “the root authority” for the proposition, is submitted to be wrong. The authorities and text that Robinson cited are said to be directed to the analogues of s 122(1)(a) of the LTA, not an analogue of s 188(1).

135. The Purchasers respond that the State’s attempt to discredit the authority of Robinson and Diemasters is unpersuasive. Diemasters is submitted to be anchored in a body of authority, including the decisions in Papworth v Williams⁹⁷ and Tolley & Co Ltd v Byrne,⁹⁸ which were followed by Young J in Heid v Connell Investments Pty Ltd.⁹⁹

136. The State contends that Papworth and Tolley are distinguishable and should not be followed because the legislation considered in those cases is “fundamentally different”. The Purchasers reply that this contention does not withstand scrutiny and is inconsistent with dicta of the New South Wales Court of Appeal in Registrar-General v Harris.¹⁰⁰

137. To the extent the State’s submissions rely upon the different purposes between a caveat provision that protects an interest in a lot and a compensation provision that relates to deprivation of such an interest, I have addressed the State’s argument that the same term in different sections should be interpreted differently. The fact that a provision like s 122 of the LTA relates to a person claiming such an interest and that a section like s 188 of the LTA requires proof of deprivation of such an interest, does not mean that the words “interest in a lot” have a different meaning in each section. I turn to the authorities that are relied upon by the parties.

Diemasters

138. In Diemasters, Windeyer J considered the compensation provisions of the Real Property Act 1900 (NSW), in particular s 129 and its predecessor s 126. As for s 126, Windeyer J stated:¹⁰¹

“It is, I think, clearly established that an interest in land referred to in the prior s 126 included an unregistered interest and it would do so under s 129: see Robinson v Registrar-General (1982) 2 BPR 9634; (1983) NSW ConvR ¶55-138 (57,022). It is also established that deprivation can extend, in the words of Professor Butt: to “being outranked in priority by other interests”: Land Law, 3rd ed (1996) Sydney, LBC Information Services, at 2085. Heid v Connell Investments Pty Ltd (1987) 9 NSWLR 628 at 637; and Robinson.”

139. Incidentally, Windeyer J went on to consider the requirement in s 129 that a person suffer loss or damage as a result of “the operation of this Act in respect of any land”, and whether loss or damage arises from one of the nominated circumstances. One of the circumstances was “the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud” (s 129(1)(e)). Such a person was entitled by s 129 to payment of compensation from the Torrens Assurance Fund.

140. In Diemasters, a claim was made under s 129(1)(e) and the Registrar-General was a party. The Registrar-General relied upon the words “as a result of the operation of this” Act in submitting that the Act had not operated or been brought to bear on the transaction so as to cause damage as the loss had arisen through fraud, not by reason of the Act. Windeyer J addressed this submission and a timing issue as follows:¹⁰²

“The question however is whether or not the loss has arisen as a result of both. The argument of counsel for the Registrar-General seems to be based upon the assumption that loss as a result of the operation of the Act can only occur by reason of some dealing, later in time to the interest lost or reduced, having achieved priority by registration, thus giving an indefeasible title to the holder of such registered interest. It also seems to assume that loss which would not have arisen had the land been under Old System title is not necessarily loss resulting from the operation of the Act.”

141. Windeyer J observed that “the purpose of compensation by access to the Fund is to balance disadvantage which can otherwise be brought about by indefeasibility of title”.¹⁰³ He stated:¹⁰⁴

“In principle I can see no reason to restrict access to the Fund to persons claiming that their interest has been lost through the registration of some subsequent dealing as a result of fraud. There is no particular logical reason why compensation should not be available to persons suffering damage as a result of fraud which has enabled the proprietor of a registered interest to maintain an indefeasible title to such interest based upon its continued registration. Such damage seems to me to arise out of the operation of the Act.”

142. A final question was whether or not the claimant had been “deprived of an interest in land through fraud”. Windeyer J considered the meaning of “deprived” in this context, noting that the meanings of “deprived” include to keep a person from possessing or enjoying something and to keep out of. Those definitions were said to accord with the meaning given in Finucane v Registrar of Titles¹⁰⁵ under the corresponding Queensland legislation relating to claims on an Assurance Fund. The provisions warranted such a meaning in the context of a provision giving a right to claim against the Fund. In the circumstances, Windeyer J would have come to the conclusion that the claim of Mr Jain would have fallen within s 129(1)(e), had he been the sole purchaser.¹⁰⁶

143. This conclusion, which adopted the view that the compensation provisions include an unregistered interest, and the observations on issues of causation and deprivation, were obiter. They proceeded on the assumption that one joint tenant is not bound by or affected by the fraud of the other, of which the first is unaware, being a proposition that Windeyer J did not consider to be correct. Nevertheless, the conclusions of Windeyer J warrant respect.

Robinson v Registrar-General

144. One of the authorities relied upon by Windeyer J was Robinson.¹⁰⁷ Foster J accepted that if a contract were signed, this would be sufficient to provide the plaintiffs with an interest in the land within the meaning of s 126 of the Real Property Act 1900 (NSW). Foster J cited at p 9637 John Baalman’s The Torrens System in New South Wales¹⁰⁸ and the cases there cited in support of that proposition. The State submits that those cases were authority for the proposition that “interest” in the analogue to s 122(1)(a) includes an equitable interest, and were not directed to the analogue to s 188(1). Robinson is submitted to have transposed a conclusion as to a caveat provision to support a conclusion in relation to the analogue to s 188(1).

145. As already discussed, the State submits that such a transposition is erroneous because of “the different tasks of the Court in hearing a caveat dispute, and the task of the judge in deciding a compensation claim”. I have addressed and rejected that argument. The issue is not the different task of the Court in hearing a caveat dispute. It is the meaning of “interest in a lot” being the interest that a caveator claims to have. The authorities establish that “interest” includes an equitable interest. Incidentally, many caveats do not lead to court disputes and therefore to focus upon the task of a court in a caveat dispute does not assist in determining the meaning of “interest”. In the circumstances, I do not accept the State’s submission that Robinson is erroneous.

Heid v Connell Investments Pty Ltd

146. In Heid,¹⁰⁹ Young J (as Young CJ-in-Eq then was) considered the compensation provisions of s 126 of the New South Wales Act. He concluded that the cause of action provided by the section to a person deprived of land arises not only where the legal interest in land has been lost, but also where what is lost is an equitable interest in land. The factual circumstance concerned a vendor’s land which had been held to have priority over many other equitable interests. The plaintiff claimed against the Assurance Fund. One issue was whether the plaintiff had been deprived of an interest in land. The Registrar-General submitted that s 126(1) only referred to a legal interest in land and that an equitable interest did not fall within the section. The issue arose in the context of provisions that did not refer to an equitable estate in the statutory definition of “land” in the Real Property Act 1900 (NSW). After referring to the statutory provisions, Young J stated:¹¹⁰

“However it is quite clear from the authorities that this proposition is not so. This point first came up for determination in Papworth v Williams (1899) 20 LR (NSW) 280; 16 WN 48. There the Full Court decided that an equitable interest in a rent charge constituted an interest in land for the present purposes. Again in Tolley and Co Ltd v Byrne (1902) 28 VLR 95, the plaintiff had held an equitable mortgage by way of deposit of title deeds. The registered proprietor fraudulently represented that the certificate of title had become lost and obtained the issue of a new certificate of title and so defeated the plaintiff’s equitable mortgage. A‘Beckett J held that the plaintiff had been deprived of land within the meaning of the Victorian equivalent of the section. If further authority were necessary it would be provided by the decision of Foster J in Robinson v Registrar-General (1982) 2 BPR 9634 and indeed its correctness was at least assumed by the High Court in Registrar-General (New South Wales) v Behn.”

147. Heid is authority for the proposition that the compensation provision may be engaged where a claimant has been deprived of an equitable interest in land. I turn to the authorities upon which Young J relied.

Papworth v Williams; Williams v Papworth

148. This proceeding concerned s 117 of the Real Property Act 1862. Due to a mistake in the Registrar-General’s Department, a certificate of title did not note that land was subject to a rent charge. The issue was whether the claimant beneficiaries had an interest in the land. Chief Justice Daly held that each clearly had a joint equitable interest in the land and had been deprived of it.¹¹¹ Stephen J agreed and observed that there was no doubt that the plaintiffs had an “interest” and that they had been deprived of that interest, and therefore were entitled to bring the action.¹¹² Owen J concurred.

149. On appeal, the Privy Council confirmed that each beneficiary had an interest in the land within the meaning of s 117. Lord Macnaghten stated:¹¹³

“It could not, of course, be disputed that the expression ‘interest in land’, unless there was something to restrict the meaning, must include equitable as well as legal interests.”

The Privy Council rejected an argument that the scope of the Act required such a restriction.

Tolley & Co Ltd v Byrne

150. The Victorian decision of Tolley¹¹⁴ concerned the Transfer of Land Act 1890 (Vic). An original certificate of title was deposited as security for a mortgage debt. The registered proprietor made a statutory declaration alleging that she had lost the certificate and that there had been no dealings whatever by her with her interest in the land. A new certificate of title was issued to her. She subsequently transferred the land to a purchaser who acted in good faith and for valuable consideration, and who became the registered proprietor of the land. The original proprietor became insolvent without having paid to the plaintiff any part of the debt. The plaintiff claimed to have sustained “loss” within the meaning of the Act and to be entitled to recover damages out of the Assurance Fund. A‘Beckett J held that the plaintiff had an interest in land and was entitled to compensation. He stated:¹¹⁵

“I cannot conceive of any sound ground for saying that it is not an interest in land. It amounts to a contract between the parties that security shall be given over that land for the debt for which it is deposited. There are various ways by which that right may be enforced; but every mode of enforcement recognizes that to be an act, equivalent to a contract, whereby an interest in that land has been acquired by the person who obtains the appropriate or convenient remedy in the circumstances. It is specifically attached to that land, just as, under a contract for the sale of land, an equitable interest is created in the land.”

151. The State submits that Papworth and Tolley are distinguishable because they were decided by reference to the Torrens statutes enacted in Victoria in 1890 and in New South Wales in 1862, which were akin to the Queensland legislation enacted in 1861. The purpose of those statutes is said to have been considerably different to that sought to be achieved by the LTA. Papworth is submitted to have been decided in relation to a statute that was enacted in a markedly different context that included bringing Old System land onto the Torrens System. The text, context and purpose of the legislation are submitted to have “all changed since Papworth was decided”. The Privy Council decision in Papworth is submitted to no longer bind this Court, being persuasive but distinguishable by reference to the context and purpose of the relevant provisions.

152. Section 117 of the statute considered in Papworth commenced:

“Any person deprived of land or of any estate or interest in land in consequence of fraud or through the bringing of such land under the provisions of this Act or by the registration of any other person as proprietor of such land estate or interest …”

It went on to provide other circumstances in which a person deprived of land or of any estate or interest in land might bring and prosecute an action at law for the recovery of damages against a nominal defendant appointed by the Governor. The bringing of such land under the provisions of the Act was only one such circumstance. The fact that the legislation was enacted when Old System land was being brought under the Torrens System does not, in my opinion, detract from the force of the authorities upon which the Purchasers rely to the effect that “interest” in compensation provisions includes an equitable interest.

153. The QLRC in a 1988 working paper considered Papworth in the context of what was said to be ambiguity in the provisions of the Real Property Act 1861 (Qld), particularly a proviso to s 42 that prohibited recovery in respect of breaches of trust. The Purchasers’ submissions comprehensively address what should be made of the QLRC’s observations at page 98 of its working paper. The Commission’s discussion related to the policy of the Torrens System in excluding trusts from the register and prohibiting recovery from the Assurance Fund in respect of the deprivation of a purely equitable interest, whether arising under an express, implied or constructive trust. The State accepts that the QLRC working paper did not deal comprehensively with the first instance cases that post-dated Papworth. Instead, it submits that the provisions upon which Papworth was premised to conclude that “interest” in the compensation provisions included an equitable interest are not present in the LTA, such that the reasoning is not applicable to s 188 of the LTA. The State does not contend that the observations of the QLRC in its working paper assists in resolving its submission that the authorities which I have canvassed are wrong or distinguishable.

Does the legislative history call for a different conclusion?

154. The provisions considered in Papworth were replaced in later legislation, including s 126 of the Real Property Act 1900 (NSW). The legislative history of s 126 was considered by Mason P in Registrar-General v Harris.¹¹⁶ Mason P explained that s 126 re-enacted s 117 of the Real Property Act 1862 (NSW). The amendments solely consolidated and did not alter, add to or amend the law that was contained in the Acts that were consolidated. Powell JA reached the same conclusion that s 117 of the 1862 Act was “re-enacted” by s 126, with no intention to change the law.¹¹⁷ Stein JA agreed with Mason P.

155. In the circumstances, the State’s argument that the decisions of the Full Court and of the Privy Council in Papworth are distinguishable and should not be followed is unpersuasive.

Conclusion: the authorities should be followed

156. The recent authorities of Diemasters, Robinson and Heid should be followed unless there are reasons to distinguish between the scope of the relevant compensation provisions in the New South Wales legislation and s 188 of the LTA.

157. There may be occasions when there are significant differences between various State Torrens statutes. The differences may be such that each provision must be construed according to its own language.¹¹⁸ In the present context, however, the State does not identify a sound reason to distinguish between the compensation provisions that have been interpreted in the authorities to which I have referred. Those authorities support the conclusion that “interest in a lot” in s 188 includes an equitable interest. The primary judge was correct to conclude that the decision in Diemasters bolstered his earlier conclusion that s 188 extends to equitable interests.

A purposive interpretation

158. The State’s case is that “interest in a lot” in s 188 should be given:a meaning other than the AIA definition; anda different meaning to the same words in s 122,

and read as if additional words appeared in it so as to exclude equitable interests.

159. A clear legislative purpose would be required to adopt this interpretation so as to displace the ordinary meaning of the words “interest in a lot”.

160. The State does not clearly articulate a purpose that would be served by giving the words of s 188(1) the meaning for which it contends. Instead, it advances a textual argument that, with some exceptions like s 184, the LTA does not refer to “unregistered interests” and with the notable exception of the caveat system it does not protect unregistered, equitable interests. The State accepts that the LTA by its terms and by its interpretation¹¹⁹ recognises that equitable interests affecting registered land exist. Its case is that the protection of these equitable interests is undertaken by the Court exercising its jurisdiction in equity by applying equitable principles. Equitable interests are not governed by the LTA itself.

161. On this basis, the State argues that the statutory right to compensation is limited to registered interests. The right to compensation under the LTA is not an insurance scheme to underwrite any and all risks associated with property transactions in Queensland. According to the State, it is “a distinctly fashioned right conferred on a limited class of persons” with the availability of that right constrained by the language of the LTA. The Court acting as “guardian of the Revenue” should confine the right to compensation accordingly.

162. The State also submits that the fact that victims of fraud like the Purchasers are deprived of an interest and will go uncompensated because of a timing issue is simply a consequence of the limitations on compensation.

163. If the scheme of the LTA, its terms, or the specific terms of s 188 made it tolerably clear that compensation was limited to the loss of an “interest in a lot at law”, then the State’s purposive interpretation argument about limiting compensation to deprivation of a registered interest would be compelling. The Court’s function is not to expand the scope of a statutory compensation scheme beyond its legislated limits.

164. The fact remains that, as the State accepts, the LTA is not concerned solely with registered interests, even if one of its principal purposes is registration of interests in land and the creation of a system whereby an instrument does not transfer or create an interest in a lot “at law” until it is registered.¹²⁰ The fact that equitable interests cannot be registered does not compel the conclusion that equitable interests are not protected by the LTA in defined circumstances: by a caveat system and by compensation for the deprivation of an “interest in a lot”, not simply deprivation of a “registered interest” or “an interest in a lot at law”.

Does the State’s suggested interpretation produce arbitrary and apparently unintended consequences?

166. The Purchasers submit that to discard the AIA definition would produce illogical, arbitrary, and capricious distinctions between the positions of adversely affected, innocent parties, when applying the remedial provisions of s 188. It would produce apparently unintended consequences for the victims of fraud and other persons who are deprived of an interest in a lot in one of the circumstances stated in s 188(1).

167. According to the Purchasers, the State’s interpretation of s 188 would make compensation for victims of fraud depend on happenstance and timing issues. For example, if the Purchasers had been a little quicker in seeking registration or the Registrar a little slower in lodging a caveat, the Purchasers would have obtained a registered interest. That timing should not affect an entitlement to compensation under remedial legislation that compensates victims who are deprived of an interest because of the operation of the statutory scheme.

168. The State responds that there is nothing arbitrary or capricious about making a right to compensation depend upon such timing issues. It contends that the LTA’s purpose is to protect against losses that the Torrens Scheme brings about and that, even under the old title scheme, the Purchasers would not have been entitled to the interest they claim to have been deprived of. This argument is raised in the context of ground 4, but it has a relevance in the present context, given the view I take about the meaning of “deprived” and “because” in s 188(1) (which arise for consideration in grounds 3 and 4 of the appeal). The compensation scheme exists to protect individuals like the Purchasers who would have obtained the benefit of indefeasibility of title, but for the intervention of the Registrar’s caveat.

169. Counsel for the Purchasers are correct to describe the State’s interpretation as making compensation for victims of fraud depend on a timing issue. That interpretation appears arbitrary in respect of a scheme that has the purpose of compensating innocent parties for losses that are sustained in one or other of the circumstances defined by s 188(1).

170. The interpretation adopted by the primary judge, rather than that urged by the State, appears to best achieve the purpose of the LTA, and the purpose of Subdivision C of Division 2 of Part 9, in particular.

Ground 3: Were the Purchasers deprived of an interest in a lot?

171. The primary judge was “satisfied that the Purchasers have, as a matter of common sense, been deprived of their equitable interest in a lot because of the fraud of another”.¹²¹ Under ground 3 of its appeal, the State submits that the primary judge erred in concluding that the Purchasers were “deprived of an interest in a lot”. Relying on their earlier analysis, they submit that the Purchasers were not deprived of any interest in a lot because they never acquired an interest. On this argument, the Mortgagees could not give good title so as to enable the Purchasers to complete the contract, and all the Purchasers had were contractual rights against the Mortgagees. The State’s argument emphasises that the primary judge ruled that the mortgage was void, did not obtain the benefit of indefeasibility under s 184 of the LTA, and the Mortgagees could not have granted to the Purchasers an equitable interest in the property better than that which they held.

172. The State’s arguments on ground 3 depend upon acceptance of its arguments in relation to ground 1 and, in particular, its arguments about the meaning of an equitable interest and a narrow conception of what is meant by “specific performance” in this context. However, for the reasons given, the Purchasers had an equitable interest.

173. Although the primary judge declared the mortgage void and, in that sense, the Mortgagees might be said to never have an indefeasible title, the contract they entered into with the Purchasers was valid. The Mortgagees had a defeasible, registered interest, and were capable of effecting a transfer of title to the Purchasers pursuant to a void instrument of transfer under the Torrens system.¹²²

174. Had the fraud not occurred and, instead, Ms Issa had signed the mortgage, the Purchasers’ equitable interest would have resulted in their being registered as owners. The fraud meant that their interest could not prevail over that held by Ms Issa and registration of their transfer was prevented by the Registrar’s caveat.

175. Once it is accepted that the Purchasers had an equitable interest in the lot, it makes sense to say that they were deprived of it because of the fraud of Ms Issa’s son. This adopts the meaning of “deprived” discussed in Diemasters. The Purchasers were deprived of an interest in a lot.

Ground 4: Were the Purchasers deprived of an interest in the lot “because of” the fraud of another person?

176. The word “because” concerns an issue of causation that the State raises in relation to ground 4. The State disputes the conclusion that the Purchasers were deprived of an interest “because of” the fraud of another person. It contends that the primary judge erred in applying the common sense test of causation identified in March v E & MH Stramare Pty Ltd.¹²³ It also argues that the proper construction of the expression “because of” in s 188 of the LTA requires the matter in s 188(1)(a)-(h) to be “the real or proximate cause” of the deprivation of the claimed interest. The State submits that the primary judge erred in not holding that the Purchasers, to the extent they were deprived of an interest in a lot, were deprived of it “because of” the failure of the original mortgagees (the first to sixth defendants) and the Mortgagees (the first to seventh defendants) to comply with ss 11A and 11B of the LTA.

177. The State submits that any equitable interest of the Purchasers only arose upon their entry into the purchase contract and that they “cannot have been deprived of an interest because of something that occurred at a point in time before that interest came into existence”.

178. Many statutes allow a claimant to be compensated for loss or damage caused by, by reason of, because of, or as a result of something. Such a causation requirement must be determined in its particular legal context.¹²⁴ March concerned causation in the context of negligence and the operation of an apportionment statute. Mason CJ made the general observation that causation in the context of legal responsibility and in law are not the same as philosophical and scientific notions of causation. In law, problems of causation may arise in the context of “ascertaining or apportioning legal responsibility for a given occurrence”.¹²⁵

179. When lawyers use the term “causation”, for example, in the context of loss and damage caused by misleading or deceptive conduct in contravention of statute, one of two different types of inquiry may be involved. The first concerns the role that something played, along with other conditions or “causes”, in bringing about the loss. This is a “factual causation inquiry”. The second inquiry is whether legal responsibility should be attributed to the defendant for such a loss.¹²⁶ In the context of legislation that is intended to protect consumers from misleading or deceptive conduct, it is sufficient if the contravening conduct was cause of the loss, in the sense of materially contributing to it. This requires only that the contravening conduct played some part in contributing to the loss.

“The principle that beneficial legislation is to be construed beneficially is a manifestation of the more general principle that all legislation is to be construed purposively.”

182. The State invites the Court to construe “because of” in a remedial provision to mean “the real or proximate cause” of the deprivation of the claimant’s lot or interest in a lot. However, nothing in the provision’s text or context requires such a restrictive meaning, and if the legislature had intended to impose such a requirement, it might have stated it in terms. Absent the enactment of a term like “proximate cause” or “dominant cause”, the term “because of” should be given the type of meaning which it has in other remedial statutes. It certainly should not be read as if to require the fraud or other circumstance stated in s 188(1) to be the sole cause of the deprivation.

183. The fact that Mr Karbotli’s fraud pre-dated the Purchasers’ contract and their acquisition of an interest in the lot does not mean that the fraud did not cause the deprivation. The primary judge was correct to describe the fraud as the root cause of the deprivation.¹³²

184. The fraud did not cease to be a cause of the deprivation because, had it not been for the failure of the mortgagees to comply with ss 11A and 11B of the LTA, they and the Purchasers would have obtained indefeasible title. The State submits that although the fraud was “a prerequisite of the Purchasers not obtaining the title, it was the failure of the Mortgagees to make their title indefeasible that was the cause”. This submission operates upon the unfounded basis that s 188 requires that the fraud be the sole cause.

185. The State’s submissions about counterfactuals tend, if anything, to highlight why Mr Karbotli’s fraud caused the deprivation such that the deprivation of the Purchasers’ interest was “because of” the fraud of another. The State’s counterfactual assumes that the Mortgagees had complied with s 11B, in which event the Mortgagees would have had an indefeasible interest and the Purchasers would have been able to resist Ms Issa’s case, despite her having registered title to the lot. On that counterfactual, Ms Issa would have had a right to compensation for the deprivation of her registered interest in the property. The State argues that the thing that made the difference was that the Mortgagees did not have an indefeasible interest, and that turned upon their failure to comply with s 11B. However, this argument serves to highlight the fact that the failure of the mortgagees to comply with ss 11A and 11B only arose for consideration because of Mr Karbotli’s fraud.

186. In summary, Mr Karbotli’s fraud was the root cause of the deprivation, as the primary judge found. It, together with the mortgagees’ failure to prove compliance with ss 11A(2) or 11B(2), meant that the original mortgagees and the Mortgagees did not obtain indefeasibility for their registered interest. The existence of that additional cause of the Purchasers’ deprivation does not alter the fact that the deprivation was “because of” Mr Karbotli’s fraud. The fact that the mortgagees failed to take steps that might have detected the fraud tends to emphasise it.

Ground 5: Was it an error to assess the quantum of compensation by reference to the value of the property?

187. The State contends the primary judge erred in assessing compensation by reference to the value of the property, namely $2,700,000, rather than by reference to the value of the equitable interest, which the State contends had no value in the circumstances. What fell to be assessed was not the value of the lot, but the value of the equitable interest. According to the State, no party would be willing to pay anything like the value of the property for the equitable interest.

188. The Purchasers respond that the State’s submission is misconceived since it relies upon the fraud in order to defeat a statutory remedy for it. Compensation should be assessed by reference to what the value of the interest would have been in the absence of fraud.

189. The loss caused by the relevant deprivation is ordinarily measured by reference to the value of the land, or interest, of which the person seeking compensation was relevantly deprived.¹³³

190. A first impression may be that the figure of $2,700,000 is the value of the registered title. However, in the circumstances it was open to the primary judge to adopt the valuation report as an appropriate measure of compensation for the deprivation of the Purchasers’ interest in the lot. This is because, as the State accepts, the interest was assignable in equity and its value is to be determined upon the application of the classic statement of Isaacs J in Spencer v Commonwealth*.*¹³⁴

191. The relevant assessment concerns the value the Purchasers’ interest would have had in the absence of fraud. In that regard, if the Purchasers had not been prevented because of the Registrar’s caveat, which in turn was based upon the alleged fraud that was proven at trial, then the Purchasers were in a position to lodge transfer documents and obtain registration. They had completed the contract. It was not the case of a contract that was conditional upon a contingency such as a development approval.

192. As was raised during oral argument, had there not been a fraud, the Purchasers’ interest would be valued according to what a potential purchaser would have been prepared to offer to them in order to on-sell the property. There is no criticism that the primary judge was entitled to assess compensation by reference to value at the date of the trial, rather than the value of the property at the date it was purchased. A hypothetical buyer, knowing that the Purchasers’ contract had been completed and the Purchasers were in possession of transfer instruments capable of registration, would have been prepared to offer the market value of the land for the assignment of the Purchasers’ equitable interest.

Ground 6

194. The State’s sixth ground contended that the order for compensation was not just because of alleged errors relating to earlier grounds. These alleged errors are not established.

The purpose of s 188 and compensation that is just

195. Most of the State’s grounds of appeal concerned the interpretation of s 188 in the context of the compensation provisions of the LTA and the statute in general. Those issues of interpretation required consideration of the purpose of the compensation provisions and their application in a case such as this.

196. The compensation provisions in the LTA are remedial provisions that protect claimants who are deprived of an interest in land because of one of the matters stated in s 188. According to the ordinary meaning of the words “interest in a lot”, according to the AIA definition of “interest”, by regard to context, and by reference to authorities, an “interest in a lot” for the purposes of s 188 includes an equitable interest.

197. Compensation is appropriate where the loss arises from the operation of the Torrens system.¹³⁵ To the extent that a predominant purpose of the original compensation provisions that were enacted in the late 19th Century was to compensate for losses that arose from the operation of the Torrens system, and that purpose remains one of the purposes of the modern compensation provisions of the LTA, the Purchasers’ loss was the result of the Act’s operation. The Registrar’s caveat that was lodged to protect Ms Issa from a suspected fraud caused the Purchasers to not become registered in her place. This protective mechanism, which is part of the system, placed the Purchasers in the predicament of having paid the purchase price but being kept out of enjoying the thing that they had purchased. That deprivation was the result of the operation of the LTA’s provisions that allow for a Registrar’s caveat to prevent a party obtaining registration of a transfer and the benefit of indefeasibility.

198. Part of the State’s case about the interpretation of s 188 turned on consequences for the State’s revenue if the term “interest in a lot” was given its ordinary meaning, and not limited to a registered interest.

199. The purpose of the compensation provisions are to be discerned from their history¹³⁶ and, most importantly, from the terms of the provisions. Section 188 is not limited in its terms to deprivation of a registered interest and it is not evident that Parliament intended it to be so limited.

200. Section 188 operates in the modern era of land title registration, not in an era in which Old System Title was being brought under the Torrens system with risks and losses associated with that transition. Section 188 need not be read as if it includes the words “by operation of the Act” as an additional causal element. However, if it was to be read that way, then in this case it is appropriate to award compensation because the Purchasers’ loss was, in part, the result of the operation.

Summary and conclusion

209. After entering into the contract to purchase the property and prior to registration of the transfer, the Purchasers had an interest in the land that was enforceable against third parties and could take priority over holders of competing interests. This “equity” might have been protected by equitable remedies to protect the Purchasers’ contractual rights. For example, they might have obtained an injunction to restrain the Mortgagees from making or completing a contract with another purchaser. In the circumstances, the Purchasers had an equitable interest in the land.

210. The Purchasers’ equitable interest was an interest of substantial value, particularly after the contract became unconditional, they paid the purchase price, and they obtained transfer documents that entitled them to become registered as owners. Their equitable interest might have been assigned to someone who wished to buy the property from the Purchasers. Such a party might be expected to pay the market value of the land.

211. Had Ms Issa executed the mortgage, rather than her signature being forged as part of a fraud, then the Purchasers would have been able to have the transfer to them registered. In addition to their equitable interest, they thereupon would have obtained an interest at law and indefeasible title.

212. Instead, because of the fraud:the mortgage was rendered void and the mortgagees’ non-compliance with ss 11A and 11B of the LTA meant the mortgagees’ registered interest in the land was defeasible;the Registrar lodged a caveat that prevented the Purchasers from becoming registered owners with an indefeasible title; andMs Issa’s interest was not displaced by a registered interest held by the Purchasers.

213. In summary, the fraud deprived the Purchasers of an entitlement to obtain an indefeasible title as the result of the registration of a transfer to them; the transfer being the result of the antecedent agreement that created their equitable interest. They lost the use of or were deprived of their equitable interest.

214. Given the value that the Purchasers’ equitable interest would have had in the absence of the fraud, and the fraud’s consequences, it was reasonable to assess compensation by reference to the market value of the land.

Disposition and orders

215. The State having not succeeded on its appeal, it is unnecessary to consider the Purchasers’ proposed notice of contention that they are entitled to compensation pursuant to s 188, as they were deprived of a legal interest in the property because of the fraud of Mr Karbotli.

216. I would order that:

1.The appeal is dismissed.

2.The appellant pay the respondents’ costs of and incidental to the appeal.

Footnotes

1. Issa v Owens & Ors [2023] QSC 4 at [121] (“Issa”). ↩

2. Issa at [123]. ↩

3. Issa at [204]. ↩

4. Issa at [396]. ↩

5. Issa at [370]. ↩

6. Issa at [369]. ↩

7. Sir Frederick Jordan, Chapters on Equity in New South Wales (6th ed, 1947) at 52, footnote (e). ↩

8. Ibid. ↩

9. (1989) 168 CLR 242 at 253 (“Chan”). ↩

10. (1988) 165 CLR 489 at 522. ↩

11. (2015) 89 NSWLR 237 at 262 [104] (“Golden Mile”). ↩

12. Ibid. The second, third and fourth equities are: (2) an equitable right that the vendor exercise due care to preserve and maintain the land pending completion; (3) an equitable right to the rents and profits received by the vendor between the agreed and actual date of completion; and (4) an equitable lien for repayment of the purchase price in the event of non-conveyance by the vendor. ↩