(2)Do the Applicants have rights to protect?
79In my opinion the scheme of the Real Property Act 1900 stands in the way of the Applicants having any interest in the land as against the Plaintiffs which they can protect. Sections 42 and 43 relevantly provide:
42(1)Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded...
The exceptions are not relevant to the present matter.
43(1)Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such registered owner or any previous registered owner of the estate or interest in question is or was registered, or to see to the application of the purchase money or any part thereof, or shall be affected by notice direct or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.
80The position with regard to a trustee as registered proprietor is dealt with specifically in s 96 which provides:
A fiduciary registered as proprietor pursuant to section 93 shall hold the estate or interest in respect of which the fiduciary is so registered in trust for the persons for whom and purposes for which that estate or interest is applicable by law, but for the purposes of any dealing therewith the fiduciary shall be deemed to be absolute proprietor thereof.
81The learned authors of Woodman & Nettle, The Torrens System in New South Wales (LBC, 2003) say in relation to this section at [96.20]:
The object of this section is to draw a curtain between the obligations which a fiduciary owner owes to the beneficiaries and the relation he or she bears towards the outside world. The right of purchasers to regard a registered proprietor as an absolute owner is not to be prejudiced by that owner's duties towards persons claiming under unregistered interests. It is, in effect, a restatement of s 43.
82The decisions in Bursill and Hemmes, relied on by the Applicants, were concerned with easements and rights of way which are subsisting interests. Woodman and Nettle say at [42.400]:
...the preferable view is that Bursill's case requires only that a person taking an interest in land investigate subsisting registered dealings. Dealings whose functions are exhausted on registration (such as transmissions, or transfers not incorporating an easement or covenant) and dealings which, even though when originally registered evidenced an intention to create a continuing contractual relationship, no longer relate to a subsisting interest (such as mortgage since discharged, or an expired lease) may be disregarded.
83That statement is entirely consistent with what the Privy Council said in Gibbs v Messer [1891] AC 248 at 254, namely that the Torrens system was:
to save persons dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of the author's title, and to satisfy themselves of its validity. That end is accomplished by providing that every one who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author's title.
That position has been affirmed frequently since that decision - see, for example, Bahr v Nicolay [No 2] (1988) 164 CLR 604 at 652 and Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528 at [39].
84The Applicants rely on s 40(1B) RPA to suggest that the estate of Alvera in the computer folio certificate was subject to the provision of an instrument being the Transmission Application. The short answer to this contention is that the certificate was not expressed to be subject to the provision of an instrument merely by referring to the instrument as it has. Ordinarily, the matters to which the registered title is subject are to be found in the Second Schedule on the title. Nothing of relevance appeared in the Second Schedule on the title to the Thornleigh land when the First Plaintiff registered its mortgage.
85The Applicants say further that registration by transmission is "a unique form of transfer" and the requirement that they suggest, that a search should be made of the instrument by which Alvera came to be registered, would not be a considerable incursion into the Torrens system. However, they do not point to the basis for suggesting that such a search should be made. Nor is the submission consistent with Gibbs v Messer and the authorities which have followed it.
86The Applicants' submissions and proposed defence appear to assume that the only way there could have been a transmission application whereby Alvera became registered was because she was the legal personal representative of a deceased person. However, she may have become registered as the proprietor by a transmission application in one of the circumstances envisaged in the definition of "transmission" in s 3(1). In particular, she might have become registered that way as a result of being a joint tenant with the deceased person. In such circumstances the land would not necessarily have been held on trust for any other person.
87There must be doubt, in any event, that Alvera held the land on trust for the Applicants or any other person. If Sid's estate remained un-administered, as the evidence seems to suggest, there would be no trust fund of the residuary estate in which the Applicants could be said to have a beneficial interest: Livingston at 708; Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 312. Nevertheless, I do not base my decision on this point. Although such matters as the absence of the Applicants from the title and the need for George to obtain Letters of Administration in respect of the un-administered estate of Sid suggest that administration was not complete these are factual matters which it is not possible to decide on an application such as the present one.
88Even if Alvera held the property on the trust for the Applicants ss 43 and 96 RPA mean that the First Plaintiff was not bound to concern itself with that arrangement. This highlights the submission made by the Plaintiffs that any rights which the Applicants have are rights against Alvera by reason of the way she has dealt with the land. Those rights concern vastly different issues from those in dispute in the present case.
89The Applicants' submissions concerning constructive knowledge on the part of the Plaintiffs of the Applicants' alleged interests in the land are inconsistent with the provisions of the Real Property Act to which I have referred. To the extent that they rely on personal equities or rights in personam to avoid the operation of s 42 the authorities are against them. It should be noted that the Applicants do not allege fraud on the part of the Plaintiffs.
90In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 81 ALJR 1107 the High Court agreed with Tadgell JA in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 156-157 that it "is not possible, consistently with the received principle of indefeasibility ..., to treat the holder of a registered mortgage over property that is subject to a trust, registration having been honestly obtained [by the mortgagee], as having received trust property".
91Campbell J (as his Honour then was) said in Brueckner v The Satellite Group (Ultimo) Pty Ltd & Ors [2002] NSWSC 378 at [70]:
The most that Westpac could possibly have had, at the time it took its mortgage, is constructive notice of the existence of Mr Brueckner's rights in relation to the two apartments. That is not enough to give Mr Brueckner, against Westpac, any right in personam. In Bahr v Nicolay [No.2] (1988) 164 CLR 604, at 652 Brennan J said, of the Western Australian analogue of section 43 of the Real Property Act 1900:
"These provisions are designed to achieve the main object of the Torrens system of registration of interests in land which the Privy Council in Gibbs v Messer [1891] AC 248, at 254 perceives to be:
"To save persons dealing with registered proprietors from the trouble and expense from going behind the register, in order to investigate the history of their author's title, and to satisfy themselves of its validity. That end is accomplished by providing that everyone who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author's title."
The consequence is that, whereas equity would subject the interest of a purchaser of land to an antecedent unregistered interest of which the purchaser has notice, a purchaser who takes with notice of an antecedent interest but who becomes registered under the Act without fraud takes free of that interest: Ortel v Hordern (1902) 2 SR (NSW) (Eq) 37; Munro v Stuart; Friedman v Barrett; ex parte Friedman [1962] Qd R 498 at 511-512."
92Even assuming, therefore, that Alvera held the land on trust for the Applicants and that the First Plaintiff was on constructive notice of that trust (as the Applicants allege without specifying the basis for it) the Applicants' interest would still not be sufficient to defeat the interest of the First Plaintiff as registered mortgagee of the land.
93In relation to any rights George claims by reason of building a house on the land I note that he has never lodged a caveat claiming such an interest. It was not put as an alternative in the caveat he lodged in 2008. It is not and cannot be alleged, therefore, that the First Plaintiff was on notice of an interest arising in that way, let alone that such interest over-rode the First Plaintiff's registered mortgage. Any rights he may have in that regard are against Alvera and do not impact on the position of the Plaintiffs.
94A similar situation arose in Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295. In that case Mrs Hammond was the registered proprietor of the land but her husband claimed that she held the property for the two of them beneficially as joint tenants on the basis that he provided some or all of the funds for its purchase. A loan was obtained from JP Morgan Trust to purchase the property. Default followed and the mortgagee sought possession of the property. Mr Hammond sought to be joined as a necessary party to the proceedings. Mr Hammond had sought to be joined as a party to the appeal from a judgment of Johnson J who had ordered possession in favour of the mortgagee. Beazley JA dismissed Mr Hammond's application to be joined as a party to the appeal.
95In the appeal from that decision Meagher JA with whom Basten JA and Bergin CJ in Eq agreed said:
[69]For Mr Hammond to have been a necessary party to the possession proceedings, the judgment for possession sought by the respondent against the appellant as registered proprietor must have "directly" affected his rights or liabilities: John Alexander's Clubs Pty Ltd at [131]-[132].
[70]In John Alexander's Clubs Pty Ltd, Walker Corporation's unregistered interest as mortgagee of the Option Land was liable to be displaced if the relief sought by White City Tennis Club - a constructive trust over and transfer of that land to the Club - was granted and that transfer registered so as to make the Club's interest indefeasible. For that reason the orders sought directly affected its right as unregistered mortgagee. In News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 the rights and liabilities of the players and coaches under their Super League employment contracts were directly affected by the restraining orders sought: esp at 525, 527. For that reason they should have been joined as necessary parties.
[71]The right which Mr Hammond asserts in relation to the Faulconbridge property is as a joint beneficial owner with the appellant. He does not assert that he has any personal equity or other right as against the respondent or in respect of the property, other than by reason that the appellant holds her registered interest beneficially for them jointly. Any such beneficial interest is subject to the statutory and contractual rights which the respondent has as registered mortgagee.
[72]The effect of any judgment for possession on Mr Hammond is only indirect and consequential on the fact that it is given against the appellant as registered proprietor. For that reason, Beazley JA was correct to conclude at [19]:
"JP Morgan is not concerned with the interests of those who stand further down the ladder of claimable interests. It has a first registered mortgage which takes priority over any other interest and it has not, in seeking to enforce its interest, engaged in any conduct that affects any interest of an equitable nature claimed by Mr Hammond. Rather, Mr Hammond is seeking, as against his wife, as registered proprietor, an interest in property."
96Any rights arising out of unconscionability on the Plaintiffs' part would have to be shown to give rights in personam or personal equities to the Applicants to overcome the indefeasibility provisions of the RPA. The Applicants relay on Spina v Conran Associates Pty Ltd; Spina v M & V Endurance Pty Ltd [2008] NSWSC 326; (2008) 13 BPR 25,435 at [98] to submit that where a mortgagee behaves unconscionably a Plaintiff may have rights in personam to have the mortgage removed from the register. However, in that case the mortgagee knew or was taken to know the limitations on the power of attorney pursuant to which the mortgage was entered into - see at [27] and [44]. Further, knowledge by the mortgagee of the position concerning the disadvantaged person was shown - see at [110].
97The pleading in the present case does not demonstrate any knowledge on the part of the First Plaintiff of the existence of the Applicants let alone their financial or other position. The thrust of the complaints concern the position of Alvera and Lily - see paragraphs 52 (c) and (d) and 53 (d) of the proposed defence. To reach the point of unconscionability the Applicants rely on the assertion of constructive knowledge of the alleged trust by which Alvera was said to hold the land for the Applicants. For reasons given earlier constructive knowledge of the existence of rights on the part of the Applicants has not been demonstrated.
98The Applicants submitted that they have standing under the Contracts Review Act as beneficiaries under Sid's Will. In addition George claims standing by reason, now, of being the Legal Person Representative of Sid's estate. In this regard they point to s 12 of that Act which provides:
(1) Where in proceedings for relief under this Act in relation to a contract it appears to the Court that a person who is not a party to the contract has shared in, or is entitled to share in, benefits derived or to be derived from the contract, it may make such orders against or in favour of that person as may be just in the circumstances.
(2) The Court shall not exercise its powers under this Act in relation to a contract unless it is satisfied:
(a)that the exercise of those powers would not prejudice the rights of a person who is not a party to the contract, or
(b)that, if any such rights would be so prejudiced, it would not be unjust in all the circumstances to exercise those powers,
but this subsection does not apply in relation to such a person if the Court has given the person an opportunity to appear and be heard in the proceedings.
99The Applicants point particularly to subs (2) to argue that the Court may not exercise powers under the Act which may prejudice rights of the Applicants without giving them the opportunity to be heard. This submission mistakes the protection that s 12 provides. Its operation can clearly be seen from the situation in Murphy v Overton Investments Pty Ltd [2001] FCA 1725 at [109] -[113]. The party against whom relief was being sought, who had the benefit of the contract, had assigned its rights to a third party which was not before the court. The order would have prejudiced the third party's rights and was, accordingly, not made.
100That is the type of third party to which s 12 is directed. As s 12(1) makes clear orders may be made against a non-party who "has shared in, or is entitled to share in, benefits derived or to be derived from the contract". That is not the position the Applicants are in. They did not obtain, and would not obtain, any benefits under the contract - those benefits went to Lily or, possibly, Alvera. If the Court exercises its powers under the Act that exercise would not prejudice the rights of the Applicants - the exercise of these powers could only benefit their position by ameliorating the effect of the loan agreement and mortgage on any interests they have in the land. Section 12 is not concerned with third parties who have already been detrimentally affected by the entry into the contract to which they were not a party.
101It may be thought doubtful that s 7 of the Act enables a third party to make application under the CRA - the considerations in s 9(2) are all, expressly or impliedly, concerned with matters touching the parties to the contract. However, it is not necessary to decide that point. I can see no basis on which it would be appropriate to join the Applicants as Defendants to the present claim. Considerations such as those discussed in Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) [1999] FCA 1820; (1999) 169 ALR 419 at [53]-[55] and Mizzi v Reliance Financial Services Pty Ltd [2007] NSWSC 37 at [79] concerning cases where a trustee does not take the action it should or does not defend a claim do not apply here. Alvera has vigorously defended the proceedings and has brought cross-claims against relevant parties. In that regard her interests and those of the Applicants are identical.
102For these reasons I consider that any rights which the Applicants have in respect of the land are subject to the rights of the Plaintiffs. The Applicants cannot defeat the Plaintiffs' rights. In those circumstances there is no utility to joining the Applicants to the proceedings. Any rights they have against Alvera and/or Lily should be brought in separate proceedings.