Williams v Davis

FILE NUMBER(S) : SC 3587/02 COUNSEL : T Alexis (Plaintiff) W Marler - solicitor (First & Third Defendants) SOLICITORS : Robbins Watson Lawyers (Plaintiff) Tzovaras Legal (First & Third Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3587/02 IVY GLADYS WILLIAMS V BRIAN ARTHUR DAVIS AS EXECUTOR OF THE ESTATE OF MALCOLM CLARENCE WILLIAMS & 2 ORS Reasons 1 The plaintiff, Ivy Gladys Williams, is the widow of the late Malcolm Clarence Williams. The first defendant, Brian Arthur Davis, is the executor of his estate. The third defendant, Sherril Louise Gisler, is the daughter of Mr and Mrs Williams and a beneficiary of Mr Williams' estate. Mr T Alexis of counsel appeared for Mrs Williams. Mr W Marler, solicitor, appeared for Mr Davis and Mrs Gisler. The Registrar-General is a party to the proceedings but no claim against him has been pursued. 2 Mr and Mrs Williams were married in 1948. In November 1956, Mr and Mrs Williams contracted to purchase a house and land from the Housing Commission of New South Wales ("the Commission") for the price of £3,000, payable by a deposit of £50 with the balance plus interest being payable by monthly instalments of £13.5.0 each. The period over which the instalments were to be paid was 45 years. It was a term of the contract that Mr and Mrs Williams made the purchase as joint tenants. On 1 January 1986, pursuant to the Housing Act 1985 Schedule 1, the assets, obligations and functions of the Commission passed to the New South Wales Land and Housing Corporation ("the Corporation"), which was constituted by that Act.

3 After paying the deposit, Mr and Mrs Williams moved into the home, known as No. 19 Heyson Avenue, Ermington, NSW. In about 1969, Mrs Williams moved out of the matrimonial home. Mr and Mrs Williams thereafter lived entirely apart. Mr Williams remained in the matrimonial home. The younger daughter Sherril, who was 15 years of age at the time, remained with her father until she turned 18 years of age. Mrs Williams commenced a relationship with her current partner in about 1972, but she and Mr Williams were never formally divorced. 4 At the time of Mr Williams' death in 2002, Mrs Williams believed that the property was owned by herself and Mr Williams as joint tenants. Subsequently, she ascertained that a search of the title disclosed that the property had been transferred from the Corporation into the names of herself and Mr Williams as tenants-in-common in equal shares. These proceedings were then instituted. 5 Evidence as to the circumstances surrounding the transfer of the property was given by Janice Pinter, a solicitor who acted for Mr Williams during the last years of his life. In September 1993, Ms Pinter wrote to the Department of Housing to seek the transfer of the property. After investigation, it was accepted by the Corporation that the property had been fully paid off in or about January 1987. Accordingly, the Corporation executed a transfer of the property into the names of Malcolm Clarence Williams and Ivy Gladys Williams as joint tenants. This transfer was sent to Ms Pinter. Although she was instructed only by Mr Williams, Ms Pinter took it upon herself to execute the transfer as "solicitor for transferee". 6 No doubt Ms Pinter ought not to have so acted without informing Mrs Williams. Ms Pinter has given evidence that she was informed by Mr Williams that he did not know Mrs Williams' address. However, as there were three children of the marriage including Sherril, it should not have been difficult to obtain the necessary information. Nevertheless, I cannot draw any inference of significant impropriety from the fact Ms Pinter executed the transfer. It was appropriate that the transfer be effected and lodged for registration, for the property had long since been paid off. The transfer was from the Corporation to Mr and Mrs Williams as joint tenants. There was nothing adverse to Mrs Williams' interests in that. 7 About the time this was occurring, Ms Pinter discussed with Mr Williams the severing of the joint tenancy. Ms Pinter was of the view that Mr Williams, as a joint tenant, could execute a transfer of his half interest in the property to himself and that, on registration of that transfer, the joint tenancy would be severed. In this view, Ms Pinter was correct. See s 97 of the Real Property Act 1900. Sub-section 97(5) empowers the Registrar-General to give notice of such a dealing to all joint tenants. 8 Ms Pinter was instructed by Mr Williams to proceed with the severance of the joint tenancy. She accordingly prepared a transfer of a one half share in the property from Mr Williams to himself, the tenancy to be "tenants in common". Ms Pinter intended that both transfers would be lodged at the same time, the transfer executed by Mr Williams to follow the transfer executed by the Corporation. She had in mind that, on registration of the transfers, Mr and Mrs Williams would hold the property as tenants in common. I see no element of impropriety in that. A joint tenant is entitled to sever a joint tenancy registered under the Real Property Act by executing and having registered a transfer of the type which Mr Williams executed. It is unnecessary for a joint tenant who seeks to sever a joint tenancy to seek permission from the other joint tenant to do so, but the Registrar-General may give notice to the other joint tenant or tenants that the transfer has been lodged. 9 Ms Pinter then forwarded the documents to a lodgements clerk, Vicki Moore, with the following instructions: "Please attend the Stamp Duties Office and stamp Transfer re Tenants in Common. Then lodge Both Transfers and Deed at Land Titles Office.

CT Vol 13400 Folio 121 Transfer to joint tenants Transfer re tenants in common Contract

I have enclosed contract just in case there are problems with the old Transfer." She enclosed a cheque to cover the stamp duty and lodgement fees. 10 Ms Pinter had it in mind that the transfer from the Corporation would not have to be stamped with more than nominal duty as the contract of sale itself had been stamped. The transfer to achieve a tenancy in common required stamping. 11 Unfortunately, Ms Moore, perhaps after a conversation with some person at the Stamp Duties Office, took it into her head to save duty on the second transfer by altering the transfer from the Corporation to a transfer to Mr and Mrs Williams as tenants in common. She crossed out the words "as joint tenants" and wrote in the words "tenants in common in equal shares". She then lodged the transfer from the Corporation and the certificate of title in the Registrar-General's Office. The transfer so altered was in due course registered. The procedures for which s 97 provides were not initiated. 12 In accordance with her usual practice, Ms Moore returned to Ms Pinter her letter of 17 March 1994. On it Ms Moore wrote the following notations: "2nd tsf not required Changed cheque 100773 to $50-

• changed cheque no. 100773 to $50-" 13 Ms Moore also returned to Ms Pinter the transfer from Mr Williams to himself. It had not been stamped or lodged for registration. 14 Ms Moore's note indicated to Ms Pinter that the second transfer, the transfer from Mr Williams to himself, was not required. Plainly, as a solicitor, Ms Pinter had a duty to make inquiries. She had sent an executed transfer to Ms Moore for stamping and registration. Registration of that transfer was required to achieve severance of the joint tenancy pursuant to s 97 of the Real Property Act. Her evidence, that, on receipt of Vicki Moore's note, she thought that the procedure at the Registrar-General's Office had changed and that "procedures change all the time" demonstrates a profound ignorance of the practice of the Registrar-General's Office and of the provisions of the Real Property Act. Ms Pinter knew that what she had asked Ms Moore to do had not been done but she gave no professional consideration to that circumstance. 15 Ms Pinter received the details of the registration in October 1994 and she then wrote to Mr Williams: "I advise that I have now had the transfer registered showing you and your wife as tenants in common rather then (sic) joint tenants. This means that your wife will not automatically be entitled to the whole property upon your death which would have been the previous situation. I am holding the Deed in my safe.

If you wish to exclude your wife from having any interest in the property you will have to make a property application to the Family Court of Australia. However this document will need to be served on your wife so we must have an address for service on her. This will also (sic) required for the divorce proceedings." 16 Again, Ms Pinter would have realised, if she had turned her mind to the matter, that there could not have been a transfer from the Corporation to Mr and Mrs Williams as tenants in common absent some unauthorised dealing. However, she did not do so. 17 The position therefore is that, had the transaction proceeded as Ms Pinter intended, the joint tenancy would have been severed and Mrs Williams would have had no redress against that result. If she had received notice, Mrs Williams would not have had grounds to stop the severance. However, the action taken by Ms Moore resulted in the registration of a transfer from the Corporation into the names of Mr and Mrs Williams as tenants in common in equal shares. That registration did not represent the underlying transaction. 18 Section 42 of the Real Property Act 1900 provides inter alia, 42. Estate of registered proprietor paramount (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 section excepts certain circumstances which I need not discuss. 19 In general, for the purposes of the Torrens system, the term "fraud" means actual fraud, involving moral turpitude, some act of dishonesty on the part of the person whose title is sought to be impeached. Assets Co Limited v Mere Roihi [1905] AC 176; Waimiha Sawmilling Co v Waiole Timber Co [1926] AC 101; Butler v Fairclough (1917) 23 CLR 78; Wicks v Bennett (1921) 30 CLR 80; Bahr v Nicholay (No 2) (1988) 164 CLR 604. The extent to which some species of what is termed "equitable fraud" may fall within this concept was discussed by Mason CJ and Dawson J in Bahr v Nicholay at 614-6. 20 In Assets Co Limited v Mere Roihi, Lord Lindley, delivering the judgment of their Lordships, said at 210: "Passing now to the question of fraud, their Lordships are unable to agree with the Court of Appeal. Sects. 46, 119, 129, and 130 of the Land Transfer Act, 1870, and the corresponding sections of the Act of 1885 (namely, ss. 55, 56, 189, and 190) appear to their Lordships to shew that by fraud in these Acts is meant actual fraud, i.e., dishonesty of some sort, not what is called constructive or equitable fraud- an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud. Further, it appears to their Lordships that the fraud which must be proved in order to invalidate the title of a registered purchaser for value, whether he buys from a prior registered owner or from a person claiming under a title certified under the Native Land Acts, must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him. A person who presents for registration a document which is forged or has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon." 21 In the present case, we are not concerned with any acts done to defraud Mrs Williams. Mr Williams, Ms Pinter and Ms Moore did not have that in mind. 22 We are concerned with fraud in the sense of fraud upon the Registrar-General, fraud in the preparation, execution and certification of a document lodged for registration in the Registrar-General's Office. Fraud in this context has sometimes been referred to as "fraud for the purposes of the Act". It takes into account the need of the Torrens scheme for those persons who are responsible for the preparation, execution, certification and lodgement of documents to undertake their tasks responsibly, so that officers of the Registrar-General's Office may act on the basis that the documents lodged for registration are what they purport to be. 23 It has been held that persons who sign as witnesses to the execution of documents represent to the Registrar-General that they have witnessed the execution which the document purports to show and therefore that the witness misrepresents the position if the witness did not in fact witness the execution or did not have proper grounds for believing that the person who signed the document and whose signature was witnessed was the person described in the document. Similarly, the view has been taken that, where a document has been certified in the circumstance that there were no adequate grounds for belief that the certification was correct, then the certifier misrepresented the facts to the Registrar-General. 24 I need not discuss individual cases but the following are cases in which this approach has been adopted: Australian Guarantee Corporation Limited v De Jager [1984] VR 483; Pyramid Building Society (in liq) v Scorpion Hotels Pty Limited (1996) 136 ALR 166; Beatty v Australian and New Zealand Banking Group Limited [1995] 2 VR 301; Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790; National Commercial Banking Corporation of Australia Limited v Hedley (1994) 3 BPR 9477. In Grgic v Australian and New Zealand Banking Group Limited (1994) 33 NSWLR 202 the principle was recognized by Powell JA, with whom Meagher JA and Handley JA agreed. In that case, it was held that the bank officers were not "privy to the putting forward of a document which they knew to be false, nor was either of them privy to the putting forward of the document as to the truth or falsity of which they cared not." See p.223. 25 In all these cases in which fraud was found there was actual underlying fraud. However, the principle applied did not depend on that. 26 The fraud must be brought home to the person whose registered title is impeached or to his agents. In Grgic at 221, Powell JA said: " … the position still remains that, for the purposes of s 42 of the Act, "fraud" comprehends actual fraud, personal dishonesty or moral turpitude on the part of the registered proprietor of the subject estate or interest or of that registered proprietor's agents : see Bahr v Nicolay [No 2] (at 614) per Mason CJ and Dawson J; (at 631-632) per Wilson J and Toohey J" (emphasis added).

27 In Schultz v Corwill Properties Pty Ltd (1969) 90 WN (Pt. 1) (NSW) 529, Street J explained that responsibility for the acts of an agent was to be determined upon the ordinary principles of agency. At 537-8, his Honour said: "If the fraud in question is the immediate act of the person whose title is impeached, then the position is not open to doubt. If, however, the fraud is that of an agent for the person whose title is impeached, the principle of respondent superior, with all its limitations and qualifications, is applicable. The matter is to be tested by investigating whether or not the principal is, in the particular circumstances under consideration, liable to the person who has been defrauded for the acts of the agent. On this topic one need not delve more deeply than the general statement in Bowstead on Agency, 13th ed., p. 242: "An act of an agent within the scope of his actual or apparent authority does not cease to bind his principal merely because the agent was acting fraudulently and in furtherance of his own interests. This principle is general, applicable to cases of actual and apparent authority; in tort; in the disposition of property; a similar result even appears in criminal cases. But the mere fact that the principal, by appointing an agent, gives that agent the opportunity to steal or otherwise to behave fraudulently does not without more make him liable: the agent must normally be acting within the scope of his actual or apparent authority for the principal to be responsible."" 28 In the present case, the certification on the transfer, when executed on behalf of the transferor and on behalf of the transferee, was correct. It was the alteration of the transfer by Ms Moore, which may have occurred about the time she was in the Stamp Duties Office, which has raised the current problem. The alteration posed the additional problem that it was not initialled or verified by the parties to the dealing as Reg 5 Sch 1(9) required. 29 Mr Alexis submitted that Mr Williams must have been aware that an error had occurred. However, I do not see that there was any fault on his part. He was entitled to leave the matter of severance in the hands of his solicitor. 30 The Statement of Claim and much of the address of Mr Alexis concentrated on fault on the part of Ms Pinter. I do not think her actions prior to the registration of the transfer can be categorized as fraudulent. Her conduct was grossly negligent but she did not herself act recklessly without caring as to whether or not her actions were correct. She relied upon and trusted her registration clerk. Of course, once she had received back the details of the registration she knew that what had been registered was wrong. Her conduct at that stage had an element of reckless indifference about it. But, in the circumstances of this case, it is her conduct prior to registration which matters. 31 There was fraud in the sense I have discussed committed by Ms Moore. She altered the transfer from the Corporation to Mr and Mrs Williams, after the transfer had been executed, by crossing out the words "as joint tenants" and inserting the words "tenants in common in equal shares". She knew that this did not represent the transaction between the Corporation and Mr and Mrs Williams and she expected the Registrar-General to act upon the alteration, as in fact occurred. She took that course for the purpose of saving a small amount of stamp duty. Nevertheless, she deliberately altered the transfer with the intention that the Registrar-General would act upon her alteration. Her conduct amounted to fraud for the purposes of the Act. 32 It has been submitted by Mr Marler, solicitor for the defendants, that Mr Williams and his estate were not responsible for the acts of Ms Moore, who was an agent, not an employee. However, the liability for acts of an agent which are carried out in the course of the agent's employment is a wide one. In his Commentaries on the Law of Agency, 7th edition, at para 452, Story said: "In the next place, as to the liability of the principal, to third persons, for the misfeasances, negligences, and torts of his agent. It is a general doctrine of law, that, although the principal is not ordinarily liable (for he sometimes is) in a criminal suit, for the acts or misdeeds of his agent, unless, indeed, he has authorized or co-operated in those acts or misdeeds; yet, he is held liable to third persons in a civil suit for the frauds, deceits, concealments, misrepresentations, torts, negligences, and other malfeasances, or misfeasances, and omissions of duty, of his agent, in the course of his employment, although the principal did not authorize, or justify, or participate in, or, indeed, know of such misconduct, or even if he forbade the acts, or disapproved of them. In all such cases, the rule applies, respondeat superior; and it is founded upon public policy and convenience; for in no other way could there be any safety to third persons in their dealings, either directly with the principal, or indirectly with him through the instrumentality of agents. In every such case, the principal holds out his agent, as competent, and fit to be trusted; and thereby, in effect, he warrants his fidelity and good conduct in all matters within the scope of the agency." 33 Those words of Story have often been cited. See, for example, Lord Macnaughten with whom Lord Loreburn and Lord Atkinson agreed in Lloyd v Grace Smith & Co [1912] AC 716 at 737. 34 The relevant determining or controlling concept is usually referred to as the scope of employment. In State of New South Wales v Lepore [2003] HCA 4 at para 40, Gleeson CJ said of this concept, in relation to a servant/master relationship, that "its aspects are functional, as well as geographical and temporal". In para 42, Gleeson CJ dealt with the circumstance of unauthorised acts as follows: "It is clear that if the wrongful act of an employee has been authorised by the employer, the employer will be liable. The difficulty relates to unauthorised acts. The best known formulation of the test to be applied is that in Salmond, Law of Torts in the first edition in 1907, and in later editions: an employer is liable even for unauthorised acts if they are so connected with authorised acts that they may be regarded as modes - although improper modes - of doing them, but the employer is not responsible if the unauthorised and wrongful act is not so connected with the authorised act as to be a mode of doing it, but is an independent act." 35 An interesting illustration of the principle in Morris v CW Martin & Sons Limited [1966] 1 QB 716, in which the plaintiff had sent a mink stole to a furrier to be cleaned, the furrier had delivered the stole to the defendants, who were cleaners, and in their possession it was stolen by one of their employees whose duty it was to clean the fur. At 728, Lord Denning MR said: "From all these instances we may deduce the general proposition that when a principal has in his charge the goods or belongings of another in such circumstances that he is under a duty to take all reasonable precautions to protect them from theft or depredation, then if he entrusts that duty to a servant or agent, he is answerable for the manner in which that servant or agent carries out his duty. If the servant or agent is careless so that they are stolen by a stranger, the master is liable. So also if the servant or agent himself steals them or makes away with them." 36 Ms Moore was a registration clerk. She was employed through Ms Pinter to act on Mr Williams' behalf in the stamping and lodgement of the transfer from the Corporation to Mr and Mrs Williams. The fraud which she committed was not authorised, but it was fraud committed in the course of and for the purposes of the transaction which Ms Moore was employed to do. Her fraud was fraud for which Mr Williams was responsible, it having been carried out by his agent in the course of her employment and, if it were necessary to add, for his benefit. 37 Although Ms Moore's actions of themselves were not expressed to be the basis of the claim made in the Statement of Claim, her actions were proved by the evidence before the Court. Mr Williams' responsibility for her actions was debated in the addresses of both Mr Alexis and Mr Marler. In the circumstances, the plaintiff is entitled to rely upon the acts of Ms Moore acting as agent for Mr Williams. 38 Mrs Williams has a personal entitlement to have the transfer from the Corporation rectified to reflect the agreement between the parties, the Corporation on the one hand and Mr and Mrs Williams on the other. That agreement and their common intention was that the property would be transferred from the Corporation to Mr and Mrs Williams as joint tenants. Mrs Williams has a personal entitlement to have the Register rectified to reflect the proper position. 39 For these reasons, an order should be made for the rectification of the transfer and for rectification of the Register. 40 Mr Marler submitted that rectification of the Register should not occur without the registration of the unilateral transfer. However, the rectification of the Register will simply restore the Register to its correct state as at the date when the registration of the transfer from the Corporation to Mr and Mrs Williams occurred. The unilateral transfer cannot now be recorded on the Register. It was not lodged for registration and it was not registered prior to Mr Williams' death. On Mr Williams' death the survivor of the joint tenants became entitled to the whole of the property. The unregistered unilateral transfer was ineffective to sever the joint tenancy. 41 The defendants have cross-claimed for a declaration that Mrs Williams is a constructive trustee of her share in the subject property by reason that Mr Williams made almost all the instalment payments for the purchase of the property, that he paid for substantial improvements to the property, that he met outgoings in relation to the property and that at his own expense he maintained the property. 42 As I understand it, this claim is based upon the proposition that Mrs Williams has a one half interest in the property as a tenant in common. That proposition appears from the form of the cross-claim. Mr Alexis in his address said that the cross-claim was based upon a rejection of the plaintiff's claim. Mr Marler agreed that that was how the claim was put. 43 As the plaintiff has succeeded in the claim, I need not discuss the cross-claim in any detail. It is sufficient for me to say that the evidence before the Court does not support a conclusion of a constructive trust. Mrs Williams was the wife of Mr Williams. There was a presumption of advancement in her favour. The fact that Mr Williams chose the course of severing the joint tenancy rather than of going to the Family Court to seek an order granting him a share in the property greater than one half is a strong indication that he considered himself and Mrs Williams to each have a half interest in the home and that he was content with that position. 44 I should further add that in any event the facts proved by Mr Marler do not persuade me that Mr Williams made such a substantially greater contribution to the property than Mrs Williams that a trust should be recognised. 45 For these reasons the cross-claim must be dismissed. 46 The defendants should pay the plaintiff's costs of the proceedings. 47 Counsel should bring in within 7 days minutes of the orders which they propose. **********

Last Modified: 06/12/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.