The Exceptions to the Indefeasibility of Torrens Title

In 1993 Gerard Cassegrain & Co Pty Ltd settled legal proceedings brought against CSIRO on the basis that it was paid the amount of $9.5 million.  Entries were then made into the company’s accounts to create a loan of $4.25 million owing by the company to Claude Cassegrain, one of the directors.  In the court proceedings it was accepted that Claude had no entitlement to any part of the compensation and that there was never any moneys owing to him by the company.

In 1996 the company transferred a property to Claude and his wife, Felicity as joint tenants.  The transfer purported to debit Claude’s loan account with the company for the consideration payable.

In 1996 Claude’s siblings brought oppression proceedings against him in the Federal Court.  The Federal Court held that Claude’s conduct in relation to recording a loan of $4.25 million and drawing down on that loan was oppressive and unfairly prejudicial to the other shareholders in the company.

In 2000 for a consideration of $1 Claude transferred his interest in the property to Felicity.

Subsequently further proceedings were brought seeking to have the whole of the property re-transferred to the company.  The claim was that:

  • Claude had fraudulently effected the transfer of the property;
  • Claude had acted as Felicity’s agent for the purpose; and
  • her interest in the property was tainted by Claude’s fraudulent conduct.

The High Court noted that it was not alleged that Felicity was a participant in or had notice of Claude’s fraudulent conduct.

The relevant sections of the New South Wales legislation (which is similar to the Western Australia legislation) provide that:

s.42  “The registered proprietor … of an interest in land … shall except in case of
fraud, … shall hold the same, absolutely free from all other estates and interest that are not so recorded”.

s.118  “Proceedings for the possession or recovery of land do not lie against the registered proprietor of the land, except as follows:

Proceedings brought by a person deprived of land by fraud against:

  • a person who has been registered as proprietor of the land through fraud; or
  • a person deriving (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud.”

The Court concluded that Claude taking the steps necessary to procure registration of the transfer from the company to Felicity and himself as joint tenants showed no more than that Claude had performed tasks that were for the advantage of Felicity.  This alone did not show that his fraud was within the scope of any authority she had given to him.  Without further evidence it did not show that knowledge of his fraud was to be imputed to her.

In this case Claude, but not Felicity, were registered as proprietors of interest in land (as a joint tenant) through fraud.  This joint interest which Felicity acquired for valuable consideration was indefeasible.

However, by the second transfer Felicity derived from Claude an interest as tenants in common as to half.  Felicity derived that interest from a person who was registered as proprietor of that interest through fraud.  As Felicity was not a transferee for valuable consideration the Court held that the second transfer should be reversed.

Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] HCA 2.

For more information on this update or any other property matter please contact David Miller on (08) 9321 3755.

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