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Supreme Court 17 March 2005

Ryan v Starr & 2 Ors

[2005] NSWSC 170

Other
REAL PROPERTY TORRENS SYSTEM INDEFEASIBILITY OF TITLE EXCEPTIONS FRAUD IN PERSONAM RIGHTS

Citation: Ryan v Starr & 2 Ors [2005] NSWSC 170
Court: Supreme Court of New South Wales, Equity Division
Date: 17 March 2005
Judge(s): White J

Background

The plaintiff was the registered proprietor of 50 Carrington Street, West Wallsend. In late 2002, he paid $17,000 to the then-owner of the neighbouring property at No. 48 for a right of carriageway over a driveway along the common boundary, needed to access a new carport at the rear of his property. A Transfer Granting Easement was drawn up and partially signed, but the instrument was never registered, and no caveat was lodged to protect the plaintiff's interest.

When the neighbour later decided to sell No. 48 (in 2003), he told the plaintiff it would be simpler and cheaper to have the incoming purchaser register the easement at the same time as their own transfer. He promised to include an obligation to that effect in the contract of sale. The plaintiff agreed to this arrangement.

The first and second defendants purchased No. 48 pursuant to a contract that contained a special condition acknowledging the easement and obliging the purchasers to take steps to register it. Despite this, the easement was never registered after settlement, and the defendants constructed a fence that blocked the plaintiff's access to the driveway. The plaintiff commenced proceedings in the Equity Division seeking declarations and orders to enforce the easement.

  • Whether an unregistered easement could be enforced against a subsequent registered proprietor, despite the indefeasibility provisions in s 42 of the Real Property Act 1900 (NSW).
  • Whether a special condition in the contract of sale (acknowledging the easement and obliging the purchasers to register it) formed part of the binding contract, given questions about whether the solicitor had authority to agree to it and whether it was signed.
  • Whether the contractual term amounted to a declaration of an express trust and, if so, whether it was unenforceable for want of signature under s 23C(1)(a) of the Conveyancing Act 1919 (NSW).
  • Whether the defendants held their title subject to a constructive trust in favour of the plaintiff, following the reasoning in Bahr v Nicolay (No. 2) (1988) 164 CLR 604.
  • Whether the defendants' conduct amounted to fraud sufficient to defeat indefeasibility.

Decision

White J found that the special condition in the contract of sale formed part of the binding agreement between the vendor and the defendants. The defendants' solicitor had authority to agree to the term on their behalf, and the condition was sufficiently incorporated into the contract even though it was not separately signed.

The court examined whether the contractual acknowledgment of the easement constituted a declaration of an express trust requiring compliance with the formalities in s 23C(1)(a) of the Conveyancing Act. His Honour found it unnecessary to resolve that question definitively, because the constructive trust analysis from Bahr v Nicolay (No. 2) provided a sufficient and independent basis for the plaintiff's claim.

Applying Bahr v Nicolay (No. 2), White J held that where a purchaser takes title with express contractual knowledge of a third party's interest and an obligation to give effect to it, a constructive trust arises in favour of that third party. The defendants had purchased No. 48 knowing of the plaintiff's right of carriageway and contractually bound to register it. Their failure to do so, and their erection of a fence blocking access, engaged the constructive trust exception to Torrens indefeasibility.

The court granted the full relief sought: declarations that the plaintiff has the benefit of a right of carriageway and that the defendants hold their land subject to it, orders compelling execution and registration of the necessary instrument, removal of the obstructing fence, and a permanent injunction against interference with the right. Costs were ordered against the defendants. White J observed that the litigation could have been avoided by proper conveyancing steps, but expressly declined to attribute blame to any specific legal practitioner.

Orders Made

  • Leave granted to the plaintiff to discontinue proceedings against the third defendant (the original vendor).
  • Declaration that the plaintiff holds the benefit of a right of carriageway over the defendants' land (No. 48 Carrington Street) in the terms of Part 1 of Schedule 8 of the Conveyancing Act 1919.
  • Declaration that the defendants hold their interest in No. 48 subject to that right of carriageway.
  • Order that the defendants execute a Transfer Granting Easement in registrable form and take all steps necessary to procure registration of that instrument.
  • Order that the defendants remove the fence obstructing access to the right of carriageway within 28 days.
  • Permanent injunction restraining the defendants from hindering or interfering with the plaintiff's use of the right of carriageway.
  • The defendants to pay the plaintiff's costs of the proceedings.

Key Takeaways

  • Under the Bahr v Nicolay (No. 2) principle, a registered proprietor who purchases land with express contractual knowledge of a third party's unregistered interest, and who is contractually obliged to give effect to it, holds title subject to a constructive trust in favour of that third party. This constructive trust operates as an exception to the indefeasibility provisions of the Real Property Act 1900 (NSW).

  • Indefeasibility under s 42 of the Real Property Act does not protect a registered proprietor who takes title in circumstances that engage the in personam exception, including where that proprietor's own conscience is bound by a prior contractual obligation to register a third party's interest.

  • A contractual term acknowledging an unregistered easement and requiring its registration can bind a purchaser even where questions arise about whether the term was separately signed, provided the solicitor acting for the purchaser had actual or ostensible authority to agree to the condition.

  • Whether a contractual acknowledgment of a third party's equitable interest amounts to a declaration of express trust (requiring compliance with s 23C(1)(a) of the Conveyancing Act) was left open, because the constructive trust analysis provided an independent and sufficient route to relief.

  • The Supreme Court noted, without attributing individual blame, that the dispute arose from a failure to take straightforward conveyancing steps, particularly the lodging of a caveat and the concurrent registration of the easement alongside the purchasers' transfer.

Legislation and Cases Referenced

Legislation
- Real Property Act 1900 (NSW), s 42
- Conveyancing Act 1919 (NSW), s 23C(1)(a); Part 14 and Part 1 of Schedule 8; s 181A(2)
- Transfer of Land Act 1893 (WA)

Cases
- Bahr v Nicolay (No. 2) (1988) 164 CLR 604 (applied)
- Breskvar v Wall (1971) 126 CLR 376
- Assets Co Ltd v Mere Roihi [1905] AC 176
- Butler v Fairclough (1917) 23 CLR 78
- Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265
- Frazer v Walker [1967] 1 AC 569
- Sindel v Georgiou (1984) 154 CLR 661
- Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146
- Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044
- Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
- Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198
- Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537
- Strangas v Young (1975) 1 BPR 9123
- Munro v Stuart (1924) 41 SR (NSW) 203n
- Butts v O'Dwyer (1952) 87 CLR 267