Real Property, Equitable Claims, & Justice

By Jozef Borja-Erece and James Tan

Torrens System & the Land Register

In Queensland, it is well-known that a register of real property ownership – put simply, a running record of who has a legal right over land in Queensland as an owner or otherwise – is maintained under the Torrens system. In practice, this system involves the creation and transfer of legal title over land by way of registration of those titles with the Queensland Government’s Department of Natural Resources, Mines, and Energy.

For reference, the land register is administered by the registrar of titles in a public service context under the provisions of the Land Title Act 1994 (Qld). Engaging with the Torrens system effectively and making the process of registering and/or transferring your interest in land as painless and stress-free as possible is the bread and butter of conveyancing work. It is a specialty area we would be delighted to help you with if ever you find yourself in a situation where you’re purchasing, selling, or otherwise making a change to the legal status of your real property – your land.

But that’s not the focal point of this article.

Disputes Over Interests

With such an efficient running record of ‘indefeasible’ legal titles to land ensuring that there is no ambiguity pertaining who is legally entitled to what – no disputes should arise over who is entitled to what, right? The land register surely sets out everything we need to know about parties who have interests in property, parties who enjoys usage rights, and generally what the different relationships are between all of the stakeholders, right? Subsequently, there’s no room for ambiguity and divisive chaos to arise out of land ownership, right?

Unfortunately, none of the above assertions are correct.

If the land register perfectly accommodated those interests which are not evidenced by the appropriate documentation and appropriately registered, perhaps there would be a chance for us to see a less chaotic and conflict-riddled private sector – at least as far as real property ownership is concerned. Case law proves that this is not always the case, and that parties (who in some circumstances have been unjustly treated) should be entitled to part of (or proceeds from) property not in their legal name.

Equitable Claims Against Registered Interests

Disputes over legal rights to real property today are still not only possible, but remain a relatively common occurrence – especially since our case law based on the doctrine of precedent provides grounds for equitable claims against registered interests:

  1. Resulting trust’ per Calverly v Green [1984] 155 CLR 242 – The decision of the High Court in this case gave rise to an equitable presumption that someone who has contributed the purchase monies to a land acquisition without being vested with the legal title may regardless enjoy an equitable claim to the land in the form of a ‘resulting trust.’ Effectively, this means that a legal titleholder of property who did not contribute or contributed minimally to the purchase of that property may be presumed to have held that property on trust for the benefit of the primary provider of the purchase monies.
  2. Constructive trust’ per Muschinski v Dodds [1985] HCA 78 – In this case, Deane J materially stated at 614 that a constructive trust is a:

    “… remedial institution which equity imposes regardless of actual or presumed agreement or intention.. to preclude the retention or assertion of beneficial ownership of property to the extent that such retention would be contrary to equitable principle.”

    In plainer language, the decision effectively built on equitable claim principles stipulated in Calverly v Green and recognized that a party who contributed substantially to the purchase of a property who does not enjoy legal title may have an equitable claim to the property via the presumption of a constructive trust. This presumption essentially means that regardless of legal ownership, a constructive trust by which an unregistered contributor enjoys rights to the property may arise if it can be proven that either at the time of purchase or at some later point in the party’s relationship, there existed a common intention between the parties that said parties would acquire an interest in the property.

  3. Equitable Estoppel per Waltons Stores (Interstate) Ltd v Maher (1987) 76 A.L.R. – ‘Estoppel’ always sounds very fancy when said – but its operation in this context is relatively straightforward. Generally, it means that out of equity considerations in light of conduct undertaken, a party is ‘estopped’ from taking a certain inequitable or otherwise unjust action to the detriment of another party.Case in point, it was established by the High Court in Waltons Stores (Interstate) Ltd v Maher that an equity can be established if it is found that a party has created in another party the expectation that the latter will obtain an interest in the former’s land if it alters its position and acts to its detriment in some way (i.e. latter party invests in the land or in some way accrues costs that it would not otherwise have accrued if not for its operating in reliance upon that expectation).

    Flinn v Flinn [1999] 3. V.R. 712 – A similar decision was seen in Flinn v Flinn. Succinctly, this case involved a nephew and his wife who had worked farming the uncle and aunt’s land – acting in reliance on a promise that an ownership interest in the farm would be passed to them, and then on a subsequent promise that the entire farm would be passed to them so long as they paid the son (of the uncle and aunt) an amount ($150,000 plus interest over a ten-year period) sufficient to cover the son’s living expenses. This arrangement was encapsulated in a will.

    After the uncle’s death, however, a new will was created by the aunt which, by effect, did not leave any interest in the farm to the nephew and his wife – and they were forced to leave the farm in spite of the great contributions they had made to the maintenance and development of the farm.

    The Court in this matter determined that the promises made in 1988 and 1993 were intended to be, and perhaps more importantly, were reasonably understood and acted upon by the promisees as, promises to make a gift by will which would take effect on death. They were not promises to make a revocable instrument. Ultimately, the Court found that the nephew and his wife suffered considerable detriment in terms of both apparent and opportunity cost by acting in reliance on the promises – and determined that the presence of proprietary estoppel created an equity.

    What did that mean?

    Through a recognition of the claim in equity of the nephew and his wife to the farm, they were declared as rightful joint tenants in equity of the farm as well as many assets accompanying – subject to conditions which reflected the 1993 promise.

Order Out of the Chaos

If there is one major lesson which arises from this, it’s that there are scarce easy answers when it comes to legal ownership disputes. While the Torrens system is our domestic legal system’s latest and most efficient approach to minimizing ambiguity and problematic information asymmetry in the area, there are still many issues which it falls short of addressing. Such issues include reconciling registered interests with said equitable claim prospects – especially in common circumstances where the foundations of these claims are not static terms which are neatly settled on paper, but rather dynamic circumstances that live and change through the progression of day-to-day relationships.

Practically, this means that the law provides avenues under equity to obtain a just and equitable interest in property which the legal titleholder may have intentionally sought to defeat.

Our ethos as a firm is to mitigate the damage caused by the ambiguities and uncertainties often encountered in the course of day-to-day engagements – and to make a positive contribution to the fabric of this world through promoting justice and order. In saying this, it would be our pleasure to serve if ever you find yourself in a position where that justice and order is direly sought – such as in circumstances as above where you consider you might be entitled to a right to land in equity.

Have a question about property law?

Corney & Lind lawyers will be happy to answer your questions.

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