Posted on May 1, 2013 by

The High Court considers ‘omissions’ from the Torrens Register

When is an omission of an easement from the Register not an omission? This question is at the heart of the High Court’s reasoning in Castle Constructions Pty Limited v Sahab Holdings Pty Limited [2013] HCA 11. The answer, so it appears, is when the omission occurs in accordance with the procedures for removal of the easement. And there are ultimately good policy reasons why that is the case.

Facts

In 1921, landowners subdivided their land and sold a lot (Strathallen land) to a Mr Davis.  This land was given the benefit of an easement  and certain other covenants over other land (Sailors Bay Road land).

Each lot passed through several hands until 2001 when the Sailors Bay Road land was bought by Castle Constructions Pty Limited (Castle).  Castle asked the Registrar General to remove the easement, arguing the easement was only intended to subsist while Mr Davis or his successors owned the land.

The Registrar General notified the Howards, the then owners of the Strathallen land.  They did not object, and the Registrar General removed the easement from the Register.

In April 2007, Sahab Holdings Pty Limited purchased the Strathallen land and asked the Registrar General to restore the easement.  The Registrar General declined to do so, and the matter went before Slattery J in the Supreme Court.  Castle asked to be joined to the proceedings.  His Honour dismissed Sahab’s claim and Sahab appealed, successfully, to the Court of Appeal.  Castle then applied to the High Court for special leave to appeal against the Court of Appeal’s decision.

Basis of Sahab’s claim

Section 42(1) of the Real Property Act 1900 (Act) provides that except in the case of fraud, the registered proprietor holds the “estate or interest in land recorded in a folio of the Register” subject to other recorded interests, but free from all other estates or interests other than in five listed circumstances.

One of these exceptions is s42(1)(a1) of the Act: “in the case of an omission…of an easement… validly created at or after [the time the land was brought under the provisions of the Act] under this or any other Act or a Commonwealth Act” (emphasis added).

Sahab contended that the the word “omission” meant simply “not there“.  The fact that the Registrar General had deliberately removed the easement was not, in Sahab’s submission, relevant.  In this Sahab relied on the similar interpretation placed on the term ‘omission‘ by a previous Court of Appeal decision (Dobbie v Davidson (1991) 23 NSWLR 625).  There Kirby P, Priestly and Handley JJA had found that an ‘omission‘ for the purposes of section 42(b)  meant no more than that the easement was simply ‘not there‘ when one looked at the Register.  Whether it was ‘not there‘ because of some error or mistake of the Registrar General was simply irrelevant, according to the Court of Appeal in Dobbie.

In Dobbie a right of way had existed for over sixty years prior to the land it related to being brought under the Torrens system.  When the land had been registered, the easement was not recorded.  Much of the judgment proceeded on arguments about why the easement had not been recorded.  The Court determined that this line of argument was ultimately incorrect and the reasons for the ‘omission‘ were irrelevant.  The fact that the easement was not recorded, and that it had existed immediately before the land came within the Torrens system was all that mattered.

The Court of Appeal decides

Unsurprisingly, the Court of Appeal (see Sahab Holdings Pty Limited v Registrar General & Or. (2011) 15 BPR 29,627) followed its own previous ruling in Dobbie and determined that an ‘omission‘ was simply the absence of the existence of the easement on the folio of the Register.  The positive action of the Registrar General in removing the easement was not to the point.

The Court of Appeal looked at the terms of the easement and the request made by Castle to remove it.  The Court determined that the argument by Castle that the easement came to an end on its own terms when Mr Davis sold the dominant tenement was ‘mistaken, but arguably correct‘ (at paragraph 161).  The Court of Appeal therefore found that Castle had not ‘wrongfully obtained‘ the extinguishment of the easement (see paragraph 163) but the easement subsisted and the Registrar General should not have removed it in 2001.

The Court of Appeal was redressing the wrong committed by the Registrar General.  The exception for an ‘omission‘ under s42(1)(a1) allowed the mistake to be corrected.

The Court of Appeal determined that the Court had the power to order the restoration of the easement under sections 122 and 12(1)(d) of the Act and overturned Slattery J’s decision.

Before the High Court

The High Court proceeded from an entirely different basis.  The majority of Hayne, Crennan, Keifel and Bell JJ proceeded from the well known formula in Breskvar v Wall (1971) 126 CLR 376 at 385 per Barwick CJ that the Torrens system of registered title (of which land under the Act is an example)  ‘is not a system of registration of title but a system of title by registration’.

What appears in the Register is not merely a record of what interests a person may hold in land: the Register itself, subject to certain exceptions, defines the rights which attach to property.

The High Court did not ride roughshod over Dobbie as being wrong or irrelevant.  The Court distinguished the situation where the easement had existed for a long period of time immediately before the land was brought within the Torrens system, and was then  omitted, as in Dobbie, from the case before it. This case the High Court indicated, was not a case of omission but rather a case of removal (see paragraph 25): ‘The presupposition for the operation of s 42(1)(a1), that the easement continues to exist, is not valid.  The easement has been removed from the Register.’

The High Court never questioned the correctness of the Court of Appeal’s reasoning concerning  whether the decision to extinguish the easement was correct.  The importance of the Castle Constructions case is the primacy it places on the processes set out in the Act for extinguishment of the easement.  If those processes are followed, and they are unchallenged, then even if the Registrar General was in error, the removal of the easement remains valid.

Castle had asked the Registrar General to remove an easement.  The then owners of the dominant tenement, Mr and Mrs Howard, were advised.  They did not respond.  The Registrar General then removed the easement.  The processes under the Act had been followed.  If there was an error in the rationale for Castle’s request for removal, the time to bring that forward was when the Howards were advised of the request to remove the easement.

Sahab argued that it was able to resurrect the matter because it was a ‘person dissatisfied‘ by the Registrar General’s decision, and therefore under s 122(1) it could approach the Supreme Court for relief.  Not so, said the High Court.  Once the Registrar General had removed the easement, the Register was altered and Sahab, a subsequent purchaser could not be a person dissatisfied with the decision because it had purchased the property after the removal.  What it purchased was what was disclosed on the Register at the time of the purchase: a lot without the benefit of an easement.

The High Court judgement is much shorter than the Court of Appeal decision which it overturns because it proceeds from an entirely different starting point.  The Court of Appeal asks  whether the Castle request for removal was valid.  The High Court says that issue is irrelevant.  The relevant question is whether the procedures to remove the easement were carried out properly.

The minority view of Gageler J, who agreed with the orders of the majority, but for different reasons, is even more stark (at paragraph 44):

‘In my view, once it was found that the Registrar General had notified Sahab’s predecessors in title in accordance with s12A(1)……………s12A(3) provided a short and complete answer to the whole of Sahab’s case.‘

Section 12A(3) of the Act states that once notice has been given by the Registrar General of an intention to take action to alter the Register, any person who has been given such notice who fails to question the proposed alteration, and any person claiming through or under that person cannot take action against the Registrar General once the alteration is made.

Policy behind the High Court decision

At first reading, the High Court decision may appear unjust.  The Court of Appeal determined Castle’s reasoning in asking for the removal of the easement was wrong.  This finding remains undisturbed by the High Court.

The High Court instead overturned the decision on the basis that the processes to remove an easement had been followed.  It is not that the then owners of Strathallen had objected: they had simply said nothing.  The Registrar General accepted an incorrect, but arguable case, for the easement’s removal.  Once the processes were fulfilled, the easement was removed for good.

Yet the High Court’s decision must be the better answer.  Imagine you are the owner of a lot similar to the Sailor’s Bay Road lot, the servient tenement.  A purchaser of adjoining land discovers some past legal error that has removed an easement that burdened your land and applies to restore it.  You have purchased your land and financed it on the basis that what appeared in the Register is correct.  What you thought you were buying is now in doubt, and the certainty of the land titles Register is thrown into question.

The High Court majority made this point when they said (at 15):

‘Sahab did not dispute that, on this understanding of (the Act) a registered proprietor could only be confident of having an indefeasible title when any statutory mechanisms to review the Registrar General’s decision to alter the Register had been exhausted in favour of the Registrar General.  Indefeasibility of title would be contingent upon the exhaustion of  these review mechanisms.‘

The lessons to be learned from Castle Constructions are important:

• The mechanism for altering the Register is process driven.  If the procedures are followed, even if there is an error in the legal reasoning, the alteration will be valid.  Section 12 sets out a procedure for challenging the Registrar General’s proposal to alter the Register.  Miss that opportunity and there is little chance to appeal.
• The Torrens system is ‘not a system of registration of title but a system of title by registration‘.  What appears on the Register, and what does not, impacts on the rights that go with land.  Unlike old system land where covenants, easements, securities and other interests may be in a number of unconsolidated documents, the Courts take seriously what appears in the Register and will look to the Register as the final authority on what dealings impact on land, subject to the qualifications in s42.
• An omission is not merely the absence of something.  The positive act of removal of an easement means that it cannot be said that an easement has been omitted for the purposes of section 42 of the Act if the Registrar General has followed the process to cancel a dealing.  To that extent, the meaning of the word ‘omission’ as set out in Dobbie is no longer good law.