TORRENS' ELUSIVE TITLE

BASIC LEGAL PRINCIPLES OF AN EFFICIENT TORRENS' SYSTEM

Thomas W. Mapp
Professor of Law University of Alberta

Alberta Law Review Faculty of Law, University of Alberta

Copyright, 1978 by the Alberta Institute for Law Research and Reform. All rights reserved. For further information, please contact: Alberta Law Review Faculty of Law, University of Alberta Edmonton, Alberta T6G 2E1 Printed by The University of Alberta Printing Department, The University of Alberta

ISBN 0-9690908-0-3

ALBERTA LAW REVIEW BOOK SERIES, Volume I The Editorial Board, 1978/79, Alberta Law Review

Editorial Board 1978/79 Editor-in-Chief Doris I. Wilson Managing Editor Elizabeth Johnson Articles Editors June M. Enzle Barry Galbraith A. Barry McLaren Copy Editors Jean K. Coutts Richard W. Myers Circulation Duncan C. Thompson Case Comment, Notes, Book Review Editors Clarke Hunter Eva M. Stutz Business Mark D. Tims Members at Large Glen M. McDonnall (University of Calgary) Tony de Jong Helen Greaves Patricia A. Parsons Associates John Blair Stan J. Blythe John Gill Jennifer Head Felicity C. Hunter Barry M. King Arlene Kwasniak Peter L. Miller Denis R. Noel Ray Purdy J a y Thygesen

vii

Table of Contents
Page PREFACE

............................................................... xiii

CHAPTER 1. INTRODUCTION

.........................................

1

Section a . Origins of the Torrens System ....................................... b . Classification of Title Registration Systems .......................... c. Reform and Extension of Title Registration .......................... d . Purpose of Study ..................................................... e. Alberta Land Titles Act a s Representative Torrens System Model ............................................... CHAPTER 2 . CONVEYANCING UNDER THE ENGLISH COMMON LAW Section a . Some Fundamental Principles ........................................ b . Evaluation of All Known Transfers .................................. c. Extrinsic Validity of Transfers ....................................... (1) Lack of intent that transfer take effect ............................ (2) Transfer by person under legal disability ......................... (3) Involuntary transfers ........................................ (4) No transferee .................................................... d . Lost Instruments Supporting a Claimed Interest ...................... e. Unknown Legal Interests Superior to the Claimed Legal Interest ........................................................ f . Unknown Equities ................................................... (1) The Court of Chancery; equity .................................... (2) The trust ......................................................... (3) The bona fide purchaser for value ................................ (a) Acquisition by donee .......................................... (b) Acquisition not bona fide ..................................... (4) Equitable interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) Mere equities ..................................................... (6) Priorities between interests ....................................... g . Ownership and Adverse Possession .................................. (1) Possession and relative ownership ................................ (2) Acquisition of ownership by adverse possession ....................................................... h . Summary of Common Law Problems .................................

1 3 3 4 5 7

7 8 9 10 11 12 14 14 15 17 17 17 20 20 22 26 29 31 35 35 37 41

... 73 Section a .................................. (3) Power of Registrar .. (2) Recipient not a recognized legal entity ....................... Unknown Prior Interests ........................... d ..... f .. e.................................... 73 74 74 74 76 76 77 79 80 80 84 ................................... Introduction ......................... 45 Section a ..... Lost Instruments Supporting Seller's Ownership ......................................... (1) Registered interests ...... Limitations Related to the Recipient of the Registered Interest ................................. INSTRUMENT REGISTRATION: RECORDING ............................ CONFERRING OWNERSHIP BY REGISTRATION ....................................... (2) Defeasibility ................................................................................................. CHAPTER 4................. c............................. Compensation for Loss ........................... (b) Ambiguous legal description defining one of two adjacent parcels ...... Unknown Equities Binding Donee ............ Summary ........ Summary .. c......................... (3) Overriding interests ....... FUNDAMENTAL ELEMENTS OF A TORRENS' SYSTEM Section a ...................... Termination of Registered Interests ................... (1) Error ..... b .......................... Land in Which the Registered Interest Exists ................................................................................................ (3) General boundaries under the English system ........................ c............... (1) Erroneous ownership decree resulting from a mistake in a legal description ..................................... b ... (2) Ambiguous legal descriptions ........................... d ................................. (a) Ambiguous legal description defining both adjacent parcels .............................................. d ...... f .......... Inherent Elements of a Torrens System ................... Objective of a Torrens System ................................................................................. (4) Administration of the system .....CHAPTER 3.................... (2) Nonregistered interests ........................................ Strategy of a Torrens System ............ Vulnerability of Equities ........................... Introduction ........... (1) Recipient a recognized legal entity ......................................................... e.................................. b .................................................. Method of Analysis .................................. CHAPTER 5.

.......................... Section a............................................................. (a) The fee simple absolute ........ (2) Undefined legal interests ..... (6) Summary ..................................................................... (4) Defeasibility of a registered interest obtained by a n owner through knowing participation in fraud ..................... (3) Disadvantages of limiting legal interests .................................................................................. (3) Contract rights ......................... (c) Acquisition of an interest with knowledge that a conflicting prior nonregistered interest does exist ........................... (3) Defeasibility of a registered interest to permit the execution of a transaction a s mutually intended by the relevant parties ......................... (1) Legal interests in land recognized by the general law .............................. CHAPTER 6..................................................... (b) Knowing participation in the fraudulent conduct of another ... (b) Legal interests defined by statutory instruments ........e.................... f........... Defeasibility Required by Principles of the General Law Independent of a Torrens System ...................................................... Introduction .................. (a) Independent fraudulent conduct .............................. Interests Qualifying for Registration ................................................................... b............. DEFEASIBILITY OF OWNERSHIP CONFERRED BY REGISTRATION ......................... ............................................ (d) Acquisition of an interest with knowledge suggesting that a conflicting prior nonregistered interest may exist ............ (2) Defeasibility of a registered interest to give effect to other interests to which it is subjected by entries in the register ............... Limitations Related to the Type of the Registered Interest ..................... (2) Limit the number and complexity of permitted interests in land ........................................................... (5) Defeasibility of a registered interest obtained through error by a n owner who was not a purchaser for value ...................... (1) Defeasibility of a registered interest to give effect to overriding interests not entered in the register .............. c......................................................................... Current Statutory Provisions ........ (1) Limit the risk of creation of interests inconsistent with the general law .....................................

.... . ............... (1) Defeasibility of a registered interest based on a n invalid transfer from the immediately preceding registered owner ........ Introduction ...... (2) Authority of Registrar to reject caveats .... ........................... . b............. .... (3) Summary adjudication of validity of nonregistered interests ... .... ............ (3) Defeasibility when conflicting legal rights have been registered to different persons.......................... ........ .......... e..... . . e... .. . (2) Benefits secured by one who acquires a subsequent interest in reliance on the register .......... .........d.... ...... (2) Interests based on revision of the register ........... ... Defeasibility Required by Principles of Law Necessary Under a Torrens System .... c......... ................ ... (1) Interests qualifying for protection ..... .. and (b) registered to a subsequent owner who was a purchaser without fraud under a valid transfer ........... ...... ... .............................. . Removal of Caveats ......... .................. (2) Enforcement of nonregistered interests against a successor registered owner ... .................. ...... Summary .. ...................... ................ ......... .. (1) Equitable interests ... ........................ ........... Caveating Requirements ................................... ... . (4) Adequacy of safeguards for valid caveated interests ... ......... ............. ....... .. ............... Should Nonregistered Interests be Recognized? .... (1) Basic policy issues ...................... ................ ......... ..... ............. Benefits Secured Through Caveating System ..... ... all of whom were purchasers without fraud under valid transfers . ... .............. ................. (1) Enforcement of nonregistered interests between the immediate parties ....................... 129 129 135 140 141 CHAPTER 7... ...... ............ .. ...... ............. (2) Benefits secured by removal of caveats .......... . ................. ....... . ........... .. ........... .......... .. .............. PROTECTING NONREGISTERED INTERESTS THROUGH CAVEATING ............................ (3) Description of interest sought to be protected by caveat .. ......... 143 Section a.... 143 143 144 145 146 146 147 147 148 150 150 150 153 155 155 156 157 158 ................... (2) Defeasibility of a prior registered interest to the extent that conflicting legal rights are (a) erroneously registered to a n intermediate owner. .... ..... ...... ............. .................. d........ ...... . ....... ..... .... ............................. ... (1) Benefits secured by caveating a prior nonregistered interest .... ........ ................. ..

........................ Limitation of Actions . (4) Compensation from assurance fund ...................... 200 TABLE OF CASES ...................... 161 Section a ....... Section a ................................................................... REMEDIES ......... (3) Revision of register in order to require registered ownership .................. Introduction .. c............... CHAPTER 10........... (4) Exceptions and reservations in original Crown grant ................ (3) Revision of register in order to acquire registered ownership .................................................................................................... (2) Specific performance .......... Justification for Overriding Interests ....................................................................... (3) Leasehold interests ........... (1) Interests protected by federal law in a federal system .................................................................................................................................... (6) Charges based on writs of execution of judgment debts ............................... (2) Specific performance ................................................................... CHAPTER 9 ................................................. Types of Remedies ....................... (c) Obtaining compensation ................................................... OVERRIDING INTERESTS 161 161 161 162 162 164 164 167 169 172 172 173 174 176 179 .......................... (4) Compensation from assurance fund ............ Conclusion ........................... c....................................... CONCLUSION 179 179 181 181 184 185 187 191 192 194 197 ................................................ b ................................... (b) Fees under the Alberta Act ........................................................... (a) Comparative benefits of registration and of caveating ..... (1) Obtaining possession by a registered owner ..CHAPTER 8................................................................. 201 ....... (5) Easements ...... (1) Obtaining possession by a registered owner .......................... Section a ....................................................................................... (2) Tax liens ... Typical Overriding Interests ......................................................... Expropriation ................. b ........... d . 197 b ........... Summary of Fundamental Policy Issues .............................. Introduction ..........

However.. it was necessary to summarize conveyancing under the English common law and under modern recording systems. I n keeping with its primary purpose. it was necessary to analyze many judicial decisions under the system. And. because many laymen occupying legislative and business positions are vitally interested in the Torrens system. Although the author's present work casts him in the role of a law reformer. The organization used in the study will probably seem highly unorthodox to a reader familiar with Torrens literature. in many respects a n introductory textbook on conveyancing from common law through Torrens system. in equity. However. The study is. The author . he also consciously tried to produce a textbook for the use of law students in introductory courses on the Torrens system. or in admiralty. If the study suffers because the author wore too many hats simultaneously.. He is reminded of the many times that he told his law students that after the Judicature Act of 1873. a s the study progressed he found it impossible to suppress his more conventional habits a s a law professor. I n addition. a n English judge of the Supreme Court of Judicature could. although he did not shy away from including frequently difficult materials in the study. he hoped that they would find the study useful.Xlll . The author anticipated that the study would be read by trained lawyers: those who are interested in what the author believes is a rather nonconventional description of the Torrens system a s well a s those who are interested in improving it. Therefore. he strove to utilize a s simple a presentation style a s seemed reasonably possible. he can only apologize. and constitutes the initial phase of a fundamental review of both the basic legal principles and the operation of the Torrens system in Alberta which h a s been undertaken by the Institute. the study contains a n analysis of the basic legal objectives of a Torrens system. a s the legal objectives of a Torrens system could only be discussed relative to the body of law it sought to improve. be a judge a t law. and was continually mindful of his experiences as a teacher. depending on which hat he chose to wear. Preface This study was prepared in the course of the author's employment with the Alberta Institute of Law Research and Reform. and presents a series of important policy issues which the author believes should be considered by any law reform body which contemplates proposing alterations to a Torrens system designed to facilitate the accomplishment of its maximum potential. in order to determine how well the Torrens system is achieving its goals. therefore.

Chapter 7. deeply grateful to the Institute for having made the production and publication of the study possible. and Mr. the Director of the Institute. The author. The author h a s many academic debts to acknowledge. Although this study was written under the auspices of the Alberta Institute of Law Research and Reform. takes credit for all mistakes. in turn. and no statements contained in it should be interpreted a s reflecting the position of the Institute on any issue. and in formulating and organizing his thoughts.xiv Torrens' Elusive Title believes that a functional system depends on a sound conceptual foundation. who patiently typed the manuscript. For this reason.R. He thanks his secretary.1978 Edmonton. however. and for publishing the study. the Editor of the Alberta Law Review. Chapter 5 is devoted to a n examination of the extent to which it is feasible for the state to confer rights of ownership by registration under a Torrens system. Canada . Chapter 6 is entitled "Defeasibility of Ownership Conferred by Registration".H. Hurlburt. and to her and to her staff for reading the galley proof. for her expert editorial assistance with the manuscript. however. Hudson. He is most grateful to Doris Wilson. and in particular Professor W. Mapp September 12. A. is concerned with the protection of rights in land which are characterized a s nonregistered interests because they are not created by registration a t all. through several drafts. its content is solely the responsibility of the author. The author is. provided him with invaluable assistance in research. Marlene Welton. His colleagues on the Institute legal staff. Thomas W. Because the author believes that it is misleading to suggest that ownership rights created by registration are indefeasible.

who had acquired from a n earlier predecessor.CHAPTER 1 Introduction a. wills.~ the purchaser would be bound by the c o n t r a ~ t In South Australia the original government grant was the source of all ownership.3 Under the English system one who claimed ownership of land had to prove to a prospective purchaser that he had acquired what he claimed from a predecessor. the volume of land transactions was extremely large. Instruments such a s deeds. mortgages. If one who contracted to sell could meet this burden. within twenty years. In 1853he was appointed registrar-general of deeds for South Australia. and they did not pass uneventfully. The significant years of his life for our purposes were passed in South Australia. . and no grants could have been made before the South Australia Act was passed in 1834. 1. and so the line of transferred claimed ownership had to be traced back to someone whose ownership no one could effectively challenge. proof of ownership to much of the land in the colony had become inordinately expensive. Because so much land was held by speculators.4 Land descriptions were inadequate because surveying was primitive where it existed. before 1874 the general practice of conveyancers was to trace claimed ownership to a n acceptable source a t least sixty years back. would clearly have furnished a n adequate source of ownership for anyone's derived ownership! Of course ownership was not traced to so mighty a source. and died in England in 1884.2 Sir Robert Richard Torrensl was born in Ireland in 1814. and even original government grants were often defectively drawn and executed. Upon his arrival in Adelaide in 1840. 1. Where trained lawyers were available their charges were so high relative to the value of the land concerned that they were avoided by poor settlers. 1.1 Who was Torrens. and in this position became intensely concerned with the problems individuals experienced in proving their ownership of interests in land under the English legal system a s exported to Australia. Moreover. they were frequently lost. William the Conqueror.4 Robert Torrens advocated adoption of a different system common- .3 Nevertheless. if not impossible. and was often not available a t all. and what is a title? To what extent can a jurisdiction confer secure titles to interests in land under a system designed to increase facility of transfer? Is Torrens' title a n elusive ideal? What are the basic legal principles of a n efficient Torrens system? This study will be addressed to these questions.Torrens became collector of customs. from 1066. Origins of the Torrens System 1.

there seems little reason to doubt that significant contributions were made by Torrens' colleagues. Land was a . I n Australasia the settlers wanted to do more than merely acquire land. Although not a lawyer. Torrens topped the poll. ideally it represents a conclusive decree by the state. derived from the claims of predecessors. 1858. each wanted to augment the size and value of his holdings by a process of purchase. the Australasian Acts held firm.17 Professor Whalan discusses many reasons for the immediate success in Australasia.5 This idea was hardly the invention of Robert Torrens. in the face of bitter opposition from the legal profession. Acts based on the South Australian model. and the Bill was passed and became law on January 27. to a title granted by the state.13 Torrens denied using the substance of the English Report of 1857. and 1861. arrived in Adelaide in midNovember 1857.9 Torrens introduced his Bill in the South Australia Legislature on J u n e 4.7 Although a n outline of a draft Torrens Bill was published in The South Australian Register on October 17. but present when finally passed. primarily the Act of 1861. and as one of the most effective popularisers of the faith. were adopted throughout Australasia by 1874. 1856.6 Title systems were advocated by reformers in England early in the nineteenth century. came from the English Report of 1857.15 1. Under this system the state maintains a register which contains the following information: (1) a description of every parcel of land covered by the system. improvement. and the movement actively surfaced in Australia by 1856. but its help in neutralizing his opposition a t a key point before the second reading of his Bill.6 This need not tarnish the fame of Robert Torrens. real property conveyancing. systems of government sponsored titles had existed on the continent for centuries. and (3) a description of any rights over the parcel owned by someone other than the owner. In England most of the land was held by a wealthy elite who wished to retain ownership. but Professor Whalan submits that some very important concepts absent in the Bill when first introduced. sale. This register is more than just a state maintained record.1° We know that a copy of the Report of the English Royal Commissioners of 1857. and to amending Acts of 1858. both to the 1857-58Act. Torrens was truly "In Search of Title".12 Torrens acknowledged not only the Report. a rival title registration bill Land titles reform was one of the was published within the m ~ n t h .14Moreover. This system elevates a claim of ownership.11which recommended the introduction of a land titles system in England. that the rights described by the register are all and the only rights the state recognizes a s existing with respect to the parcel. he led the fight for adoption against strong opposition from the legal profession.1860. and further purchase of a larger tract. (2) the name of the person who owns the parcel.16 and whereas the original English Acts were not successful. the source of all rights in land. he led a n attack which produced profound changes in one of the most complex branches of English law. but he emphasizes the factor of public support.5 1. in some respects the Australasian Acts were functionally superior to the early English Acts. 1857.2 Torrens' Elusive Title ly called 'registration of title'. ~ primary issues in the election which preceded self-government for South Australia in 1857. and of any rights over other land which ownership of the parcel confers.

English.9 The exception is the United States. . and (2) the opposition of groups in the United States with vested economic interests which would be adversely affected by success. and some 1awye1-s. private abstractors. German. Torrens. Torrens. There is reason to believe that constitutional doctrine in the United States has changed in recent years so that.~~should be noted It that neither of these reasons goes to the merits of a title registration system. that "genuine classification of the variant statutes according to differences in system is possible". in particular. tenacious. 1875. and Torrens and his associates were quite willing to go to the public for support. supposedly required by the United States Constitution. all of the states of the United States that adopted title registration. Swiss. Nova Scotia. although Dowson and Sheppard used five groups. .8 With one exception. 1897. . 1862. and Ontario. It spread throughout Australia and to many other parts of the world under his name . in the United States."20 They warned. b. His name has become so associated with the fruits of his political victory in South Australia that Simpson can write "Outside Great Britain the system of registering title . is widely known a s the 'Torrens system'.2~ Reform and Extension of Title Registration 1.23 and the Land Transfer Act.7 Dowson and Sheppard arranged the jurisdictions of the world with title registration systems into "groups [to] indicate broadly the registration law upon which the various statutes have been founded or are most closely connected with. .24I t includes England. the registered title under the Torrens system is generally referred to a s a 'torrens title'.21 Thus. with a carefully drawn statute. and in only three states has the system enjoyed "any measure of success". Ireland.27 Simpson observes that of nineteen states that adopted the Torrens system. . the author knows of no jurisdiction in which title registration can be said to have failed. these groups do not represent systems with significant consistent differences.Chapter 1 . . On the contrary. . . but two reasons are consistently stressed: (1) the high cost of initial registration through a judicial procedure.28 Of course many reasons for this failure are cited in the literature on the subject. The English group is categorized to connote the derivation of the various registration laws the from the English Land Registry Act. and Saskat~hewan."19 Indeed. five have repealed their Torrens statutes. 1. however. Introduction 3 commercial commodity. Alberta. Classification of Title Registration Systems 1. and relatively uncompromising politician.22 Land Transfer Act. Manitoba. such a s title insurance companies. Only some of the jurisdictions listed in the English and Torrens groups will be indicated here. c.18 The settlers were willing to support reforms which promised facility of transfer and security of title. and Ottoman. . there appears to be a trend in the direction of strengthening and expanding existing systems. emerges a s a n aggressive.25 The Torrens group includes jurisdictions whose statutes can be traced to South Australia: all of Australasia. British Columbia.

and giving the tentative views of the Commission on some of them. and Prince Edward Island.34However. much remains to be done if his system is to achieve its potential. . . I t now covers many of the principal urban areas of England and a number of counties also. raise many fundamental socio-economic policy issues. . and plans to make such recommendations a s may be deemed necessary to improve it. are in a uniquely advantageous position to organize the issues which will arise in the process of law reform. strive to present and discuss the basic policy issues which a society must resolve if i t is to have a functional system of title registration. the object is to determine the extent to which these goals can be achieved. the Law Commission has published four working papers discussing problems which seem to arise under the land registration system.10 This study does not purport to cite all of the title registration reform projects recommended or underway in the world."32 The Three Maritime Provinces of Canada. Of the author's jurisdiction. charged with the responsibility of developing and implementing a unified land registration system for all three provinces to replace existing deed registration systems. 1. with their experience in working with conflict resolution under legal systems."37 The study will. A few examples must suffice. Law is very much a creature of lawyers. and the Council h a s created a n agency. expansion of the English system of land registration is not waiting upon statutory improvements. and although Torrens' accomplishments in law reform have been exceptional. Alberta. have established the Council of Maritime Premiers. We are told that the policy is to extend the system "as fast a s the facilities of the Land Registry permit. the Land Registration and Information Service (LRIS). and the most efficient method of doing so. Purpose of Study 1.11 The purpose of this study is to present a systematic organization of the fundamental policy issues inherent in a Torrens system. Nearly half the work of conveyancing is estimated to concern registered land . New Brunswick. The Institute of Law Research and Reform has undertaken a fundamental review of the Torrens system. Starting with the avowed goals of such a system.~~ economic politics. t h a t any suggestion to replace it would be met by solid o p p ~ s i t i o n " . therefore. . Lawyers will be essential. believes that lawyers.33The work of the LRIS is well advanced a t this time.4 Torrens' Elusive Title initial registration could be greatly ~ i m p l i f i e dThe second reason reflects . Nova Scotia. "set a thief to catch a thief. The Ontario Law Reform Commission "recommends t h a t a n improved land titles system should be the sole system for land registration i n Ontario . The study will. I n England. One need not be accused of demagoguery if he agrees with Torrens that the resolution of these issues through "'thorough law reform' is essentially 'the people's questi0n'". who is of their profession."35 d. .I~ ~ n Alberta. and i n terms comprehensive to a reasonably educated . from purpose and necessity. . .~6 The author. and to summarize the advantages and disadvantages of possible solutions to problems. . it has been said "the landowners and the members of the legal profession of this province are so convinced of the merits of the Torrens system .

n. Statutes of other jurisdictions will be discussed when they reflect solutions to basic policy issues differing from those in the Alberta Act.. 6. 16. 8. 16. L. e. n. Fiflis.42 As none of the Torrens acts have ever been thoroughly reviewed and revised. Simpson. contain recommendations. 1975). a t least to the author's knowledge. 416. 12. a t 178-79. 6. (Imp.Z. 28. Land Registration 98 (2d ed. Whalan. (Imp. 6. Whalan. Introduction 5 layman. (Imp.431-36. supra. Payne. 20. 3. 4. 9. 10. 21. a t 4. Report of the commissioners Appointed to Consider the Subject of the Registration of Title with Reference to the Sale and Transfer of Land (1857. 87. 2. (1961) 1 Adelaide L. Id. a t 88. 22. 65. varying in detail. 169. n. 7. Torrens. 53. 11. Rev. No. supra.39 The Land Titles Act (Canada) of 1894t0 and the Territories Real Property Act of 1886. this study will focus primarily on the Torrens system a s it now exists under The Land Titles Act of Alberta. Whalan. Pike. 16. at 423. 1956). a t 86-90. (1965-66) 38 Colo. supra. 1971). 3. n.12 Although systems of title registration. (1967) 2 N. Rev.L. (Imp.171. Land Transfer Improvement: The Basic Facts and Two Hypothesis for Reform. 17. supra. supra. Rev. 27. Dowson and Sheppard. supra. 4. Alberta L a n d Titles Act as Representative T o r r e n s S y s t e m Model 1. supra. n. Pike. 2215). 19. supra. 15. 27. exist throughout the world.) 60 & 61 Vict. 3. 14. Real Property 578-79 (4th ed.) 38 & 39 Vict. Whalan. Simpson. 25. Dowson and Sheppard. Rev.. Real Property Act (1858). 30. 5. n. The New Zealand Torrens System Centennial Essays 1 (Hinde ed. Simpson.41The latter Act closely followed the Australasian mode1. a t 5-9. n. Id.. 11. 22 Encyclopaedia Britannica 309 (1963). n. 26. 16. 21 Vict. c. n. Land Law and Registration 71 (1976). 29. Megarry and Wade. Id. The South Australian System of Conveyancing by Registration of Title vii (1859). London C. c. FOOTNOTES 1. Simpson.38 Its principal historical predecessors are The Land Titles Act (Alberta) of 1906. Id. . Introduction of the Real Property Act in South Australia. a t 9-10. however. 20. Id.) 25 & 26 Vict. 431. a t 68. In Search of Title (Part I). Id. a t 2-3.Chapter 1 . Fiflis. for it is written for those who must make the value judgments for a society. The Origins of the Torrens System and its Introduction into New Zealand. I t will not. a t 172-76. c. (1961) 14 Ala. the Alberta Act may be taken a s fairly representative. 13. Id.U.) 4 & 5 Will. supra. 23. 95. 24. see Pike. 18. 15. L. c. Immediate Success o f Registration of Title to Land in Australasia and Early Failures in England..

R. The Territories Real Property Act. 34. 198. 13. Torrens. a t 1055. 38. 35. 26. No. supra. (1957) 35 Can.and No. c. 36. The Torrens System in Alberta: A Dream in Operation. 1906. 1970. Rev. 1886. The Land Titles Act. S. 32 (1970). 24. 40. a t 7. 1. 45 (1972). 28. 67 (1976). 41. c. Bar. Computerization of Land Records in the Maritime Provinces of Canada. .S. Report on Land Registration 23 (1971).R. 1894. 37. c.A. S.No.A. S. The Land Titles Act. 2. Carlin. 33. 487. 37 (1971). Familiar Quotations 58 (13th ed. supra. 42.6 Torrens' Elusive Title 31. Ontario Law Reform Commission.C. Working Paper: No. Head. 39. Registration of Title to Land Throughout The Empire 14 (1920). Bartlett. The Land Titles Act. 1955).C. n. 32. Megany and Wade. c. (1974) 43 Cincinnati L. Hogg. n. The Law Commission.

2 Under the common law system of conveyancing one had to prove his ownership of a n interest in land derivatively. it falls short of being a 'system'. this summary will review a considerable part of English property law. which were accepted by the society it served. was based on certain basic principles. But it was sufficiently comprehensive to provide solutions for most conflicts concerning property rights. as jurisdictions which received the common law retain that law until it is changed by judicial or legislative action. like any legal system. and are solutions provided for them? I n fact. I t evolved over a period of centuries. it will introduce a presentation style which would justify titling the entire study 'The A. Cs of Conveyancing from Common Law to Torrens System'. Indeed. The possibility that the new system swept with so broad a broom that it eliminated old solutions without clearly providing new ones must be investigated. The historical . Of necessity. A new system may excise so deeply into its predecessor system that it eliminates former problems by altering accepted principles. most of the subjects to be discussed remain relevant to significant current problems in the Alberta Torrens system. Before we can analyze the Torrens system.CHAPTER 2 Conveyancing Under the English Common Law 2. through his predecessors. it was dreadfully complex. The complexity of the common law made Torrens' task a s a law reformer far from easy. a. one must determine whether or not its solutions for old problems improved on the system it replaced. this chapter will summarize the difficulties inherent in conveyancing under the common law. if a new 'system' leaves significant gaps in the law. we must understand how the common law system of conveyancing operated and what practical functions it served. the common law system of conveyancing. if not replace. To measure the effectiveness of his new system. Through a series of relatively simple examples. has the new system created a n entirely new set of problems. S o m e F u n d a m e n t a l Principles 2. However. or values. The English common law. it was inefficient. 2.3 (1)T h e volitional n a t u r e of conveyancing.1 Jurisdictions which received the English common law have adopted Torrens systems in a n effort to improve. The question then becomes. B. and its substantive elements were not completely consistent in terms of public policy. This requirement reflected some very fundamental principles of English law.

access to this power was usually through the courts. Or. An owner could voluntarily transfer his ownership to another by following legal procedures designed to furnish proof that the transfer was intentional. without judicial intervention. I t may be based on A's will. Obviously. on a sale incident to foreclosure of a mortgage given by A. what is commonly thought of a s 'absolute ownership'.6 Suppose that B.l If one could prove his ownership of a n interest in land. The point is that unless a n owner's voluntary transfer was intended to be effective. he might lose it to another who adversely possessed it for that period. his interest in land might be sold by a public official. on intestate succession from A. and how A acquired ownership from his predecessors.5 (3)The passive role of the state. Common law conveyancing is often referred to a s a system of private conveyancing. 2. Assume that B's ownership claim is derived from A. his rights under the common law were a s secure a s any legal system could make them. However. These instruments. The state intervened only when its courts were called upon to resolve disputes concerning the ownership or use of land. and it would take effect a t the moment selected by the owner. who is in possession of Blackacre and who claims to be the owner in fee simple absolute. such a s a sheriff. Law defined the private rights in land which could be enforced through the power of the state.8 Torrens' Elusive Title source of one's derived ownership was usually the original grant from the sovereign. The qualifying 'usually' is required because one may acquire a n original ownership of land under the doctrine of adverse possession. of course. lose his ownership 'involuntarily'. if one chose to ignore his land for a number of years. or unless a n involuntary transfer was effected by a court or public official with jurisdictional power to accomplish the result. The owner of the parcel is said to own in fee simple absolute (hereafter FSA). Thus. B must demonstrate that he owns Blackacre. wishes to sell Blackacre to C. Fee simple absolute is the legal terminology for the maximum bundle of rights which a n individual can own in a parcel of land under the common law. a voluntary transfer would not take effect until intended by the owner. and the procedure for securing the enforcement of those rights. or on a deed executed by a n agent of A. if one incurred more debts than he could pay. But rights in land could be transferred many times. the legal procedures which resulted in a n 'involuntary' loss of ownership contained significant safeguards for the landowner. C must insist that B provide him with all relevant transfers disclosing how B acquired ownership from A. but only through voluntary conduct which would produce this result under laws deemed necessary for reasons of public policy. b. This principle is inherent in that just discussed. and functionally this procedure differs significantly from acquiring land by means of a grant from the state. 2. over the course of decades. An owner could. to raise money to satisfy a judgment obtained by a creditor of the debtor-owner. the transfer was void.4 (2)The transfer of interests at a time chosen by the parties. that it reflected the owner's volition. the judicial arm of the state. collectively. . Evaluation of All Known Transfers 2.

In the example given the words "and his heirs" are omitted. 2. All of the title instruments which B submits to C can be conveniently described as known transfers. they are simply evidence of B's claim that he owns Blackacre. many inhabitants of the locale may know precisely where "Blackacre" is. he must evaluate B's deed to him with the same care a s required for the title instruments. or the 'title instruments'. Although the concept that the deed must express A's volition may be easily stated. 2. "No.10 All of the relevant title instruments must be evaluated in terms of the foregoing issues. frequently. They do not. many may be able to trace the customary boundaries of "The Sutton Place". however. if C acquires Blackacre and subsequently decides to sell a n interest to D. in fee simple absolute. that it was intrinsically effective to transfer the FSA to B. Similarly. the FSA. If we assume that the latest transfer in B's title instruments is a deed from A to B. D must repeat the procedure followed by C.7 (1) Extrinsic validity. the deed was valid if it satisfied the legal requirements designed to ensure that it reflected A's intention that something pass to B.Chapter 2 . English Common Law 9 are often referred to a s the 'title deeds'. we can introduce these three issues in relation to this deed. Therefore. the problems it presents are so numerous. But. or the 'chain of title'.11 We must now examine. C must determine that the deed was intrinsically effective to transfer the FSA from A to B. and adequate legal description. and so complex. that is. C will know that B may have acquired something from A. C must determine that the deed contained a legal description of Blackacre adequate to make it possible to actually locate the land. Suppose that A's deed purported to grant Blackacre "to B. 2. and. and they must be evaluated in terms of three primary issues: extrinsic validity. C must not only determine that the deed from A to B was extrinsically valid. 13Bridgenorth Road" may be adequate. and every common law lawyer would know that a deed to "B and his heirs" was necessary to express A's intent that B receive a n interest in land that could pass by inheritance to B's heirs upon his death. C must determine that the deed was extrinsically valid a s a matter of law. constitute a title. A simple example should underscore the problem. C would purchase a lawsuit on the basis of these descriptions. in more detail.9 (3)Adequate legal description. c. forever". so manifestly A did not intend to transfer the FSA to B! The deed.8 (2) Intrinsic effect. If the deed was valid. and should ascertain that the deed accurately described the physical location of Blackacre. some uncommon situations which pose problems as to the extrinsic validity of transfers. Extrinsic Validity of Transfers 2. Everyone is presumed to know the law. intrinsic effect. 2. if C is satisfied as to B's ownership and decides to purchase Blackacre. True. The . Moreover. Normally. although valid. he must also determine that it was properly drawn. would transfer only a life estate to B. C or his surveyor should inspect Blackacre and locate the physical monuments which delineate its boundaries. that they will be reserved for the following section.

14 Purported agent. and absconded. or both. although their conduct was unduly trusting or negligent. blotted out the word "secretary" on the cheque. and by delivery was intended by the grantor to become effective. Where fraud was present. B was killed in a n automobile accident while on holiday in France. X procured B's signature on a deed to C by telling B the document was needed to verify B's entitlement to pension benefits.16 Improper execution of company deed. until X received a cheque for the purchase price payable to B. was the owner. delivered the deed. X was B's real estate broker. X was B's lawyer. but they are representative. delivered the deed to C. and absconded. secretary". X delivered a deed to C. X induced C to make a cheque for the purchase price payable to "X. and absconded. for a power of attorney is revoked by.5 2. B executed a deed to C. director".13 Nondelivery. received a cheque for the purchase price payable to X. unless otherwise stated.3 2. affixed the corporate seal in the presence of Y.15 Mistake as to nature of instrument. They are all based on the same set of facts. called a n escrow agent in this context. and absconded. Shortly thereafter. X forged B's name to a deed to C. Y signed "Y. the death of the prin~ipal. i.e. X induced C to make a cheque for the purchase price payable to X. and absconded. delivered the deed to C. It is doubtful that any . X prepared a deed from B company to C. X sold Blackacre to C.10 Torrens' Elusive Title examples given cannot be exhaustive of all possible problem areas. X was B's agent under a general power of attorney authorizing X to do anything on behalf of B which an agent could lawfully do. B was a n incorporated company. the deed remained inoperative and no interest passed to C. delivered the deed to C.~ 2. X was B's spouse. received the cheque. No interest passed to C.. not become effective. received the cheque. that the corporate seal be affixed to each deed in the presence of the secretary of the company and one director. received the cheque. and signed the deed "X. C wished to acquire Blackacre in FSA from B. cashed it. and that the secretary and witnessing director sign the deed. X was the secretary of B company. Because B stipulated that the deed not be delivered. B was illiterate.2 2.12 Forgery. B and C were innocent. It is doubtful that any interest passed to C for B had no intention to execute a n effective deed. (1) Lack of intent that transfer take effect 2. for a forged deed is void. Without any authorizing resolution of B company. A deed is not legally delivered until it has been both physically delivered. and gave it to X with instructions that X deliver the deed to C upon receipt of a cheque for the purchase price payable to B. received the cheque. it was committed by X. and because this condition was not satisfied. secretary". Its articles of association required that deeds conveying company real property be specifically authorized by a resolution of its board of directors. and before B's death was known to either party. induced C to make a cheque for the purchase price payable to X. and a t the time of. No interest passed to C. X induced C to make a cheque for the purchase price payable to X. who. In the example delivery was to be made through a n agent. Although not a director.

X procured B's signature on a deed to C. no interest passed to C. The point is that until B dies. a widow is entitled to a life estate of one-third of all the freehold estates (usually FSA) the husband possessed a t any time during the marriage. in order to be valid. English Common Law 11 interest passed to C. X was B's spouse. for a deed from a person for whom a receiver of the estate has been appointed is void. or until some earlier event such a s W's death or a valid divorce from B terminates the dower right. without imposing any life estate on Blackacre. the value of Blackacre had trebled over the price C paid. 2. and tendered the purchase price with interest back to C.Chapter 2. who was B's brother. but in its general application. and assured C that he was not married. Common law dower. B learned that because of a planned highway relocation. Even if B signed the deed in a lucid moment.19 Mental incapacity. B was 19 years old. Blackacre would be subject to her dower right. B assured C that he was 22 years old. a t B's death a court might be able to satisfy her claim entirely out of land owned by B a t death. and a receiver of his estate was appointed. and C may not even be aware that his ownership is vulnerable to partial divestiture should W actually be awarded a life estate in all or part of Blacka~re.7 2. Although the deed to C was valid when made. In the example above. Shortly after attaining age 21.18 In the following two examples. is extremely complex. B transfered Blackacre to C. the lack of a n . In fact the divorce was invalid. reflects a public policy determination that persons under legal disability lack the maturity or mental capacity to formulate a n intent which is likely to result in prudent property dispositions.17 Common law dower.~ (2) Transfer by person under legal disability 2. but a s W neither joined in the deed nor released her dower right. As W's dower right was limited to one-third of the realty owned by B during the marriage. C had no knowledge that B had been found to be of unsound mind. Blackacre is in a jurisdiction in which the age of majority is 21 years. Blackacre remained subject to it. and received the purchase price. B promptly notified C that he repudiated the sale. received the cheque.1° . executed a deed to C. which does not exist in Alberta. and especially to the court appointed receiver. i t remained voidable by B. if W survived B and became his widow. X was hostile to B's family. and C was a good faith purchaser. induced C to make a cheque for the purchase price payable to X. delivered it to C. delivered the deed to C. B believed that he had a valid divorce from W.~ authorizing resolution would not make the deed i n ~ a l i d However. and W neither knew of nor joined in the deed to C. If B was a company with general authority to acquire and dispose of land. Blackacre will remain encumbered by it.20 Minority. and could be repudiated by B within a reasonable time after his attaining the age of majority. and absconded. B was judicially found to be of unsound mind. The FSA passed to C. contracted to sell Blackacre to C.9 2. the deed must still be executed by the company's officers. The law. and in the manner prescribed by the articles of association. B may have intended that the transfer take effect. however.

however. 2. Four situations in which such a transfer was held to be void will be presented. or indirectly by means of a deed executed by a court official. As there were no unpaid . As the taxes were invalidly assessed. In this category we can include transfers resulting from sales under mortgage foreclosures. They will also vary within jurisdictions according to the type of proceedings. (1)Assume that the statute required X to signify by separate warrant to the tax assessors the sums to be raised by taxes for each municipal purpose. however. he conducts the sale and executes the transfer under direct statutory power. under authority of a court order. and are of vital significance in terms of the extrinsic validity of those transfers. but that B had in fact paid them.13 Two basic examples will be used to demonstrate the practical implications of this doctrine. can be characterized a s judicial transfers.12 2.23 Most involuntary transfers. to sell property of B to raise money to satisfy the judgment. if they are successful B will be divested of his ownership of Blackacre. usually a sheriff.12 Torrens' Elusive Title (3) I n v o l u n t a r y t r a n s f e r s 2. tax liens.21 As noted in paragraph 2. A summary of the most common situations must suffice to underscore the dimension of the problem for one checking the extrinsic validity of transfers. and that X issued only one warrant stating a total sum to be raised for all municipal purposes. will vary between jurisdictions. We can. he could obtain a writ of execution from the proper court authorizing a public official. and bankruptcy proceedings. can result in a transfer of Blackacre to C.3.25 Tax lien sale. such a s a master. X was a municipal corporation which purported to sell and transfer Blackacre to C under statutory power to enforce a lien for nonpayment of taxes. 2.22 The execution sale must be discussed separately because in most common law jurisdictions it is conducted by a non-judicial public official. that is. Although the public official acts under a judicial writ.14 (2) Assume that there were taxes validly assessed. without his actual volition. B's conduct can leave him vulnerable to legal procedures which. builders and mechanics liens.24 The statutory procedures governing involuntary transfers. What if a n official acts either beyond the scope of his conferred powers (in excess of his jurisdiction a s it is frequently expressed). The power to produce this result is conferred on officials by the state. identify some basic principles which are pervasively applicable to involuntary transfers. The functional key is the fact that they are involuntary. usually through statutes which define not only the external scope of the powers conferred but the internal method for their proper execution. whether by non-judicial public officers or judicial officers. If C obtained a judgment against B. or fails to comply with a 'substantive' or 'material' procedural requirement of the governing statute when acting within his conferred powers? The general doctrine is that any transfer resulting from actions under supposed statutory power is void. and no statutory power (jurisdiction) to sell Blackacre for nonpayment of taxes. X had no valid tax lien. partition actions. a mortgage foreclosure sale as contrasted with a tax lien sale. for they result from judicial proceedings and are either accomplished directly by a court vesting order.ll 2.

C decided to expropriate Blackacre. and costs. the net effect of the proceeding was that C succeeded to the interest of X. B was not made a party to the action. Blackacre was sold to C a t public sale for $40. Any property owner is always vulnerable to expropriation procedures taken under authority of government. (4) Assume that there was a valid tax lien. 2. or by constructive service.000.27 Expropriation by municipal corporation.16 The transfer should have been executed in the form "X. Assume that C was a municipal corporation. either by personal service of process. Expropriation results in a n involuntary transfer. As the lack of a n effective date constituted a material deviation from the procedural requirements of the statute. but it differs from those previously discussed because it is not based on any particular conduct of B. a s treasurer of X. purportedly expropriating Blackacre from B.26 Mortgage foreclosure. the sale was confirmed by the proper court. that the statute provided that the confirmation order would operate a s the tax transfer. and that the confirmation order failed to indicate its effective date. then. B was unaffected by the proceeding and remained the owner and mortgagor of Blackacre. the confirmation order purporting to transfer Blackacre to C was void. became the mortgagee by judicial assignment from X. to C". Having been unable to negotiate a purchase from B. English Common Law 13 taxes. the confirmation order recited that all requirements of relevant statutes were complied with.15 (3)Assume that there was a valid tax lien. and that the transfer was executed in the form "T. and no statutory power to sell Blackacre for nonpayment of taxes.17 2. X had no valid tax lien. and does not operate a s a transfer of the land from the mortgagor to the mortgagee. B remained the owner of Blackacre. Blackacre is in a jurisdiction with a statue providing that a mortgage constitutes a charge or lien on land. C's council passed a resolution. rather than a by-law. C. the transfer was void. As T had no statutory power to execute the transfer as transferor.ls and this rule is clearly applicable to a mortgage foreclosure. B defaulted in payment of the debt.lS As the mortgage foreclosure was void a s to B's interest in Blackacre. that the statute required a transfer from X.000. and X instituted a foreclosure action. If the court's vesting order did not confer ownership of Blackacre on C. what did C obtain? As X brought the foreclosure action. B mortgaged Blackacre to X to secure a loan of $20. The mortgage debt owed to X. to C". such a s notice by publication. No interest passed to . would be paid from the $40. but subject to all preexisting rights of B.000. The statute conferring C's power of expropriation required that the council of the corporation pass a by-law expropriating any land required for the purposes of the corporation. I n fact. and a s Blackacre is located in a jurisdiction following the lien or charge theory of mortgage. and declared that Blackacre was vested in C.Chapter 2 . and the balance would be restored to C. that the statute required that the tax lien sale be confirmed by a district court judge and that the confirmation order be dated in order to establish the beginning of the period within which the defaulting taxpayer could redeem. by T a s treasurer of X. The general doctrine is that any judicial proceeding under these circumstances is invalid a s to the interest of a person not made a party. and a s C became a party by purchasing a t the judicial sale.

it could be valid.30 An important point should be stressed before we leave the subject of the extrinsic validity of transfers. By analogy to North American football. the president of the club. C was a n unincorporated club with a fluctuating group of members. In many cases. and. or to the members themselves.14 Torrens' E u i e T t e l s v il C. With the exception of the voidable transfer from a minor. The defects shown in the examples in paragraphs 2. In short. all of the examples discussed in paragraphs 2.20 (4) No transferee 2. transfers which were either void or voidable for reasons related to the lack of intent or power of the transferor to make the transfer effective have been discussed. But what if the pass were beautiful. There is seldom a feasible way for C to determine whether or not A's transfer to B was extrinsically valid. d. the lease is void. or if A is dead. C must make certain that he obtains a valid transfer from B. and he will seldom have difficulty in determining that B is of age. If the lease could be judicially construed a s having transferred the term to P. in trust for its members. C must examine the instruments which carried ownership of Blackacre from A to B. . There was a valid deed from A to B. the ownership of Blackacre never left B. for a n expropriation not conforming to the requirements of the authorizing statute is void. How is C to know that this is so? Such a break in the 'chain of title' can be a n expensive nuisance.31 Suppose that B has all of the instruments supporting his claim of ownership of Blackacre back a t least 60 years. deeds from his successors by will or by intestate succession. for C is not a legal entity. for there would be a person or persons capable of receiving the leasehold interest in Blackacre. or is a n unborn or fictitious person.28 So far. except for the deed from A to B. but there was no receiver? A deed is void if the grantee is not a legal entity. for they will not be disclosed from examination of the title instruments.29 Transfer to unincorporated club or association. that he is mentally competent. But what of the transfer from A to B? As h a s been emphasized. and the dower example.12-20 demonstrate what are known a s hidden defects. A's successors may be difficult to locate. a s B swears. lost instruments seriously impede transfers of interests in land. I n order to be safe. Lost Instruments Supporting a Claimed Interest 2. no interest in Blackacre passed from B to any0ne. Indeed. and that he has delivered the deed. a s president of the club. it was destroyed in a fire a t his home years ago.25-27 might or might not be disclosed by the relevant judicial records available for examination.2~ 2.21 2. the ball never left the passer's hand. C must insist that B obtain a new deed from A. B executed a lease of Blackacre for a five-year term to the C club and delivered the lease to P. and from A's predecessors to him. But if C is the intended lessee. and obstructive when found.

but there are trusting folks in the world. but C took Blackacre subject to the legal interests of T. B also gave C the title instruments. and then reacquired them by theft. the instruments creating these legal interests would not be necessary links in B's chain of title. might own a n easement. Unknown Legal Interests Superior to the Claimed Legal Interest 2. they would not be inconsistent with it. the owners of these subsidiary legal interests would have no right to possess B's instruments of title. C decided to purchase the property. Although these subsidiary legal interests would encumber B's ownership of Blackacre. and P. a n easement.32 Suppose that B offered to sell Blackacre to C free of any encumbrances. B or one of his predecessors in title might previously have granted one of the common subsidiary legal interests to someone else. but that he had previously transferred it to X. through his ownership of adjacent Greenacre. A leasehold interest of a cottage and of its immediate grounds on Blackacre for a term of five years might be owned by a tenant T. and that B nevertheless conveyed Blackacre to C by a warranty deed including the customary covenant that Blackacre was subject to no encumbrances. Such legal interests a s a leasehold. B could simply conceal them from C if he were dishonest. B might have convinced X that the title instruments were with his solicitor in London. Although it was B's deed which conveyed his interest in Blackacre to C. and P did own the property interests in Blackacre illustrated above. 2. might be owned by P. he retained nothing to convey to C. C was entitled to them for they will be essential should he in turn wish to sell Blackacre. At common law the usual legal mortgage conveyed the FSA to the mortgagee and included a covenant that the mortgagee would reconvey the property to the mortgagor if the loan were repaid on time. or pump and remove oil and gas. B would still own in FSA. and a profit a prendre. Did C acquire any It is legal interest in Blackacre through B's deed? The answer is simply axiomatic in the common law that B could convey no more than he owned. Having already conveyed Blackacre to Y by the mortgage. The rule is caveat emptor. English Common Law 15 e. Consequently.34 The common law recognized a limited number of legal interests in land which could be owned by persons other than the owner of the basic FSA. Moreover. B retained no legal property interest which could pass by his deed to C. Or. and that after examining the title instruments. 2. B breached his covenant that there were no encumbrances. are frequently referred to a s rights in rem to emphasize that they are property interests in the land itself. and would be delivered shortly. such a s a right to dig and remove gravel. and received a deed conveying Blackacre from B to C. E. and if he had previously conveyed Blackacre to X. such a s a right to use a private road across Blackacre. A neighbor E. C paid the purchase price. and he would be . Assume that B had a t one time owned Blackacre. Even if B owned Blackacre in FSA before his deed to C. Normally X would have obtained the title instruments upon completion of his purchase.Chapter 2 . The deed transfered the FSA to C. E .33 Suppose that. prior to his deed to C. A profit a prendre in Blackacre. with B's covenant that there were no encumbrances. B had mortgaged Blackacre to Y to secure a loan from Y to B. Assume that T. B might have given the title instruments to X.

2. 2. . An unexploited profit a prendre is quite another matter. C will obtain no more than B owns a t the time of B's deed.16 Torrens' Elusive Title liable to C in damages for breach of contract. and a profit a prendre in Blackacre. others might be apparent. would likely be in possession and available for questioning. One concluding remark on this subject should be made. or T as a leasehold tenant. Although some easements. for a mortgagee will seldom have a right to possession. None of these legal interests would necessarily be disclosed in the title instruments for Blackacre. 2. Perhaps the most serious problem is a possible legal mortgage held by Y. B simply lacked the power to convey more than he owned. whether or not C discovers inconsistent legal interests. E.37 What should C do to increase the odds that he will obtain what he intends to buy? Most people inspect property they contemplate purchasing to determine if they like it. he (and anyone claiming under him) would be barred by the act from bringing a n action to recover possession of Blackacre from Z. When C inspects Blackacre to look for clues a s to possible legal interests inconsistent with what B offers to sell. his possession must be "open and notorious". and T.36 In summary. and C would obtain no interest in Blackacre through B's deed. Z had been in possession of Blackacre adversely to B for the period required by the limitation of actions act of the jurisdiction concerned. If a profit a prendre were being exploited by P. that fact would be easily discernible by C. prior to B's deed to C. a leasehold. oil wells and gravel pits are rather obvious. X a s a prior purchaser. But B's warranty deed could not cut off the outstanding legal interests of T. or to Y a s a mortgagee. a n easement. It would not be a n excessive burden for C to question neighbors a s to possible easements. if a private road across Blackacre extended onto Greenacre. B might b v e wrongfully retained or obtained possession of the title instruments for Blackacre even though he had conveyed Blackacre in FSA to X absolutely. For example. C would have a strong clue that there might be a n easement in favor of Greenacre. Suppose that. and P might own.35 One further significant peril faced by C remains for consideration. and whether or not C was a n innocent purchaser for value with neither knowledge nor notice of the outstanding interests is irrelevant. such a s underground drains. Prudence dictates that a n inspection be extended to include a n investigation into the possibility of unknown legal interests inconsistent with the interest one wishes to purchase. If B were the true owner of Blackacre. he does so to increase his knowledge of the ownership of Blackacre. so such a claim should be rather easy for C to discover. both of the visible and invisible variety. Similarly. Z would have acquired ownership of Blackacre. respectively. might not be disclosed by surface observations. and P. However. E. Z might have acquired ownership of Blackacre by adverse possession under a limitation of actions act. If Z is in adverse possession to B. In reality.

As the volume of work increased. English Common Law 17 f. Functionally. 1873. and why this difference has so profoundly affected the law of real property. (2) T h e t r u s t 2. Both historically and functionally. and by the sixteenth century the Chancellor supervised the Court of Chancery. it never abandoned its foundation principle that its remedies were discretionary and would evolve to suit the justice required for new situations. until the two were merged into the Supreme Court of Judicature by the Judicature Act. and such appeals were increasingly referred to the King's Chancellor. one must depend on the context in which the word appears. but for historical reasons which are beyond the scope of this study.38 So far we have studiously avoided using the words 'equity'. Historically. the common law courts administering law.25However. but for simplicity the modern terminology will be used. When the Chancellor began to enforce trusts in the fifteenth century. 'equitable interest' or 'mere equity'. Throughout the seventeenth century the Chancellors developed equity into a code of principles.26 A judge of the Supreme Court of Judicature simply became both a law judge and a n equity judge. or 'equitable maxims' a s they are often called. a s in the title of this chapter. the Chancellor retained assistants. There were common law courts in England long before the development of equity. equity 2.39 It is imperative that we understand how rights and remedies in equity differ from those a t law.Chapter 2. This merger pattern has been followed in virtually all jurisdictions in which the legal system is based on the English common law. The phrase 'English common law' just used.27the legal terminology was quite different from that in use today. it did not abolish the substantive rights and remedies of law and equity. means in the broad sense 'English law and equity'. Two distinct court systems thus existed in England for centuries. From now on 'equity' will be almost pervasively with What does it mean? A brief answer must compress the relevant scholarship of volumes of English legal history into a few paragraphs. the system of law which they administered had become relatively inflexible by the thirteenth century. the concept of the trust is the essential starting point for our inquiry. U n k n o w n Equities (1) T h e C o u r t of Chancery. this Act merely merged the courts. the development of the trust in equity produced the initial division between legal (at law) and equitable (in equity) interests in land. which remain distinct. it is almost a s though . the very nature of equitable interests in land depends on the trust. The number of wrongs for which the common law courts could provide a remedy was limited. Law students have a tendency to look a t the trust a s a mystical concept. his recourse was a n appeal to the King. with the result that a judge of a superior court of record has both legal and equitable power. If one complained of a new wrong. and the Chancery courts administering equity. whose judges dispensed a system of justice called equity. No special word in the legal vocabulary exists to denote 'common law' when it is intended to mean 'law' a s distinct from 'equity'. Although equity moved in the direction of inflexible rules to a degree.

convey Blackacre to several trusted friends a s joint tenants. T owned Blackacre. in trust to T. and for B's children until they came of age. the beneficiary(s). until they are mature enough to assume legal ownership and management themselves. and even if he had been permitted to enforce it a t law. With a trust B can avoid the expense and delay involved in the administration of property he would otherwise own a t death. will be E. and B's wife.28 The courts of law refused to enforce such agreements during the fifteenth century. B could. and it was uncertain that B's conveyance of Blackacre to T in reliance on that promise was adequate consideration to render it enforceable a t law even by B. There were doctrinal obstacles to the enforcement of trusts under legal theory which did not exist in equity. and B would obtain the benefits of a will through his instructions to T. Moreover. that T would have acquired Blackacre on the basis of a n express or implied agreement with B.18 Torrens' Elusive Title they wanted to see it a s the creation of strange creatures called Chancellors dressed in outlandish robes who arrived from outer space making 'blip' and 'bleep' noises. he may be able to reduce estate taxes. the basic functional elements of a trust are as simple a s the primitive agrarian society which produced it. onerous to B's family.) B would retain the right to occupy Blackacre during his life. will be T. Under the trust B was entitled to occupy Blackacre for his life. frequently the King himself. Assume that B transferred Blackacre. a farm which had been in B's family for four generations.41 What if T refused to carry out B's instructions? At law.40 Suppose that B was the feudal owner of Blackacre. would arise in favor of B's overlord. W. Subject to his wife's dower interest. however. (Hereafter. and in the process various feudal obligations. however. A trust today will frequently be created to accomplish very similar purposes. in trust examples the legal owner(s) in trust. a t his death no feudal obligations would arise for B would not have owned Blackacre a t death. a t B's death Blackacre would descend to his eldest son by intestate succession. Moreover. is that the remedy a t law would have been inadequate even if it had been available. B owned the benefit of the promise. that he had a wife and young children. with income payable to them. 2. and then for B's wife and children on terms B would communicate to them. and that can be demonstrated by a relatively simple example in a modern setting. T could be instructed to manage Blachacre for B's wife. T was to manage the farm and to pay . in this way favoring younger sons and daughters over a n elder son if he chose to do so. 2. Professor Maitland emphasized. and the Court of Chancery filled the gap.42 The important point. and the person(s) for whom the hold in trust. to hold the legal ownership in trust for B while he lived. the trustee(s). was entitled to occupy the farm home for her life if she survived B. however. Actually. In the fifteenth century B had no power to make a will disposing of real property. The promise of T was addressed to B. the members of his family would not have been able to do so after his death. T would have promised B to faithfully carry out his directions a s to who should be entitled to occupy Blackacre and receive the income produced from the land. and that he wanted them supported from Blackacre after his death. and he can obtain competent trustees to manage property for members of his family. 2.

Chapter 2 . English Common Law

19

the income to W for her life, and a t W's death was to transfer Blackacre to B's then surviving children, with living issue of any deceased child of B to take the share of a deceased child by representation. T had no authority to sell Blackacre. B, W, and B's descendants were the beneficiaries of this trust. Law is frequently described a s operating in rem, that is, legal rights exist i n property, and legal remedies are enforced through property. Assume that, after B's death, T sold Blackacre to C. Because T owned Blackacre, T had the power to sell to C, even if the sale was not authorized by the terms of the trust. Law h a s no remedy to prevent breach of contract; it can only aivard damages for breach of contract. Consider the practical nightmare this remedy raises. How does one determine the damages B's family suffered? Were the damages merely the sale value of Blackacre? After all, Blackacre had a unique value to B, and presumably to his family. How is that loss to be valued i n money? Who should receive the damages? How much should go to W, to B's living descendants, and to his possible unborn descendants? Moreover, B probably created the trust to obtain mature business management for Blackacre, and to secure income for a n inexperienced family. If the damage award were $100,000, and if T were compelled to pay this sum to the beneficiaries, they would be left with the financial responsibility of investing this liquid capital. 2.43 The Chancellor did enforce trusts on behalf of beneficiaries a s early a s the fifteenth century. Professor Maitland says that the principle is very simple indeed; persons who receive property on the strength of Perhaps the promise promises are obliged to carry out those promise~.~g enforced in equity was something less than a contract a s law would view the matter. But whether express or implied, there was surely a n understanding which B trusted T to honor. Because equity would enforce the promise of T on behalf of E, the latter had substantive equitable rights which were not recognized by law. I t is the equitable remedy, however, which is of primary importance. I t is said that equity acts in personam, against a person, rather than in rem, through property, a s does law. Equity does not wait until a breach of contract has occurred, and then try to redress the balance by a reallocation of property rights. Rather, equity strives to prevent wrongs before they have occurred, through direct orders addressed to the relevant persons. In the example under consideration, equity might have issued a negative order to T, a n injunction directing him to refrain from selling Blackacre to C. Or, if the problem is that T was not complying with affirmative trust duties, such a s paying the income from Blackacre to W, equity would order him to carry out that obligation. Such a n affirmative order is referred to a s a decree of specific performance. One who declines to obey a n equitable order is guilty of contempt, and the conventional punishment is imprisonment. There need be no mystery concerning the in personam nature of equitable orders if it is remembered that the Court of Chancery was the Chancellor's court, and that historically orders of the Chancellor were issued in the name of the King's Coun~il.~O effect, they were orders from a monarch to his subject. In 2.44 The rights of T and E in the trust example under consideration can now be summarized. T owned Blackacre a t law, and law to this day does not recognize the trust. I n equity, however, T held his legal ownership

20

Torrens' Elusive Title

in trust, for the benefit of E, and for this reason, a s between T and E, we frequently say that E was the equitable owner of Blackacre. Why do we say this? I t comes perilously close to saying that E had a property interest in Blackacre, albeit recognized only in equity, and equity was just described a s exercising its power through personal orders. Moreover, in paragraphs 2.32-37 it was emphasized that only legal interests, the FSA, a lease, a n easement, and a profit a prendre, are property interests in the land itself. If C, or anyone else in the world, purchased Blackacre from B, the resultant ownership would be subject to any outstanding legal interests already owned by someone else. Whereas legal interests are based on a conveyance, any 'equitable interest' of E in Blackacre is based on the willingness of equity to require T to specifically perform his promises and to prevent T from breaching his trust obligations. Whether the interest of a trust beneficiary is better characterized a s a contract right specifically enforceable against a trustee only in equity, or a property right in a n asset owned by a trustee and recognized only in equity, is a theoretical issue The author which h a s vexed and divided legal scholars for generati0ns.3~ takes the view that characterization of rights i s a means to a n end, and not a n end in itself. Consequently, the appropriate characterization of the right of a trust beneficiary should depend on the pragmatic public policy issue which requires characterization. In some situations, the property interest characterization is functionally sound, that is, where the issue concerns the taxation of E's interest, or the application of the Rule Against Perpetuities to it, or to its transfer by E during life or upon death. However, our problem is to determine the circumstances in which a third person, C, will be bound by the trust obligations of T through the acquisition of trust assets from him. As to this issue, it is suggested that the rules which equity evolved can be more rationally understood by focusing on the desire of equity judges to enforce promissory trust obligations.3"
(3) The bona fide purchaser for value 2.45 Because T was the legal owner of Blackacre, and because law does not recognize trust obligations, C would acquire legal ownership of Blackacre from T even though T had no authority under the terms of his trust to transfer Blackacre to anyone except E. Assume that C did become the legal owner of Blackacre, but contrary to the terms of T's trust. Would equity interfere with C's ownership by imposing T's promissory trust obligations regarding Blackacre upon him? The initial answer is 'no', for C is the legal owner, with the qualifying 'unless there is some reason to do so consonant with equity, justice, and conscience'. The reasons for interference are based on the manner in which C acquired his legal ownership of Blackacre.

(a) Acquisition by donee 2.46 Before the end of the fifteenth century it was held that a n heir of a trustee inherited trust property subject to the t r ~ s t . 3 ~ broader principle The quickly developed, that any gratuitous transferee of a legal interest from a trustee takes subject to the trust, and this principle applies to one who receives trust property under the will of a or by means of a gift

Chapter 2. English Common Law

21

transfer made during the lifetime of the trustee, t h a t is, a n inter vivos transfer.35 The gratuitous transferee i s frequently referred to a s a 'volunteer'. I t is quite important to emphasize that this rule is unrelated to the doctrine of fraud. If C inherited Blackacre from T under the law of intestate succession, equity could hardly have held that T breached his trust by dying! If T transferred Blackacre to C by inter vivos conveyance or by will, T would be in breach of trust, but C would clearly not be tainted with any fraud if he had no reason to know of the existence of the trust. Nevertheless, C would still hold Blackacre subject to the trust. The rule under consideration is a simple manifestation of the equitable doctrine of unjust enrichment. If T held Blackacre on trust for E, then it is E who was entitled to the beneficial enjoyment of Blackacre or of its profits; if C were permitted to take Blackacre free of the trust, without paying value, C would be unjustly enriched a t the expense of E.36 2.47 It is not always easy to determine what consideration will satisfy the requirement t h a t a transferee be a purchaser for value i n order to avoid the imposition of trust obligations. I t is clear t h a t the consideration given can be less than the adequate, or full value of the trust property obtained.37 However, Professor Scott states the view that where the consideration is nominal in relation to the actual value of the trust property acquired, the circumstances evidence t h a t the transaction is a gift rather than a negotiated purchase, and the transferee is a donee.38 If Blackacre were transferred to C on the strength of C's contract to pay the purchase price in the future, the contractual promise would not constitute value, for E could compel C to restore Blackacre to the trust. If E took this course, the consideration for C's promise would have failed, C could not be required to perform his contract, and consequently C would have suffered no l0ss.39 The same principle would apply if C paid T with a negotiable instrument, such a s a promissory note or a cheque. The instrument would not constitute value until it was paid, or negotiated by T to a holder in due course, and thus made enforceable against C.40 Even if C paid part of the purchase price, the partial payment would not constitute value, although E could not compel C to restore Blackacre to the trust until C was reimbursed for the payments actually made.41 2.48 Assume that T owed C $100,000, and that T transferred Blackacre to C pursuant to C's agreement to accept Blackacre a s satisfaction of this antecedent, or existing debt. Release of a n antecedent debt does constitute value under English law.42This rule seems to make good sense. If it did not exist, T could still borrow $100,000 from X for a few days, pay his debt to C, sell Blackacre to C, receive the same $100,000 back a s the purchase price, and pay the debt to X. Why should equity require two steps to achieve a permitted result when one step is more efficient? I n contrast, assume that T granted C a mortgage of Blackacre to secure T's antecedent debt to C. I n this situation, a s C improved his position by moving from the status of a n unsecured creditor to t h a t of a secured creditor, and gave no value for the mortgage, he would take subject to the t r u ~ t . 4 ~ However, if C had agreed to extend the due date of T's debt i n consideration for the mortgage, this agreement would have constituted value.44 2.49 One of the most troublesome situations regarding the issue of

22

Torrens' Elusive Title

purchaser for value concerns the judgment lien. Assume that C obtained a judgment against T based on the $100,000 antecedent debt. I n most common law jurisdictions C could obtain a writ of execution from a court authorizing a sheriff to sell sufficient property of T to satisfy the judgment debt. Moreover, the writ of execution would give C a legal lien over all of T's property in the jurisdiction. Assuming that C had neither knowledge nor notice that T held Blackacre in trust for E, would C be a purchaser for value of his judgment lien over Blackacre? The answer is 'no'.45 But why? There are several reasons given in the cases and texts, and they shade almost imperceptibly together. Most simply stated, the previously unsecured creditor gave no new consideration for his judgment lien. Even if we assumed that the creditor's effort and expense incurred in obtaining the judgment lien constituted value, the lien was still not obtained from the debtor. If a creditor negotiated with his debtor to obtain a n interest in specific property to secure a debt, i n complete innocence that the property was held in trust, then the policy of promoting facility of transfer by protecting a good faith acquisition might argue for favoring the creditor. But this policy does not apply where the creditor seized property of his debtor under judicial process.46I n truth, the judgment lien is a gift from the state to aid creditors in collecting their debts. Consequently, a s a matter of public policy, the judgment lien is held to attach to the debtor's beneficial interest in property he owns, and not to interests he holds in trust for someone e l ~ e . 4 ~

(b) Acquisition not bona fide
2.50 Even if C purchased Blackacre from T for value, might there still be reasons consistent with equity, justice, and conscience for imposing T's promissory trust obligations regarding Blackacre upon C? If all purchasers for value of trust property took free of the trust, the Chancellor's practical ability to specifically enforce trust obligations would have been seriously jeopardized. I n our example, T could be compelled to hold the sale proceeds in trust for E, if T had not absconded with the proceeds, but a unique parcel of land, Blackacre, would have been lost to the trust, and hence to E. 2.51 Breach of trust. Why did the Chancellor enforce trusts? Professor Maitland said because it would be "scandalous dishonesty" if the trustee disregarded his trust.48Just a s the trustee, in whom confidence was placed, would be bound by his trust, so it was held a s early a s 1453 that a transferee who expressly agreed to perform the trust would also be liable i n equity, for in him also confidence had been p l a ~ e d . 4 ~ Consequently, if C promised to honor T's trust obligations when C purchased Blackacre from T, C would hold Blackacre subject to the trust. 2.52 Participation in breach of trust. However, what if C made no promise to honor T's trust obligations? One of the most important principles of equity must now be discussed, and a t the outset we should reiterate that the rights of a trust beneficiary are equitable, not legal.50
Legal rights are good against all the world; equitable rights are good against all persons except a bona fide purchaser of a legal estate for value without notice, and those claiming under such a purchaser.

Thus, even though C purchased Blackacre from T for value, he will take

with the same diligence with which a prudent purchaser would search for outstanding legal interests. and hence will take subject to a trust. If he is a prudent purchaser. on the basis of a diligent search. he does not take subject to the trust if he paid value for the property. and the more thorough he is. .53 The Court of Chancery was. even if he had previously paid the purchase 2. . A purchase is 'bona fide'.52 As we have seen. It is only where the transferee for value knows or ought to know that he is participating in a breach of trust that he takes the property subject to the trust. However. and hence he would not have knowingly participated in that breach of trust. such a purchaser "has been guilty of fraud. and nevertheless took a mortgage of Blackacre from T a s security for a loan to T for T's personal benefit. the purchaser did not obtain knowledge that the sale to him was in breach of trust.Chapter 2. As Maitland put it. Professor Scott explains just what 'notice' will deprive a purchaser of 'bona fide' status. Megarry and Wade define 'bona fide' in this manner:51 The purchaser must act in good faith. or something very like fraudW. C would have knowingly participated in T's breach of trust. Any fraud or sharp practice will forfeit the privileges of a purchaser in the eyes of equity. C will visit Blackacre and make diligent inquiries of persons in possession in a n effort to determine if there are any existing legal interests inconsistent with what T offers to sell. If. such a s the interest of a trust beneficiary. . But this requirement of good faith mainly serves to emphasize that the purchaser must be innocent as to notice. the safer he will be. If prudent. Equity chose not to tolerate such conduct. . C might not know that T held Blackacre on trust for E. Even if the transfer is made in breach of trust and the transferee has notice of the existence of the trust. and would take free of a trust even if the sale was in breach of trust. where a trustee in breach of trust transfers trust property to a person who takes with notice of the breach of trust. if he participates in a breach of trust by purchasing trust property with knowledge that the trustee's sale is in breach of trust. and that T was not authorized to sell to anyone. but quite practical in terms of the conveyancing system in which it developed. he acts in good faith. In effect. if the purchaser did not make a diligent . All this C will do for his own protection. English Common Law 23 subject to the trust unless he was 'bona fide' and 'without notice'. he might not know its terms. if he is innocent a s to 'notice'.53 Thus. that is. . If C closed his eyes and asked no questions. if C knew that T held Blackacre in trust. he would not likely have learned that the sale to him was in breach of trust. the transferee takes the property subject to the trust. . Even if C knew of the existence of the trust. faced with a dilemma. and its solution was not only simple. the Court of Chancery simply required that any purchaser search for prior equitable interests. A purchaser is not bona fide. Assume that C desired to purchase Blackacre from T. The fundamental public policy supporting the equitable rule may be simply stated. C will certainly have his lawyers examine T's instruments of title for Blackacre to verify T's claim of ownership. however. unless he had notice that the trustee was committing a breach of trust in making the transfer.54This basic principle is demonstrated by the rule that C will not be regarded a s bona fide if he received notice of the breach of trust before he actually obtained a legal interest. he would be bona fide.

55 A prudent purchaser would make inquiries as to any legal rights of persons in possession before he completed a purchase. If C called for the title instruments and was deceived by reasons for their non-availability which would have satisfied a prudent purchaser. The extent of the burden equity cast on a purchaser can be shown through a general sketch of how the doctrine of constructive notice operated. But if a proper search would have disclosed that the purchase involved participation in a trustee's breach of trust.59 This exception. C would not be bona fide. C would have constructive notice of the trust terms if he failed to make prudent inquiries concerning them. but failed to state the terms of the trust.58 Although the attitude in equity was strict.54 A prudent purchaser would check the title instruments. and not merely a n abstract of it. is generally referred to as 'constructive notice'. but in the view of equity should have known. but which were concealed from the mortgagee under circumstances that made detection of the fraud virtually impossible. he would not be affected by constructive notice of their contents. only applied to one who actually made the required diligent inquiries. A moralist would hardly characterize such conduct a s fraudulent.61 a mortgagee was not bound by constructive notice of a trust which was disclosed by two deeds which were in fact part of the mortgagor's 'chain of title'. and not a lesser legal interest. and the doctrine of constructive notice. C should study the deed.56 If C failed to examine the deed a t all. C would not prevail on the argument that he would have been deceived by falsehoods if he had made diligent inq~iries. C would not be bona fide. C would have constructive notice of any equitable rights of a person in . The deed might well contain equivocal language leaving C and his lawyer uncertain a s to whether or not T had authority to sell Blackacre. If equity solved its dilemma. and of T's authority.~'J a famous English case. Equity had chosen to protect trust insofar a s reasonably possible. If C purchased on the advice of his lawyer that the sale was authorized. and contained the terms of the trust. 2. and if the purchaser is deemed to have had this knowledge. he would be deemed to have acquired whatever knowledge such a search would have produced. 2. He may have been careless. that a purchaser is treated a s knowing what he may not have known. he would have constructive notice of its contents. his lawyer may have been negligent. it was based on reasonable prudence. however. or.57 If the deed disclosed that T held in trust. In terms of actual conduct. Assume that the last instrument in the 'chain of title' was a deed from B to T. Consequently. the purchaser may have chosen to take the risk of a superficial search. and a court later construed the language a s not authorizing a sale. In Pilcher v. and if T's sale were in breach of trust. This equitable doctrine. C would have actual knowledge of the existence of the trust. If the deed were to T in trust for E. By analogy. C should determine that the deed was intrinsically effective to transfer the FSA in Blackacre to T. which imposed a relatively high standard of commercial morality on a purchaser of a legal interest in land. for he could never be sure when his search met the measure of proper diligence required for his protection. Rawlins.24 Torrens' Elusive Title search. then through a doctrine of equity carelessness is rewarded with the consequences of fraud. was the method selected to accomplish this goal. it certainly created one for the purchaser.

Chauter 2. English Common Law

25

possession which diligent inquiries would have disclosed; if E were in possession under a trust, and if T had no authority to sell to C by the trust terms, C would not be bona fide.'j2 2.56 Obviously, a purchaser will usually employ a lawyer in a land transaction, and will frequently utilize other agents. Any actual knowledge or constructive notice of a breach of trust received by a n agent of the purchaser will be imputed to the purchaser, who will be treated a s though he had obtained the knowledge or notice.'j3 2.57 A purchaser's formal search for outstanding legal interests would concentrate on the title instruments and on the persons in possession of the property being purchased. However, a prudent purchaser would pursue a clue garnered from any source if the information seemed reasonably credible. He must, therefore, do the same with regard to equitable interests a s a condition precedent to obtaining bona fide status.'j4 2.58 Professor Fratcher has written this pointed summary of the impact of the bona fide purchaser doctrine on property transactions in the United States:65
No matter how broad his powers may be, a trustee cannot enter into transactions involving third parties unless the third parties are willing to deal with or assist him. The comprehensive trustees' powers statutes proposed or in force in this country fail to grapple with the great barrier to third party participation a n d assistance in trustees' transactions - the duty of inquiry with its corollary that the third party who engages or assists in a transaction with a trustee is bound a t his peril to guess correctly how the courts will interpret the law a n d the terms of the trust. The Uniform Fiduciaries Act and the Uniform Commercial Code have abolished the duty of inquiry in virtually all transactions concerning negotiable instruments and investment securities, but little h a s been done a s to other types of transactions. One who purchases half a million dollars worth of corporate bonds from a trustee need not inquire into his powers to sell and to give a receipt for the price, but one who buys a pig or a rocking chair a t a trustees' auction is bound to study the terms of the trust a n d determine a t his peril their correct legal meaning. The duty of inquiry is especially onerous in land transactions because, if notice of a trust appears in the chain of title, not only the original purchaser from the trustee but every subsequent purchaser must diligently inquire into his powers. Might it not be better to eliminate the duty of inquiry in all transactions with trustees a n d make third parties who engage or assist i n such transactions liable to the cestui que trust only when they have actual knowledge t h a t the trustee is committing a breach of trust? The duty of inquiry is rarely of real value to the cestui, yet it impedes the effective administration of every trust by delaying necessary transactions and discouraging dealings with a n d assistance to trustees.

With regard to the situation in England, Professor Fratcher states:66
English legislation gives purchasers almost complete protection against the possibilities of trustees lacking powers by conferring on trustees statutory powers to conduct virtually all normal transactions. I t also gives them a great deal of protection against the possibility that a trustee h a s exercised his powers in a n improper manner or under circumstances which did not warrant such exercise.

The problem with the English legislation protecting purchasers in dealing with trustees is that it is not complete, i t is extremely complex, and it is contained in the three separate property statutes of 1925, with results not always consistent.'j7 The solution recommended by Professor Fratcher, which is really a synthesis and modernization of the English provisions, was adopted by the Commissioners on Uniform State Laws a s section 7 of the Uniform Trustees' Powers Act:'j8

26

Torrens' Elusive Title

5 7.

[Third Persons Protected in Dealing with Trustee]

With respect to a third person dealing with a trustee or assisting a trustee in the conduct of a transaction, the existence of trust powers and their proper exercise by the trustee may be assumed without inquiry. The third person is not bound to inquire whether the trustee has power to act or is properly exercising the power; and a third person, without actual knowledge that the trustee is exceeding his powers or improperly exercising them, is fully protected in dealing with the trustee a s if the trustee possessed and properly exercised the powers he purports to exercise. A third person is not bound to assure the proper application of trust assets paid or delivered to the trustee.

Section 7 has been quoted because of its relevance to the same problem under a Torrens system. This statute protects a purchaser up to the point where he has actual knowledge that his dealing with a trustee will involve a breach of trust.
(4) Equitable interests 2.59 The interest of the beneficiary of a trust can be considered a n equitable interest in the property held in trust because the promissory obligations of the trustee will be enforced against any subsequent owner of the property who is neither a bona fide purchaser for value himself (hereafter a BFP), nor one who has acquired ownership from a BFP. Equitable interests in property may be less secure than legal interests, which are good against anyone, but they are much more than mere contractual rights against the promisor. Having established the fundamental principles of equity in the context of the trust, we can readily describe all of the equitable interests of practical relevance, for their development simply reflects a n extension of basic equitable trust doctrine. 2.60 (a) ZYust. The interest of the beneficiary of a trust has been adequately covered; it is included a t this point to make the list complete. 2.61 (b) Sale Contract. 69 Assume that B made a n enforceable contract to sell or lease Blackacre to E. The contract might be of the short-term variety, with the closing date set a few weeks after the making of the contract to give E time to check B's title and to raise the purchase money. On the closing date the contract will be executed, or carried out; B will transfer legal ownership of the FSA or leasehold to E, and E will pay the purchase price. Or, the contract might be of the long-term instalmentpurchase variety, with the closing date set years after the making of the contract. Under such a long-term contract, E will take possession and make periodic payments, often until the entire purchase price is paid, before he will be entitled to a transfer of legal ownership. If B were to breach his sale contract of either type, E could bring a n action at law to obtain damages for breach of contract. Recall the willingness of equity to specifically enforce the promissory obligations of a trustee by a n in personam order because the trust beneficiary has no remedy a t law, which does not recognize trust obligations. Equity will also specifically enforce a contract when it considers the damage remedy at law inadequate. Why are not damages a t law a n adequate remedy for E? Because equity considers every parcel of land unique; E has a contract right to acquire a legal interest, the FSA or a leasehold, in Blackacre, and no award of fungible money was deemed a n adequate substitute for a specific portion of that fair island kingdom, England. Why this equitable philosophy continues to be

Chapter 2 . English Common Law

27

applicable to wheat land in Alberta, corn fields in Illinois, and sheep range in New South Wales is not immediately evident, but it is! Thus, unless the case is one of those rare ones in which equity exercises its direction to refuse the remedy, E will be entitled to specific performance of his binding contract. Moreover, as E has a right to acquire his legal interest in Blackacre from the moment the contract is made, and a s equity considers that a s done which ought to be done, in equity E becomes the beneficial owner of the property which is the subject of his contract right from the date of the contract. Even the language of trusts is used to describe the status of the parties, for B is said to hold his legal title on trust for E, who a s the beneficiary of the trust relationship has an equitable interest in Blackacre to the extent of his contract right. If B has no authority under the contract, or otherwise from E, to sell the legal interest held on trust for E, but B does sell to C in breach of the trust, then C will acquire his legal interest subject to the trust obligations of B unless C is a BFP. What does this mean functionally? Simply that E will be entitled against C to specific performance of B's contract unless C is a BFP. It is a peculiar trust, for B (or C) will be permitted to occupy Blackacre and receive its benefits until the closing date, unless the contract provides otherwise. And, unless E is actually entitled to specific performance, and approves the title tendered so a s to accept the contract a s binding on him, the trust relationship will never be relevant. 2.62 (c) Equitable Mortgage. There are three basic situations in which a n equitable mortgage will be recognized. 2.63 Promise to hold as security. Assume that B borrowed $10,000 from E, and executed a written agreement promising to hold Blackacre a s security for the debt. Such agreements are common today, for they eliminate the need for the formal transfer of a legal mortgage to E, and it is factually unlikely that the parties intended that B ever execute a legal mortgage. Nevertheless, in equity such a n arrangement is considered a s a contract to create a legal mortgage, and because equity regards that a s done which it will compel to be done, equity will treat E as a mortgagee to the limit of his contract rights.70 In England, if B merely deposited his title instruments for Blackacre with E, with the intention of securing the debt, a n equitable mortgage would be created without any written agreement?' In a jurisdiction in which a legal mortgage gives the mortgagee a legal lien or charge over property, by analogy an equitable mortgage creates a n equitable lien or charge. 2.64 Defective legal mortgage. If B attempted to transfer a legal mortgage to E, but the instrument were defective to create a security interest at law for some reason, equity would treat the legally defective instrument a s a n agreement to execute a valid legal mortgage, and, again by virtue of the doctrine of specific performance, E would be a n equitable mortgagee.72 2.65 Mortgage of equitable interest. Suppose that B had a n equitable interest in Blackacre a s the beneficiary of a trust, or a s the purchaser under a sale contract. Lacking any legal interest himself, B could not create a legal mortgage in someone else. If B gave E a mortgage of a n equitable interest, E's mortgage would of necessity be a n equitable mortgageJ3

28

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Torrens' Elusive Title

2.66 Assume that in each of the three equitable mortgage situations outlined above, B promised E that E's mortgage would be the first mortgage against Blackacre. If B subsequently transferred a legal mortgage to C to secure a loan from C to B of $30,000, B would have breached his promissory obligation to E; for if C were a BFP, C's legal mortgage would be superior to the equitable mortgage of E, and in any judicial foreclosure proceedings, C's debt would be satisfied first out of Blackacre. However, if C were not a BFP, his legal mortgage would rank after E's earlier equitable mortgage in order of payment. In functional terms, this means that B's promise that E will have the first mortgage will be enforced against C in equity unless C is a BFP. 2.67 (d) Vendor's lien. Assume that E, a s the vendor, transferred Blackacre to B pursuant to a sale contract before B paid the full purchase price, and without obtaining a mortgage (legal or equitable) to secure B's promise to pay the remaining balance of the price. In this situation B would not have made a promise to hold Blackacre a s security for his debt to E, but equity will imply such a promise in favor of a n unpaid vendor, and will give E a n equitable lien to secure the unpaid purchase price.74 If C purchased Blackacre from B, his ownership would be subject to E's equitable lien unless C were a BFP. 2.68 (e) Restrictive covenant. Assume that E owned Blackacre and adjoining Greenacre, that E sold Blackacre to B, that the transfer included a covenant that B, by accepting the transfer, promised that neither he nor his heirs and assigns would ever use Blackacre otherwise than for private dwelling purposes, that the covenant was made for the benefit of E and his heirs and assigns of Greenacre, and that the covenant could a s a matter of law benefit Greenacre and its successive owners. If B breached his promise and took up the business of frying and selling fish and chips from a stand in the front yard on Blackacre, E could bring a n action a t law for damages for breach of contract, a t least if B had signed the transfer. It is not likely that E would consider this remedy a s adequate for although money would give him some comfort, it would not eliminate the noise, confusion, and smell of the fish and chips stand adjacent to his once tranquil home on Greenacre. Equity would agree, and would specifically enforce B's restrictive or negative promise by a n injunction ordering B to cease and desist from his commercial use of Blackacre.75 At this stage equity would merely have enforced B's promise against him. In the famous case of Tulk v. M0xhay,~6in 1848, it was held that a purchaser of land would be bound by a restrictive covenant unless he were a BFP. If C purchased Blackacre from B, his ownership would be subject to the burden of the restrictive covenant, and unless he were a BFP, he could not use Blackacre for commercial purposes. It is E, however, the owner of Greenacre, who has the benefit of and the right to enforce the restrictive covenant; how should we describe his equitable interest? In functional terms, E, a s the owner of Greenacre (the dominant parcel), has a right in equity that the owner of Blackacre (the servient parcel), unless a BFP, observe the covenant. E's interest can be described a s a n equitable negative easement; a right that B (or C) not use Blackacre in violation of the covenant. 2.69 There is a consistent element in all of the equitable interests just

English Common Law 29 discussed. In all of these cases. the purchaser promised (by implication) to hold Blackacre a s security for the purchase price owed to his vendor. B obtained ownership of the M & M under the conveyance. will be bound by the equitable obligation. such a s that applicable to a voidable transfer from a minor. Anyone who participates in such a breach of equitable obligation by acquiring Blackacre from the promisor. only its application to a legal conveyance will be discussed. the conveyance would be read a s though it had been The conveyance was not voidable originally drawn in its rectified f0rm. follows almost as a matter of course against the original promisor. and the purchaser of Blackacre promised to refrain from using Blackacre in a way prejudicial to the enjoyment of adjacent Greenacre retained by his seller.72 (a) Rectification based on mistake. the equitable mortgagor promised to hold Blackacre a s security for a debt owed to his creditor. One who seeks to escape imposition of the equitable obligation carries the burden of proving that he is a bona fide purchaser for value. and hence the practical way of describing the mere equities is within the context of the equitable remedy upon which each is based. the factual prerequisite to rectification. The trustee promised to confer all of the benefits of Blackacre on the beneficiaries. in common with all equitable remedies. Assume that E contracted to sell Blackacre to B. of course. However. a n actual or implied promise made by the legal owner of Blackacre which. which is the source of his equitable interest. that is. prove the contract or other promissory obligation which he seeks to have enforced. its requirements are more stringent than those . If E brought his suit for rectification within a reasonable time after discovering the mistake. and that the conveyance of Blackacre with no exception was executed by E and delivered to B. that the contract provided that mines and minerals (hereafter M & M) were to be excepted from the conveyance. has been stipulated. the vendor promised to sell Blackacre to a purchaser.73 Rectification. In this example.70 The promisee must. a sale of Blackacre by the promisor in a manner which would prejudice the equitable rights of the promisee is a breach of equitable obligation. 2. the remedy of specific performance. if observed. for through the effect of the equitable order. will confer substantial beneficial rights in Blackacre on someone else. and the effect of rectification would be to restore to E the legal interest he had lost under his conveyance.80 2. we can say that a mere equity depends on a n equitable remedy other than specific performance. the court would grant a n order rectifying the conveyanceJ8 No conveyance of the M & M from B back to E would be required.Chapter 2. mutual mistake. Rather.71 One might immediately ask how a mere equity differs from a n equitable interest. that the lawyer who prepared the conveyance neglected to include the exception. unless he is a bona fide purchaser for value. 2. Having proved the contract. Although the equitable remedy of rectification applies to any written instrument.7~ by E under any rule of law. Initially.77 (5) Mere equities 2. and is governed by the conventional rules of equity in civil cases. is discretionary.

passed to B. When rectification is granted. that E defaulted on payment of the debt. C would not be subject to E's equitable right of rectification if C were a BFPF5 Functionally. and constituted a fraudulent exercise of the power of sale. The legal ownership of Blackacre. The sale by BB to a wholly owned subsidiary was tantamount to a sale by BB to itself. For this reason the burden of proof for rectification is heavy. it may divest ownership of a legal interest in land. Under a n accepted rule of law. 2.000.30 Torrens' Elusive Title applicable to specific performance. it will usually require oral evidence that the parties did not change their original which is presumed to be the written agreement prior to the c0nveyance.8~ final written agreement. 2. if parties have made a contract which is to be carried out by a subsequent conveyance. When equity grants specific performance. has been stipulated. In this example. or rectified. which is really a n equitable remedy concurrent with the legal remedy of damages. the factual prerequisite to cancellation.75 The equitable right to have a transfer canceled. E's equitable right of cancellation would be lost.sl As parties not infrequently change some terms of their agreement between the time of contract and conveyance. the court would grant a n order canceling the transfer. In both cases the par01 evidence rule is violated. fraud. and that BB fraudulently exercised the power of sale by selling and transferring Blackacre to its wholly owned subsidiary. however. and in the case of a conveyance. it merely orders the performance of a contract. it contravenes legal doctrine. for even if the conveyance is rectified to reflect the terms of the original written agreement. that under the law of the jurisdiction a mortgage gives the mortgagee a legal lien or charge over the mortgaged property. this means that any right of rectification E might have had would be lost. but still subject to the mortgage. the conveyance is treated a s the conclusive evidence of the final agreement insofar a s it could be carried out through a conveyance. however. or more accurately. and E would once again own Blackacre. it is not available to correct their agreement so that it will reflect intentions they probably would have had had they been aware of a problem or been better advised.R3Rectification is available to correct a n instrument so that it will reflect the actual intentions of the parties a t the time it was executed. for rectification in this example would necessarily divest C of the M & M he acquired a s a BFP. acquired Blackacre from B a s a BFP.84 If C acquired Blackacre from B. it may alter the terms of a written agreement. in the case of a conveyance there must be no reasonable doubt that the deed does not embody the final intention of the parties. B. the transfer would be treated a s though it had never taken place.74 (b) Cancellation based on fraud.86 As with the previous example concerning rectification. no reconveyance from B to E would be required. has . If C. that the mortgage gave BB a power to sell Blackacre if the mortgagor failed to pay the debt when due in order to satisfy the debt. If E brought his suit for cancellation of the transfer within a reasonable time after discovering the fraud. When equity rectifies a n instrument. Assume that E granted a legal mortgage of Blackacre to BB to secure a loan of $50. to be superseded by the conveyance. the contract is deemed to be merged in the subsequent conveyance.

and BB fraudulently sold Blackacre to its own subsidiary. E l did default on payment of the debt. draw together much of what has been covered in section 2. B contracted to hold Blackacre a s security for a $100. E l was the owner of Blackacre. E3. and subsequent transactions entered into by B. such a s 'preliminary equity'. 'equity'. each must be allocated a priority of recognition.f. The important point is that the right to the equitable remedy of rectification or cancellation h a s a lower status in equity for some purposes than the equitable rights which are uniformly described a s equitable interests. B. C has a legal mortgage. but others. Initially. Priority of interest 2 3 4 E2. This transaction. E l granted a mortgage of Blackacre to BB to secure a $150. English Common Law 31 been described a s a mere equity in this subsection a s a matter of convenience i n order to differentiate these two equities from the equitable interests previously discussed. and under the mortgage. the principal amount and unpaid balance of the debt.000 loan from E2. B contracted to sell Blackacre to E 3 for $250. The interests must be enforced in some rank order. which occurred a t time 1 to begin a chronological sequence of events. and C all acquired their interests a s BFPs should this be relevant. BB held a power to sell Blackacre if E l defaulted on payment of the debt.Chapter 2. and even 'equitable interest' are also used. (6) P r i o r i t i e s b e t w e e n i n t e r e s t s 2. but it cannot simultaneously support all of these conflicting interests under any legal system. and which are based on specific p e r f o r m a n ~ eThis subject will . are shown on the following table: Time sequence 1 Event B purchased Blackacre by fraud from BB. E3 has a n equitable right to become the owner through specific performance of B's contract. a n example may be helpful. B granted a mortgage to C to secure a $100. for $150. in fact.~~ be discussed in the following subsection. Blackacre is a marvelous and unique parcel of land. 'lesser equity'. For others. Blackacre is located in a jurisdiction in which a mortgage creates a lien or charge over the mortgaged property. Interest created E l has a n equitable right to regain ownership through cancellation of the conveyance to B. E2 has an equitable mortgage through specific performance of B's contract. The term 'mere equity' is probably the most commonly used descriptive phrase.000.76 To a lawyer. . the title of this subsection may be adequate to indicate the problems to be discussed.000 loan from BB. The example will.000 loan.000 free of encumbrances.

because a prior .79 In the Rice case. . a s is a legal interest. . that is to say. The vendor gave his purchaser both the title deeds and a signed receipt for the purchase money."88 As C has a legal mortgage of Blackacre. a n equitable interest is not created by a n immediately effective conveyance. In the example. and was given priority. Lord Westbury ~aid:~'J I take it to be a clear proposition that every conveyance of an equitable interest is an innocent conveyance. the first equitable interest was a vendor's lien. however. but equity cannot enforce both E3's right to purchase Blackacre free from encumbrances. Phillips. I think it should be stated in some form as this: 'As between persons having only equitable interests. a s follows: "As courts of equity break in upon the common law. priority of time gives the better equity. . a t the same time. the second interest could take no more than what was left. I n the example. there is no reason in conscience to enforce B's equitable obligations in favor of E l .78 The equitable mortgage of E2 will be the second charge against Blackacre. .equity. Kindersley V. if B granted a legal leasehold to T. has a better and superior . The subsequent grantee takes only that which is left in the grantor. This statement is frequently quoted or p a r a p h r a ~ e d ? ~ first part of the The statement. First. Armed with these documents.77 The legal mortgage of C will be the first charge against Blackacre. This is true as to legal interests. E2. the statement suggests that the first interest in time must be preferred because once it was created. Equity must make a choice. he could not subsequently transfer the FSA to C free of the lease. But equity will sometimes postpone a n earlier equitable interest to a later one. I n Rice v. Hence grantees and encumbrancers claiming in equity take and are ranked according to the dates of their securities. . This equity would do if it could.32 Torrens' Elusive Title 2. however. Because the vendor's careless conduct had made it possible for his purchaser to create the second interest. Deferring consideration of E l for a moment. both E2 and E 3 acquired contract rights from B. said:92 To lay down the rule therefore with perfect accuracy. a n equitable mortgage. or whether it will leave him to his damage remedy a t law. Any equitable interest in Blackacre which either of them has depends on whether equity will grant specific performance of his contract against B. that is. and E 3 against C. . the purchaser was able to arrange a subsequent loan and to secure it with the second interest.89 2. and E2's right to a n equitable mortgage. that equity had no choice in the matter. . The reasons for this were concisely summarized by Lord Hardwicke L. if their equities are in all other respects equal. why should E2 rank over E3? Both of them are dependent upon the willingness of equity to specifically enforce B's contracts against him. . no facts are given which would justify a holding that E 3 has a better equity than E2. and the reason for it.The first grantee. and is a BFP. .' 2. Rice. Secondly. The last part of the statement does state the rule in equity. and a s both . the grant of a person merely entitled in equity passes only that which he is justly entitled to and no more. . still they allow superior force and strength to a legal title to estates. seems worthy of critical comment for it borrows too heavily from the language and doctrine applicable to legal interests. In Phillips v. .C. it was deemed to be a better equity. when necessity and conscience require it. even though the purchase price was unpaid.C.

but a s Blackacre is subject to mortgage liens of $200. since during the long period of the mortgagor's delay in setting up the invalidity of the purchaser's title persons were induced to lend money on debentures in the belief that a n unencumbered fee simple in the subject property formed . an equity to set aside a deed for fraud. but it will remain subject to the legal mortgage.95 and to add reality. I n short. before BB exercised the power of sale E l was the legal owner of Blackacre a s mortgagor. a n earlier mere equity is inferior to a later equitable interest acquired by a BFP. Three justices of the High Court of Australia heard the appeal. Summarizing E l ' s legal and practical position if he obtains cancellation subject to the other interests will vividly demonstrate the loss he will suffer if he ranks last.. which is first in time. At that time E l had sufficient knowledge of the fraud to seek cancellation of the transfer to B. one might think of Blackacre a s the Hotel Terrigal in New South Wales.000.000.80 This leaves E l ' s equitable right to have the conveyance from BB to B cancelled for fraud in fourth and last priority. The classic statement of the doctrine was made by Lord Westbury in a dictum in Phillips v. and BB had a legal lien a s mortgagee.94 2.and the purchaser under the instrument [creating the subsequent equitable interest] maintains the plea of purchaser for valuable consideration without notice. and B's mortgage will still secure E's $150. E 3 would first have to have his contract rectified. E l ' s right of cancellation will be of slight practical value. and all three wrote opinions. on the grounds of B's fraud. by reducing the purchase price to $50. the Court will not interfere.82 Kitto J. 2.g3 The contract right of E3 to purchase Blackacre will have third priority.000 debt. probably rank after the equitable interests of E2 and E3? Under existing equitable doctrine. seemed inclined to disregard the technical distinction between mere equity and equitable interest and to focus on more functional principles of equity to decide which claim was more meritorious. B will merely have replaced BB a s the mortgagee. On this issue our example is based on Latec Investments Ltd. Because the example is set in a jurisdiction following the lien theory of mortgage. Blackacre will be subject to the collective mortgage debts i n favor of C. 2. v. a s for instance where conduct on the part of the owner of the earlier interest h a s led the other to acquire his interest on the supposition that the earlier did not exist. E2 will have priority. I t should be emphasized that E 3 gains no advantage by being a BFP. In the present case it seems to me that thereis much to be said for holding that. The suit for cancellation was brought by E l in October 1963.a s for example. where there are circumstances that give rise to a n equity a s distinguished from a n equitable estate . Hotel Terrigal Pty. E2 acquired the equitable mortgage a s a BFP. Insofar a s E l is concerned.81 Why will E l ' s equitable right. Ltd. B acquired his ownership through BB's exercise of the power of sale in November 1958.000. almost five years after El's cause of action for relief in equity arose. E2. the maxim [first in time is first in right] may be displaced and priority accorded to the later interest. Cancellation of the sale to B will restore legal ownership to E l . and B totaling $350. Phillips.Chanter 2. or to correct it for mistake . for he said:g7 But where the merits are unequal. In March 1960. a s follows:g6 Thirdly. English Common Law 33 hold equitable interests and E2 is first in time. In the Hotel Terrigal case.

E2 could not prevail unless equity chose to assist him. before he seeks that assistance. his analysis was similar to that of Kitto J. However. a t that stage. the latter prevails. and if so he would have no equity in Blackacre. and E l had only a 'preliminary equity' to have a transfer cancelled. a n equitable interest in the subject property has passed to a purchaser for value without notice of the plaintiffs prior interest. E2 must not only prove his contract right. indeed. the mortgagor ought not to be allowed to insist upon its equity of redemption a s against the equitable interest of the trustee. 2. that apart from any question of estoppel of E l by conduct. I think this is the true meaning of Lord Westbury's observations. Taylor J. the same analysis is applicable to the holder of a n equitable mortgage. We are left with the conclusion that the only reason for the rule is the logic of history. This is obviously true. E l could be left to his damage remedy a t law. but equity must be convinced that its discretion should be exercised to cancel the conveyance. Both justices stressed that one seeking cancellation of a legal conveyance required the assistance of a court of equity. I prefer the latter a s a more precise statement of the law and. that no equitable defense such a s laches or unconscionable conduct bars his remedy. If the issue is whether or not the owner of the equity of cancellation can transfer his right. Both Kitto J. wrote a n opinion clearly demonstrating that there are two lines of authority on the question of whether a n equitable right to cancellation is a n equitable interest or a mere equity. that a plaintiff seeking to set aside a deed for fraud or to reform it for mistake is. he must satisfy equity that specific performance is appropriate. in considering El's right of cancellation a s preliminary to obtaining a true equitable interest. and Taylor J. then E2 would prevail with his equitable interest. Not only must the fraud be proved. If the issue is one of priority between the equity of cancellation and a subsequent equitable interest acquired by a BFP. or. E2 could be left to his damage remedy a t law. said:98 In such cases it seems that the court will not interfere and to me it does not seem to matter much whether it be said that this is because. or a s a prerequisite necessary to remove the impediment to El's title. it is a n equitable interest. because a plaintiff in such cases will be denied the assistance of a court of equity to remove the impediment to his title if. and the former is a mere equity. Neither justice stated any public policy reason a s to why equity should favor a n equitable mortgage over a n equitable right to cancellation.34 Torrens' Elusive Title part of the security under the trustee's floating charge.83 Menzies J. said that he would describe El's right a s a n 'equitable interest'. said that if equity declined to interfere and assist E l . however. . and if so he would have no equity in Blackacre. Although Taylor J. On the basis of authority. all three justices held that the subsequent equitable interest of a BFP was entitled to priority over a n earlier equity of cancellation. The cases show that the answer depends on why characterization is required. E2 had a better equity because he held a n equitable interest a s a BFP. He held. With respect. a s Lord Westbury's observations suggest. asserting a n equity a s distinguished from a n equitable estate.

and i n the situation i n issue S can recover Greenacre from X in a n action at law unless X can prove a right to Greenacre superior to S's naked possession. shortly thereafter X ousted S by force and took possession of Greenacre. and the law accords him full rights of ownership against everyone i n the world except someone who can prove a better ownership. transfer a t a time selected by the owner. a right of possession based on a possession prior to that of S . the notion of attempting to purchase Blackacre with hard-earned money in a n effort to join the English landowning establishment ceased to be attractive to S. nor a n agent of anyone. S took possession of Greenacre. Based on the practice of English lawyers.lO1This sample example has demonstrated the importance of possession in a context where neither adversary had title instruments. We near the end of this chapter with a fourth principle even more basic. anyone with sufficient force or guile could expel him from Greenacre.Chapter 2.99 Thus. transfer a t the volition of the owner. He was neither a tenant. What are S's rights? The fact of S's possession is prima facie evidence of his ownership of Greenacre. one or both contestants will . pleading i n defense that a third person has a better right to possession than did the plaintiff.85 Having read this chapter. he would have had no defense to S's action. X can prevail only by proving that he. one in possession of land would seldom have title instruments originating from a Crown grant. He found a delightful. If X had been a stranger to Greenacre before he ousted S. h a s a right of possession prior to and hence superior to that of S. What if he had no title instruments a t all? We began this chapter with a statement of three fundamental principles inherent in common law conveyancing. a guest. or based on a grant from the Crown. O w n e r s h i p a n d A d v e r s e P o s s e s s i o n (1) P o s s e s s i o n a n d r e l a t i v e o w n e r s h i p 2. English Common Law 35 g.loo I n the meantime. one in possession of land i n England could feel relatively secure of his ownership if h e could derive his claim through title instruments for a t least 60 years. a t his death Greenacre will pass by his will or by intestacy. not A. This is known a s pleading the jus tertii. Certainly in a land so long-settled a s England. however. Alas. After building a cob and thatch cottage. and the passive role of the state in the transfer process. 2. 2. the transcendent importance of possession. not only that S was a squatter. what ownership could X prove which would give him a right of possession better than that which S enjoyed? The answer is. Why is S given this protection? Unless S's possession were protected. The crucial question is. but that A had effective possession long before S did? No. and a chain of violence would be tolerated until someone with a n ownership recognized by law chose to assert it. Greenacre would be subject to anarchy rather than law.84 The tedious problem of proving unencumbered ownership of land under the common law has been the theme of this chapter. As between S a s plaintiff and X as defendent. S was a squatter occupying Greenacre in defiance of any other ownership. Could X plead and prove.86 I n the typical situation. a servant. wild acreage in Devonshire (Greenacre) apparently unoccupied. S could make any transfer of his possessory ownership of Greenacre permitted by law while alive.

or adverse possession. For this reason. that A's ownership was based on a grant from the Crown. with C's right to recover possession based upon A's prior possession.lo7S can defend his possessory ownership by proving a fatal defect in C's chain of title. or if B's deed . or A might have vacated Blackacre and S might have taken possession peacefully.36 Torrens' Elusive Title claim under title instruments. or that B's deed to C was invalid. If X had acquired ownership of Blackacre under A's will or through a n earlier deed from B. consequently A had constructive possession until S took adverse possession. and that no one in the A. that C alleged a right to recover possession based on a prior actual possession of A. 2. A was the owner of Blackacre relative to S. the generally accepted doctrine is that a n action for a 'declaration of title' or otherwise brought to judicially verify one of C's title instruments is in legal reality a n action to recover land. the law remains the same in all respects. It is not a functional expression in the Australian example. How do title instruments prove that a plaintiff has a better ownership based on a possession prior to that of a defendant in actual possession? Assume that S is in possession of Blackacre a s a squatter. for in reality C's right is to acquire a possession of Blackacre which neither he nor any of his predecessors ever had. Referring to C's right a s one to 'recover possession' of Blackacre provides a realistic description of the legal situation in England. In short. that C's case is based on a transfer of Blackacre under A's will to B and on a deed from B to C. Because S is a squatter. S might have ousted A. S might prove that A's will was forged. so A could transfer his nonpossessory ownership. With actual possession. as a necessary prerequisite he must prove the superiority of his ownership derived from A through title instruments. In this situation S would be proving a jus tertii. or a s properly construed. S has possessory ownership. C group had ever set foot on Blackacre. is equally crucial. If A had possession. his possession is inconsistent with C's ownership.lO5 Just a s S could transfer his possessory ownership. and if S now has possession a s a squatter. and a s long a s A could recover possession from S. However. At common law there is no absolute ownership. B. C acquired A's right to recover Blackacre from S through A's will and B's deed.87 The previous example was cast in terms of a n English Blackacre. S is the owner of Blackacre relative to everyone in the world except someone with a superior right to possession.lo3 One with a superior right to possession is presumed to have possession. inter vivos or a t death. A had the better ownership.88 The object of C's action is to recover (acquire) possession of Blackacre. first arose. For example. and it is this inconsistency which is a crucial element. there is only relative ownership. or that B conveyed Blackacre to X before the deed to C. left Blackacre to X. which C now has. However. and that C can prove his allegations.lo6 2. for that determines the time when the right to recover possession.104 Phrased more directly. for C's ownership based on a Crown grant to his predecessor A is superior to S's ownership based on actual possession. A obviously lost possession. and that someone was A a t the moment when S took adverse possession. However. A had no legal cause of action to recover possession until there was someone in adverse possession. Now assume that Blackacre is in Australia.102 When S took inconsistent.

Such a right will arise. and this right arose when S took possession adverse to A. C acquired A's equitable right of rectification. Although A's right of rectification is considered a mere equity insofar a s his relation with X is concerned. it is treated a s a n equitable interest to permit its transfer by A by inter vivos conveyance. and i n which C. had possessory ownership of Blackacre. and that C h a s the same status relative to X that A had. C's ownership. The crucial point.Chapter 2 . A executed and delivered a deed to X covering both Greenacre and Blackacre. and S's possession will then become adverse to. X might have knowingly prepared the deed with the misdescription in the hope that A would not discover the error. he h a s no right to recover possession of Blackacre. however. and hence the validity.lo8 I t should be emphasized that C must prove that he is the owner of Blackacre relative to S i n order to recover possession from S. The practical right which C's ownership confers is the right to recover (acquire) possession of Blackacre from S. but in the latter situation based on X's fraud.110 Assume. C h a s no legal ownership of Blackacre. A had a right in equity to have the deed rectified and thus to reacquire his lost legal ownership of Blackacre based on the mutual mistake of the parties. C succeeded to that legal ownership a t the time of delivery. The litigation and court determination would merely judicially recognize and confirm the status quo in fact and in law a s it was created by the parties. will. of B's deed to C. As C h a s no legal ownership of Blackacre. is to identify what C does not have. or intestate succession. had acquired A's right to recover possession. then C would have no ownership a t all. that through A's will and a deed from B. and that X took possession of both parcels under the deed. The jus tertii can be proved when it demonstrates that C acquired no ownership under title instruments. but in so doing it would neither confer a n ownership which C lacked. and X's possession a s owner cannot be inconsistent with or adverse to any legal ownership of C. Or. through valid title instruments. How long should C be permitted to delay before he seeks to enforce his legal right? Statutes limiting the time available for bringing a n action to recover possession of land were enacted a s early a s the year 1275. because inconsistent with. and if the deed in issue were delivered. If so. Assume that pursuant to a contract for the sale of Greenacre. nor deprive C of one which he had. or a mere equity. A was the legal owner of Blackacre relative to S .lOgA had a preliminary equity. and X might not have been aware of the misdescription error in the deed. In accordance with the Hotel Terrigal case. After rectification C will be the owner of Blackacre relative to X with the right to recover possession. A's remedy would still be rectification. Suppose that the critical issue i n the case concerns the delivery. therefore. (2) Acquisition of ownership by adverse possession 2.89 The following example contains a significant distinction from the previous example.90 Consider the previous example in which S. The statutes . for X is the only owner. The area was wild and undeveloped. if ever. English Common Law 37 to C were void. only if and when C obtains rectification i n equity. a s a squatter. 2. The court might hold that the deed was either valid or invalid.

Before 1833 limitation statutes merely barred the legal remedy of a superior owner. and that S claims under a deed from R. cannot be displaced without cutting at his life.112was different. the public policy favoring facility of transfer is served if old claims are barred. Moreover. both contestants will frequently rely on title instruments. gradually shapes his roots to his surroundings. With the passage of time evidence is lost. and B claimed under A's will. but he can never be sure that. it h a s been carried forward to The Limitation of Actions Act of Alberta. There are many possibilities.l13 which provides a s follows: 18.91 What public policy justifies extinguishing a superior ownership i n favor of a possessory ownership? As suggested earlier. and when one therefore brought a n action to recover possession of his land. leaving his better right intact should he be able to recover his possession peaceably. Justice Holmes elaborated on this theme a s f0llows:~l8 The true explanation of title by prescription seems to me to be that man.l16 2. The operative language of the basic section of the Real Property Limitation Act. or (b) if the right to recover first accrued to a predecessor in title. but three will suffice. in a system of relative ownership. but I have been in the habit of saying it is one of the most sacred and indubitable principles that we have.ll1 The very language of the early statues demonstrated that possession was the true root of ownership in England. like a tree in a cleft of a rock. No person shall take proceedings to recover land except (a) within 10 years next after the right to do so first accrued to such person (hereinafter called the "claimant"). rather t h a n preventing reliance on a n excessively old prior possession. Perhaps R claimed under a deed from A delivered before A died. or under a will of A alleged to have revoked the will under which B claimed. he h a s the best ownership. and although both C and S are equally vulnerable to this risk. which used to lead my . or on the grounds that A died intestate and that R was A's heir. Long dormant claims have often more cruelty than of justice in them. and so does the present Alberta Act. Assume that R also claimed under A. With a reduction of the limitation period from 20 to 10 years. The law used to look with disfavor on the Statute of Limitations. directly bars a n action to recover land unless brought within 10 years after the right of action accrued. from the time of his action. and when the roots have grown to a certain size. and if prospective purchasers can deal more securely with a possessory owner. to prove his prior possession."ll7 Mr. then within 10 years next after the right accrued to such predecessor.114 The Real Property Limitation Act. I t has been said that a statute of limitation is "an act of peace. it is S who will be uprooted after long possession if he is the ultimate loser. the words 'recover land' disclose their origin in English statutes drafted when superior ownership was based on prior possession. 1833. However. the proof was prohibited. In our example.38 Torrens' Elusive Title passed before that of 1623 all limited the number of years one could reach back. It can be observed that this statute. C claims through B. and the competing chains will often link a t a common source. 1833115extinguished the formerly superior ownership a t the end of the limitation period. S h a s possession of Blackacre. if the most recent possession one could prove occurred earlier than the effective time limit. leaving the owner i n possession a s the best owner. or that of a predecessor.

Any continuous period of 10 years adverse possession will suffice.93 The elements of S's burden of proof can be quickly summarized. or must S prove that it is not? The Alberta statute quoted above. Once C proved A's prior possession.122which simply means that it cannot be secretive. tacking is only permitted when the successor acquires possession by a disposition from a predecessor. Hence when C brought his action for possession. I n order to rebut this presumption.lZ4 the example under consideration. C's cause of action accrued when someone took possession adverse to him or to his predecessors. C must prove his superior ownership. certainly seems to cast the burden of proof on the plaintiff when it says that no person shall take proceedings to recover land except within 10 years after the right to do so first accrued. and transferred his possessory ownership to S who continued in adverse possession for five more years. which is typical. and if his action is not timely. and anyone else i n actual possession was presumed to occupy on their behalf. that C proved a superior ownership based on A's prior possession and on title instruments originating with A. S must prove that C's right of action accrued more t h a n 10 years earlier by proving that S and his predecessors occupied adversely to C and his predecessors for a t least that period. Functionally.lZ0 2. Assume that C brought a n action to recover Blackacre from S. C's action had to be commenced within 10 years of the time when his cause of action arose.Chapter 2. openly. Suppose that S's fence enclosed a portion of C's land. they were i n constructive possession when Blackacre was vacant.11g This means that even if A's successors were never in actual possession. however. they had constructive possession. behind the fence. Moreover. and notorious. and if neither of them even knew .92 Limitation of actions. absent adverse possession. and that one who relies on it must prove he is entitled to its protection. is not a panacea for all the ills which inhibit facility of transfer. exclusively. If R occupied adversely for five years. If S.lZ3 but it need not be knowingly hostile. open. it was to recover from S who was presumed to hold possession under C. If the limitation period is 10 years. The adverse possession must be visible. The net result is the rule that the statute of limitation is a defense. Upon discovery of the problem. English Common Law 39 predecessor Field to say that Holmes didn't value any title that was not based on fraud or force. C and S could litigate the location of the true legal boundary for weeks in court. but that C could not prove when his cause of action had accrued because he had no evidence on this point. that is. In R and S claim under title instruments. the timeliness of C's action may be established through a n extremely important presumption. the two periods can be cumulated. and might be innocent of any knowledge that their possession is in fact adverse to C's superior ownership. A and his successors are presumed to have retained possession. or 'tacked' together. the statute of limitation will have extinguished his ownership completely. The adverse possession must be inconsistent with the rights of the superior owner. I t is often contended that innocent adverse possession performs a benign function in boundary disputes. a n d that neither of them knew that the fence was not on the legal boundary. and continuously possessed a strip of C's land for 10 years. Must C prove that his action is timely. 2.1z1 However.

and under section 46(2). secure in his ownership? Bliss remains a state for the ignorant. A and his successors will be denied equitable relief unless action is commenced within a reasonable time after the right to seek rectification is discovered. that B died exactly 30 years after A died (at the same moment a s S was serenely contemplating his domain). The equitable doctrine of laches is analogous to statutory limitation of actions. delivered a deed covering both Greenacre and Blackacre. Even this requirement would not guarantee that all superior claims had been barred by limitation. In either event.128 This means that although A's right to seek rectification arose a t the time of the delivery of the deed to X. Two very important problems remain. It is said that equity will seldom grant more time under laches than the analogous .94 Assume that R and S. exclusive. S may not be sure of his ownership of Blackacre based upon his adverse possession for another 30 years. Can S look out upon his Blackacre in peace. rectificaMoreover. under section 46(1). At least in England. intending to transfer Greenacre to X. but it brought the risk within acceptable commercial limits. assume that A's will left B a life estate in Blackacre. he would have five more years in which to bring his action under section 24. If C were not under the disability of unsound mind.40 Torrens' Elusive Title that S was in possession of C's land. or could with reasonable care have been discovered.125 which is typical. ever since the death of A. The transfer either reflected a mutual mistake of the parties or was procured by X through his fraud. future interests and disabilities. At any rate. However. It should now be clear why a n English lawyer representing P before 1874 would normally have insisted that S furnish proof that he and his predecessors had continuous possession of Blackacre under instruments of title for a t least 60 years. remainder to C. On these facts.95 The equitable doctrine of laches remains for consideration. C's right to recover Blackacre did not accrue until he had a right to possession. the doctrine of laches does not begin to apply until actual or constructive knowledge of the right is acquired by A or his successors. and bars C's right of action 30 years after it actually accrued. under the Limitation Act. because C's right to recover Blackacre actually accrued while he was of unsound mind.12~ a s a n action to recover land. Under section 23. under adverse possession. Suppose that S desired to sell Blackacre to P. and continuous possession of Blackacre for 30 years. This situation will be analyzed in terms of the present Alberta Act. and that was a t the death of B. the normal 10 year limitation period will begin to run then. successively. were in open. the argument is that the strip could not have been that important to C. A's remedy could not be characterized tion. In paragraph 2.89 a n example was presented in which A. Making a slight change in the facts. it will be deemed to accrue when he ceases to be under disability. relative to X. and ~ancellation. 2. because with a mere equity he had no legal right to possession. Under this doctrine. A was left with a mere equity to have the deed rectified. Section 46(3) then imposes a n outside limit. or dies.126there is no statute of limitations applicable to such equitable remedies a s specific performance. 1939. and that a t the same moment C was of unsound mind and 40 years old. the fence becomes the true legal boundary! 2.

c. Multiplied by tens of thousands of real estate transactions. Adequacy of immediate transfer to purchaser. The virtue of the common law was that it provided security of ownership to a very high degree. The purchaser should evaluate all of the title instruments relevant to the seller's derived ownership of the interest sought to be purchased. his ownership is a s secure a s law can make it. It is frequently said that there are two primary defects: insecurity of ownership.129 However. insecurity of ownership is not a problem. and is far more secure than it would be under a Torrens system. Problem 3. and the vice was that it did so a t the expense of facility of transfer. for the right to recover Blackacre would not arise until that time. The problem is the difficulty of proving ownership under the common law system. He should visit the land and attempt to determine if there are . Unknown legal interests superior to seller's claimed ownership. See sections 2. See section 2. h. In most transactions there will be no serious defects in B's ownership. The purchaser should require the seller to account for any gap in the chain of title.b. Problem 2.97 The specific problems inherent in the common law system are listed below: Problem 1.d. Lost instruments supporting seller's ownership. or to procure necessary transfers to fill the gap. could not begin to run against A and his successors until they obtained legal ownership through rectification. If B cannot determine with any reasonable certainty that he is the best owner of Blackacre. laches would likely be applied to deny relief much sooner. and 2. Why was it so difficult to prove ownership under the common law system? The answer was demonstrated by the examples in this chapter. If B h a s both possession of Blackacre and the best legal right to possession. and in spite of the expensive investigations.Chapter 2 . it is unlikely that he will feel secure a s to his ownership. the parties must shoulder the expense of ascertaining with relative certainty that B owns what he wishes to sell. Before a sale of Blackacre from B to C can be completed. Summary of Common Law Problems 2. English Common Law 41 limitation period. The difficulty of proving ownership also seriously impairs facility of transfer. The statute of limitations. even if he is the best owner. Problem 4. See sections 2. Adequacy of all transfers (title instruments) relevant to seller's derived ownership.c. The purchaser can acquire no larger legal interest than his seller owned. and impaired facility of transfer. however.96 The important problems inherent in common law conveyancing will now be summarized in order to provide a comparative base for our ultimate evaluation of a Torrens system's solution for these problems. However. 2. it would be a n extraordinary case if equity allowed A the full limitation period for a n action to recover land after his discovery of the mistake or fraud.b. this imposes a n enormous financial burden on society. The purchaser should evaluate the adequacy of the seller's transfer to him. if C buys he will still not be sure that he is the best owner. and 2. but emphasizes its adverse consequences to the public in terms of economic cost.

See section 2.D. Anglia Building Society [I9711 A. supra. Id. 12. n.Rayner and McLaren. supra.f. A donee of any interest. Falconbridge on Mortgages 5 25. 717. Simonds 1955). 18. 15.A. 411 (Ont.R. Patton. 439 (H. 23.L. Unknown equities binding donee. 6.lO W. See section 2. This is the correlative of problem 5. Henderson v . but we shall explore that later. The crucial problem is that because of the doctrine of constructive notice. 2. 303. A. at 55 336-37. the purchaser can never be certain that he is bona fide.W. supra. Re Land Registry Act 1911 (1916) 28 D. Sutherland v. Patton.B.g. 17. Presbyterian Church v . supra. 629 (C.A. C.A. 19.).A.R. c. 1975).L.R.C. Patton and C . will be bound by any equity binding his donor. Osbome. 14.). See R. 2. or a superior equity. See section 2. [I9251 1 W. 375. Id.(2) infra. Rural Municipality o f Spruce Grove 44 D. n. [1919]1 W. 24. Northern Countries o f England Fire Insurance Co.42 Torrens' Elusive Title outstanding legal interests inconsistent with the interest sought to be purchased. 328 (2d ed. Patton on Land Titles 5 62 (2d ed. Pelletier v . at 427. The owner of a n equity will not be able to enforce his equity to the prejudice of a subsequent bona fide purchaser for value of a legal interest. n .). Problem 6.). 10. [I8951 1 Ch. Rudry Merthyr Steam and House Coal Colliery Co. 13. Sir Robert Torrens would probably have said 'perversely'. at 55 468-71. and the title problems it creates i n states o f the United States where the interest is still recognized.R. 482 (C. [I92813 D. Whipp (1884) 26 Ch. Patton.98 As the remainder of this study is devoted to legislative solutions for the problems just listed.C. Toronto General Trusts Corp. Williams on Title 659-60 (4th ed. 9. 354. n . 471.C. at 250. Violette [I9481 2 D. Problem 5. Ruben v . R.C. Patton. 1004 (H. 3. 274 (Alta. 11 Halsbury's Laws 360-61 (3d ed. S. legal or equitable. Problem 7.97 in order to provide a crossreference to the section in chapter 2 in which the problem is discussed. 16. Patton and C . Patton and C . Battersby. at 5 462. Mortgages $5 305A. 62 O.R. County of Gloucester Bank v. 25. 1977). n. 2.C. See Saunders v . Trustees o f Grosuenor St. 231 (N. 1957). 208.L. 22 M. D. 2.L. 4. 2. 22. Battersby.). Supreme Court o f Judicature Act. 2. The donee has no method of securing protection.R. 3.A. Patton.e. they will frequently be referred to by the problem number assigned i n paragraph 2. Vulnerability of equities.).f.L. See section 2. . 1971). Patton and C.W. 20. FOOTNOTES 1. 8. The purchaser for value will be bound by a n y equities binding his seller unless he acquires a legal interest. Id. 5. See subsection 2.L.C.). Unknown equities binding purchaser.).3 (4th ed. 973 (Alta.W. supra. 327 (S. 66. Id. R. at @ 464.R. or of a superior equity. Id.R.R.f. Violette v. 11.P.D. 21.L. v . Municipal District o f Opal [I9251 2 D.D.). See R. The owner of the prior equity has no certain method of preventing a subsequent purchaser from being bona fide. and is bona fide. at 5 593 for a general discussion o f common law dower.R.L. Patton and C . 7.R.) 36 & 37 Vict. 634 (B.L. Great Fingall Consolidated [I9061 A.R. Toronto (1918)45 D.). (Imp. at 407.

31.Chapter 2.R. Simpson (1841)1 D m . at 112. (1848)2 Ph. Clements [I9031 1 Ch. Maitland. 31. at 5 296 (emphasis added). Lloyd v. n. App. 46.A. 59. 4 Scott. 31. 62. 4 Scott. 259. & J. Bank of Montreal v .). at 116. Cooper (1880)16 Ch. Basset v . Maitland. at 5 284 & n. Id. 43 Salt v . Rice (1853)2 Drew. C.). Medway Building & Supplies Ltd.). 499 in support o f the text i n this paragraph. Anstey (1852) 1 De G. & G. 60. [I9581 3 All. Thorndike v. Law o f Trusts 5 130 (3d ed. Re Nisbet and Potts' Contract [I9061 1 Ch. G. 61. n . D. 4 Ch.Mumford v. supra. Agra Bank v . Cas. Jared v. Russel (1783) 1 Bro.).A. Equity 28-29 (2d ed. (1962)37 N. Le Neve (1747) 1 V e s .C. Maitland.4 & n . 44. D.R. n. 7 C h . Re Nisbet and Potts' Contract [I9061 1 Ch. 31. 73. Megarry and Wade. 282. Challis (1859)27 Beav. 31.Finch 102. 40. 709 (H. 307. 48. E. 30. 386 (C. Williams (1857)24 Beav. at 30. at 5 308. Edwards (1876)2 Ch. 47. supra.W. 75. and Maudsley. 69.R. Stroughill v . 77. Taylor v. supra. 4 Scott. 52. supra. 469 (B. 18 Eq. Smith [I9461 3 D. Russell [I8921 A. 269. 32. 73. 27.C. 41. at 113. 34. 563. 431.). Nicholls (1745)3 Atk. supra. Sweeny (1887) 12 App. Thompson v. 639.R.). Swanson v. 540 (C. n. 58. Jones v.R. Hanbury's Modern Equity 512-26 (9th ed. Hardingham v .R. T h i s Act was approved by the National Conference of Commissioners on UniformState Laws and by the American Bar Association i n 1964. 74. A s o f 1977. 544.A. Nosworthy (1673)Rep. 386. Cas. 64. Barry (1874)L. Cave (1880) 15 Ch.). 33. 53. (1872)L. 428. 635. Russel v. Id. supra. at 3. 892 (C. Hunt (1859)3 De G.C. n . 37.R. App. 244 (H. 4 Scott. Maitland.L. 4 Scott. n. C. Id. n. Baker Ltd. Marks [I9711 C h . Wilkie (1896)26 S. 135. Housefield (1834) 2 My.L. 31. 175. 47. 31. 66. App. 29.). at Q: 305. 35. 728. 774. 419. 42. Doherty v . n.Y. W m s . 627. English Common Law 26. Real Property 114 (4th ed. 71.t. 4 Scott. 66. C. supra. 38. 63. Hodgson v . D. Rogers v. 617 (P. 304. 76. Tourville v.A. 143.4. 459. supra. 1967). 3 Ch.R. 329.). 488. 662-63 (footnotesomitted). 51. Stohwasser (1874)L.L. 65. Symmons (1808)15 Ves. 49. & K . Probate Can Be Quick and Cheap: Trusts and Estates in England 31 (1968). 43. n. 27. Trustees' Powers Legislation. Newton (1868)L. 1. supra. 50. 72. Jellett v . 57. at 549 (C. at 404.A. Rev. n. 36. Naish (1734)3 P. 54.Newlon v. supra.C. Allman (1878)3 App.L. Cave v. 1975).L. 556.A. 31. M. 27. . 7 H. Id. Brunyate 1936). at 5 302. at 5 289. L. Rice v. Banks (1868)L. 67. 64. Gaugain (1846) 1 Ph. 1969). 55. 56. 4. 27. at 5 298. 31. supra.see Le Neue v. 2 Scott. 39. Sen. at 30-34. [I9451 2 W.409-10 (C. 4 Scott. n. 45. 5 7 had been enacted in eight states.U. 28. Parker v . 4 Scott. 70. Fratcher. &War. See Lysaght v . supra. 68. Fratcher. Whitworth v. n. v . Mackreth v . For a n analysis of this legislation see Fratcher.R.

90. 107. 118.W. Walters v.Sugd. H. and Templeton v.44 78. 793 (P. Pinder [I9691 2 A. Hotel Terrigal Pty. Jones [I9541 2 All E. & J. R. at 289-91. 121. 120.R.L. 1. 88.A. 100.C. Reade (1807) 8 East 353.A.S. Phillips v. & J.R. at 78.R. supra.A. Laskin. Craddock Bros. 1970. a t 276 (Aust.C. Latec Investments Ltd. Whitlock (1865) L. s 18. Webb (1870) L. (1862) 4 De G. and Templeton v.) 3 & 4 Will. [I9381 1 A11 E. 531. 550. 109.F. 94. Burrough v. Knight Sugar Co. Piper v.C. 1970.).). 84. 208. Phillips (1862) 4 De G. n. 92. ed. Id. 111. Perry v. v. Hickman [I9071 1 Ch. 1 Q. (1965) 113 C.). 639. 50. Alberta Railway and Irrigation Co.). 564. 266 (P. (Imp. c. 523 (C. c.per Menzies J.) 3 & 4 Will.R. Id.F. supra. c.D.A. s 2. Hunt [I9231 2 Ch. A' Court v. 85.). (1965) 113 C. D.). 208. Lemer. 125. Ontario and Minnesota Power Co. Hotel Terrigal Pty. McConaghy v. per Best C. 81. Short (1888) 1. The Limitation of Actions Act.L. 113. Vandeleur v. 6. Smith v. 4. Id. 129. 95.C. Franks. n. Ocean Estates Ltd. 265 (Aust. 97. McGugan v. Ltd. 108.L. Agency Company Ltd. Piper v. (1853) 2 Drew 73.L. 122. Id. Denmark (1880) 4 S. Birkhead (1754) 2 Ves.R. Snell's Principles o f Equity 684 (26th ed. Ltd. 266 (Aust. v. 124. 208. A.S. 209 (Imp. 379.R.). 564.45 D. 820 (A. H. 19 (P.C. D. Id. 86. 571. Megarry and Wade. Fowler v. s 44.F. s 2(7).C. 609. 338 (H. (Imp. 91.D.B. supra. Cave (1880) 15 Ch.). Megarry and Wade.C.C.L.). 73 (P.12 D. The Limitation of Actions Act.R. D. 104. 266 (A. Asher v. a t 286.t.). 83.A. a t 1022 Beale v. 110.C. Stevenson (1913) 28 O. s 34. Kyte [I9071 1 Ch. R. 105. 5 Ch. 99.L.Sen. 112.R. 820 (A.). 793 (P. Sloane [I9191 1 I. App. Thompson v. Latec Investments Ltd. Cas. H. 115. (1918) 44 O. 127.). 117. 379. 216.R. c.L.C. Cross (1825) 3 Bing. & J. 250. Wortley v. Cases and Notes o n Land Law 613 (rev. 136 (C. 209. 27. Kyte [I9071 1 Ch.C. 80. c. (1965) 113 C. c.). 4. a t 117. 639.R. Harvey (1769) 4 Burr.). 101. 103.C. 823 (Ch.R. and Templeton v.R. 126.R. & J. H. .L. 2484. Cas. 1970. Hotel Terrigal Pty. Stevenson (1913) 28 O.1App. Haldane v.A. 116 (C. Id. Law v.C. 21. Limitation of Actions 116-17(1959).J. 793 (P. a t 574. 82. 93. 123. (1965) 113 C.L. 1966). 43. Latec Investments Ltd. Megarry and Baker. 102. 87. 673 (Alta.S. 50. 50. The Mind and Faith o f Justice Holmes 417 (1953).). 27.D. 209. 114.R. Re Maddever (1884) 27 Ch. R.C. 265. at 215. ZLrner [I9481 O. Torrens' Elusive Title Bealr v. Smith v. v. 12 D. Agency Company Ltd. The Limitation of Actions Act. 98. Megarry and Wade.) 2 & 3 Geo. 79.R. Roe d. D. at 217. 1964).R. Clissold [I9071 A. Ltd. Cave v. v.). (1862) 4 De G. Short (1888) 13 App. 119.R. 31. v.D. Cave (1880) 15 Ch. n. Cas. Public Trustee for Alberta v.R.). 116. 96.). [I9481 2 D. 265 (Aust. 106. 329 at 332.R. Pylypow [I9731 6 W. Fowler (1859) 4 De G.). Cave v.L. Short (1888) 13 App. at 119.L. v. 128. 89. Doe d. Warren (1843) Dr. Agency Company Ltd.

it becomes necessary in the case of every system to decide to which class it belongs. This was recognized by Hogg. and each division will contain systems closely resembling systems on the other side of the line. Instrument registration is relevant to all but the first two common law problems summarized a t paragraph 2. These statutes introduced a system variously known a s 'deed registration'. If one could identify the 'best' solution for one of these problems. one can garner some practical insights from legislative attempts to find a 'best' solution stretching over centuries. might well be the appropriate solution under both systems.1 Legislative efforts to facilitate conveyancing under the common law can be traced to statutes enacted centuries before the Torrens system developed. both must grapple with identical public policy issues. and 'recording'. Introduction 3. B might previously have conveyed Blackacre to X. 3. and is extremely important to a study of the Torrens system for a basic reason all too often ignored: to achieve its objectives a Torrens system must incorporate many elements of instrument registration. for example. in which C desires to purchase Blackacre from B. 3. C could examine the public records and determine whether or not B or one of his predecessors had made a n earlier transfer inconsistent with the ownership offered for sale. The two classes shade off into each other. and modest registration fees . both a s to substance and procedure. that solution. being divided into title and deed registration. Any dividing line between the two must be to some extent arbitrary. The records are normally kept on a county basis. 'instrument registration'. then. and it is a matter of some difficulty to distinguish with complete accuracy between registration of title and registration of deeds.2 The basic strategy of instrument registration is simple enough: to publicize the transfer of interests in land. with even a superficial study of instrument registration. one of the classic Torrens authorities.3 Under instrument registration the state provides facilities for the registration of documents affecting the ownership of interests in land.CHAPTER 3 Instrument Registration: Recording a. when i n 1920 he wrote:' Registration. If all transfers of interests i n land were registered at a public office. Moreover. Even if B could establish that he and his predecessors had possession of Blackacre under title instruments for over 60 years.97. C could not be certain that there were no outstanding legal or equitable interests inconsistent with what B offers to sell.97. Because both systems must provide some solution for problems 3 through 7 a t paragraph 2. Consider our basic example.

. For centuries land in England had been transferred by means of a ceremony called 'livery of seisin' or. . not related to the protection of purchasers from concealed prior transfers. 3. the transferee. . The transferor. "Indeed. shall pass .e. and the transferee would be left i n possession.. and usually witnesses would go upon the land. including those which have incorporated its features into a Torrens system. . that X did not register his conveyance. Some form of instrument registration exists i n all common law countries. and its indexing in particular. is how to resolve the contest between a prior transferee who h a s not registered.from one to another. registration does not give validity to a n instrument which is invalid because it does not manifest the intention of the transferor. and the public. or results from a judicial proceeding without jurisdictional foundation. in some areas little attention is paid to the instruments themselves. and a s part of this service. is of enormous consequence to lawyers."2 There is no evidence that the fare would be improved. and that each category can be traced to one of three 'granddaddy' s t a t ~ t e s . the state does interject itself into the conveyancing process. and a subsequent transferee of a n inconsistent interest. 'notice statutes'. but its role remains largely passive. Although systems vary in efficiency. and 'race-notice' statutes. ~ 3. . Such a conveyance remains void. or lacks a transferee. and one wag tells of the county clerk who would put a menu on record if a fee were tendered. delivery of possession. this important subject is left to professional systems analysts. 'race' statutes.6 The first was the Statute of Enrollments. 3." Legal historians conclude that Henry VIII had a personal reason for pressing this Statute upon Parliament. enrolled in one of the Kings courts. and the one which has most divided jurisdictions relying on the system. .46 Torrens' Elusive Title are charged. it undertakes to index them a s required by statute. . i. The state merely provides a public office and public servants to make it possible for individuals to register instruments. The administrative efficiency of a n instrument registration system. . by reason of any bargain and sale thereof. which will be explained shortly. the transferor would physically deliver a rock or a clod of dirt to the transferee and utter appropriate words signifying a transfer of possession. the registration of hundreds of thousands of instruments in a public office would serve no useful purpose unless they were indexed so that a searcher. other professional title searchers. upon investigation. lands . Obviously. . and that B subsequently purported to convey Blackacre to C by a deed which would have been effective if B had still owned Blackacre. be . In a primitive agrarian society with a nonmobile population. in modern terminology. . exept the same . .4 Subject to one exception vital to the operation of the system. It is a matter of no slight fascination that all existing statutory solutions for the problem posed above fall into one of three basic categories. proved to be forged. the transferor would retire from the land. Assume that B conveyed Blackacre to X by a perfectly valid deed. . could locate which instruments might affect Blackacre. Suppose that C discovered a prior registered instrument purporting to be a conveyance of Blackacre from B to X which. . . 1535: which provided that "no . . . With instrument registration.5 The crucial issue i n instrument registration. such a s C.

X acquired Blackacre through his prior unrecorded conveyance from B. As between B and X. even if i t were not recorded. If that is so. shalbee of force against any other person except the graunter & his heires.Chapter 3 . however. . . C would be bound by the prior equitable interest of X unless C acquired his legal ownership through registration a s a purchaser for value without notice? 3.1° 3. Henry VIII was the paramount overlord in England. unlesse the same bee recorded. the first conveyance registered gains priority. the Statute of Enrollments failed to accomplish this result in England. .~ prior but unregistered conveyance from B to X was in abeyance. lands. for whereas that Statute provided that a nonregistered conveyance passed nothing.9 What requirements are imposed on C by a typical statute based on the Massachusetts model? As X's ownership would not be divested in favor of a n heir of B. For this reason. even actual knowledge of the prior conveyance to X required by C before his purchase will not deprive him of the victory gained if he wins the race." This statute is significantly different from the Statute of Enrollments. X was intended to obtain legal ownership of Blackacre. However. This means that B retained ownership of Blackacre. registration statutes based on this model are known a s 'race' statutes. As stated above. and if B retained no interest in Blackacre. the Statute of Enrollments remains quite significant. . written conveyances called bargain and sale deeds had become common. . .5 The Statute was quickly rendered obsolete by a new form of written deed. possessory ownership. and he was entitled to feudal dues (revenue) when one of his vassals transferred any land held in tenure under him.graunt . By the time of Henry VIII. . the . and C need only register before X registers in order to acquire Blackacre. he conveyed it to C by a valid deed. notwithstanding the words of the statute.8 The second statute for consideration. . . and in England equity considered X the beneficial owner. Notice is irrelevant. the courts held that i t would not be divested in favor of . which the enrollment mandate failed to cover. . Applying this model to our example. it stipulates that no ownership shall pass under a conveyance until it is r e g i ~ t e r e dApplying this model to our example.~ North C a r ~ l i n aAlthough C must be a purchaser. Henry VIII wanted no transfer to take effect unless it was enrolled so that he could collect his feudal dues. following a chronological sequence. under a pure race statute the prior unregistered conveyance from B to X was in abeyance. The equity courts applied standard equitable doctrine and held that. was enacted in the Massachusetts Bay Colony in 1640: and provided that "no . and the most notable surviving example is that of .7 As a legislative model. Hence the Statute of Enrollments. and they facilitated the covert transfer of land ownership. the Massachusetts statute left the conveyance effective a s between the grantor and his heirs. however. for reasons that might have been predicted. the lease and release. Literally. Registration 47 livery of seisin gave effective publicity to a transfer of what was usually the best ownership. of a n y . 3. and the grantee. how could C ever acquire anything? The generally accepted explanation is that B was left with a statutory power to divest X's ownership by a conveyance to one who satisfied the requirements of the statute. .

and the interest purportedly transferred. . the words 'enrollment'. C must be a purchaser for value. . . conveyance under which such subsequent purchaser. and . . . the change from registration to recording occurred in Massachusetts in 1647. The Statute of Enrollments required enrollment. . . which of necessity means before X registered. Therefore. whereby any . .14 Originally recorded instruments were copied in script into great . statutes based on the Massachusetts model are known a s 'notice' statutes. . so that statutes titled 'Registry Acts' are functionally recording statutes. . Under such a statute. C must be innocent of any notice of the prior unrecorded conveyance to X when he purchases. In North America. may be any way affected in law or in equity. for the Act expressly states that a conveyance is void only against a subsequent purchaser who first registers his conveyance. . the court reasoned that the legislature must have intended that it be effective against B's assigns who had notice of the prior conveyance to X. The Massachusetts court used statutory construction. 3.10 The third historic statute is the English Registry Act for Middlesex County. C must acquire his conveyance from B as a purchaser without notice of X's interest. . 3. X acquired Blackacre through his prior unregistered conveyance from B. . and C must also register before X registers. . .11 There is absolutely no race feature in a statute based on this model. shall be adjudged fraudulent and void against any subsequent purchaser. C's conveyance gains priority. conveyances . But if C does acquire his conveyance from B a s a purchaser without notice. . As well.. .13 Thus although the Act was drafted a s a race statute. unless such memorial thereof be registered . Because the conveyance was valid in favor of X a s against B. . lands . . and subsequent statutes based on the Middlesex model have incorporated the notice requirement. and 'recording' have been used interchangeably. .11 To this point. For this reason. rather than the equitable doctrine relied on by the English courts with respect to the Statute of Enrollments. . . may be registered . Subsequent recording is irrelevant a s between X and C." Applying this model to our example. his heirs and his donees.48 Torrens' Elusive Title anyone who took from B a s a donee. 'registration'. conveyance . . every such . shall claim. and remains the uniform practice. Recording requires that a complete copy of the instrument be included in the public records. Both of these procedures are the same and are satisfied by a memorandum or memorial included in the public records stating the names of the grantor and of the grantee of the instrument. By recording before C purchases. and the Middlesex Act required registration. . before the registering of the memorial of the. the English courts added a notice feature. statutes based on the Middlesex model are known a s 'racenotice' statutes. and that the Act was not intended to divest a prior unregistered conveyance in favor of a subsequent conveyance acquired with notice. X can give C statutory notice and prevent him from purchasing without notice. 1708. The English courts of equity quickly held that the Act was designed to prevent fraud. . that it was just a s fraudulent for one to gain legal ownership by registering a subsequent conveyance with notice of a prior conveyance a s i t was to fail to register a prior conveyance a t all. . Because of the double requirement imposed upon C.12 which provided that "A memorial of all .

race. and problem 5. The race statute operates mechanically. C need only promptly record in order to establish his position conclusively. the relative rights of a prior and of a subsequent transferee. 3. If C receives a n instrument from B a s a purchaser for value. hard to lose. and the three statutory categories previously discussed. with regard to the central issue under consideration. there are only 100 points: if one concluded that the 07 common law gave 90% to security of ownership. A subsequent interest. but the mechanism is available to both parties on even terms. security of ownership and facility of transfer. C can rely on the public records as disclosing all of the instruments relevant to B's claim of ownership. X could gain priority by recording first. but today copies are made by various photostatic processes. U n k n o w n Prior Interests 3.Chapter 3. Neither of these results is just. whether legal or equitable. using 'recording' to describe this system leaves 'registration' available for exclusive use in subsequent chapters devoted to title registration under the Torrens system. if held by one who satisfies the requirements of the statute. victory goes to the holder of the first instrument recorded. These problems can be discussed together because few modern recording systems draw any distinction between legal and equitable interests. notice. Society can opt for either of two legal regimes concerning land ownership: hard to come by. unknown legal interests superior to the seller's claimed ownership. Secondly. This is so because a s . easy go. simply reflect different degrees of movement. Unfortunately.97. 3.14 The race statute is the most productive of facility of transfer. for he can deal safely with X or C. for two reasons. problem 4. The race statute trades justice for simplicity and certainty. First. Henceforth the term 'recording' will be used to describe the system discussed in this chapter. All recording systems seek to move the balance towards facility of transfer.13 Every issue discussed in this study will involve two fundamental goals of public policy. and race-notice. even if both of their conveyances are recorded. However. b. 'recording' is a more accurate expression for the system a s it actually operates in Canada and in the United States. except the rare loser. If C desires to purchase Blackacre from B. The system is economical for the entire society. Even if C had knowledge of X's prior interest before C purchased. for thousands of person i n the position of C are spared the expense of looking for a usually nonexistent X. they are inherently inconsistent. it makes no difference whether the statute provides for registration or recording. unknown equities which might bind a purchaser. whether legal or equitable.12 This section will consider recording systems in terms of two of the problems stated in paragraph 2. will take priority over a prior unrecorded interest. whoever recorded first. Registration 49 books kept in a public office. Even if C neither had knowledge of X's prior interest nor could have obtained knowledge by a n reasonable search. In percentage terms. then 1 9 0 remained for facility of transfer. More likely some rough balance will be sought.15 A race statute also promotes facility of transfer if D wishes to purchase Blackacre. In a contest with X. or easy come. C could gain priority by recording first. the holder of a prior instrument. 3.

Once C h a s acquired his interest a s a BFP. This prophylactic effect makes it more likely that the public records will disclose all instruments relevant to B's claim of ownership. Recording provides X with a simple method of protecting his interest by notifying the world of it. Moreover.18 On other issues. for i t might be much easier for X to establish that a prudent searcher would have discovered his interest. This means that the two systems based on notice are neither simple nor certain. D knows that the first one recorded h a s priority.16 Should a society which h a s offered X a means of protection a s close a s the county recording office. he can obtain complete protection. They are not certain because C can never be sure that he did not have constructive notice when he acquired his interest. with no more than a n equitable interest. and if C acquires his interest with the diligent care required of a BFP. I t is most unlikely t h a t C would risk a purchase if he had actual knowledge of X's prior interest. Thus if C does acquire his interest a s a BFP. If X neglects to record. This horror example is presented to underscore the reality t h a t facility of transfer is acquired a t the expense of security of ownership. the uncertainty inherent in constructive notice is a standing invitation to litigation.17 The notice and race-notice statutes are a draw in terms of facility of transfer if C desires to purchase Blackacre from B. Secondly. 3. and they will be initially analysed together. the burden imposed on C in order to achieve BFP status is the same a s it was under classic equitable doctrine in most jurisdictions. First. and for a few dollars. and that C knew these facts. it seems but just that C should gain priority over X. the rights of X and C are fixed. No duty to . Assume that X was a relatively uneducated man of below normal intelligence. Constructive notice tends to encourage litigation. 3. However.50 Torrens' Elusive Title both conveyances are from B. They are not simple because C cannot rely on the public records. Litigation can arise only on the purchaser issue. he is induced to record. X would have a difficult burden of persuasion to rebut C's case. and if C gave credible testimony that he had no knowledge of X's interest. that X had not recorded his contract. If C purchased Blackacre from B and recorded. C can gain priority over any interest held by X. he must still make a diligent search for outstanding interests in order to protect himself from the doctrine of constructive notice. the notice and race-notice systems part company. 3. that he and his family were living on and farming a quarter-section under a long-term installment-sale contract made with B. they can usually take care of themselves. The public policy upon which the notice system is based is fairness. this fact is not only objective. for although priority depends upon the fact of recording. If actual knowledge were the crucial factual issue. becauseX is vulnerable to losing his interest if he does not record. whether legal or equitable. be concerned if he fails to help himself? Laws tend to be created by persons in a socioeconomic class with above average education and commercial experience. he would extinguish X's equitable interest under a race statute. They improve C's position relative to what it would have been under the common law i n two respects. X cannot reverse the outcome by subsequently recording after his indifferent conduct h a s set the snare for C. but proven by public records.

but they do give D notice of the conflicting claims. New York. However. under a race-notice system. Under a notice statute. and sacrifices just treatment for the holder of the subsequent interest. for C does not gain priority unless he is also a purchaser without notice of the prior interest of X. There is no problem under a race statute. Registration 51 record is imposed on C in order to preserve his status relative to X. he assumes the risk of a subsequent sale by B. If X records first. it i s beyond the scope of this study to analyse any subtle distinctions that might exist between such existing systems a s those in New Brunswick. It is of particular interest as it attempts to ameliorate all of the common law problems summarized in paragraph 2. who will still appear as the record owner. but not a t the expense of the holder of the prior conveyance. which was drafted as a race statute. even if C has acquired his interest a s a BFP after making a diligent search which includes the public records. Failure on the part of the holder of the subsequent interest to make a diligent search for the prior interest i s not forgiven if he wins the race. for the race feature of the statute controls. 3. D can deal safely with X if X recorded first. I n contrast. to D. the race-notice statute enhances facility of transfer a t the expense of the holder of the subsequent conveyance. Failure on the part of the holder of the prior interest to give timely notice by recording is forgiven if he wins the race. Under a racenotice statute. and finds two conveyances from B. if C recorded first. Rather. C loses his opportunity to establish that he purchased without notice.Chapter 3. and D is in the same position he would have been i n under a notice statute. D can rely on the records and deal with the holder of the conveyance first recorded. The anomalous results of the race-notice system may reflect that fact that it did not originate from purposeful design. D cannot deal safety with either X or C. X is permitted to record first and obtain priority. and New South Wales. and the system thus created was copied in subsequent statutes. . In short. However. One proposed act will be examined.20 Given the multitude of registration and recording systems in the common law world. The two recordings are irrelevant on that issue. both recorded after the date of B's conveyance to C.97 without resort to title registration. whereas most common law jurisdictions are moving towards adopting or reforming Torrens systems to solve these problems. the race-notice system provides more security of ownership for the holder of the prior interest. and prevent him from being a purchaser without notice if he deals with the wrong party. I t is otherwise if C records first. If C records first. the notice feature of the statute controls. 3. The race system may produce a n unjust result for either X or C. for priority between them is determined by whether or not C acquired his conveyance a s a purchaser without notice of X's prior conveyance.19 The notice and race-notice statutes are not a draw in terms of facility of transfer if D desires to purchase Blackacre. If C fails to record. The notice system does provide for a just resolution of a contest between the holders of a prior and of a subsequent interest. X retains his opportunity to establish that C purchased with notice. but a t least it does not discriminate between them on the basis of the time when the conflicting interests were acquired. one to X and one to C. it developed from the judicial addition of a notice requirement to the Middlesex Act.

made in a n effort to produce a recording system appropriately balancing the goals of security of ownership and facility of transfer. and must be (c) recorded before the prior interest is recorded.52 Torrens' Elusive Title The proposed act is the Uniform Simplification of Land Transfers Act. Uniform Act (US) 3 3-202:l 6 (1) Prior interest must be: (a) recorded before the subsequent interest is recorded. (2) Subsequent interest must be acquired by: (a) a purchaser for value. In terms of facility of transfer. the following outline summarizes the requirements for priority imposed on the holders of conflicting prior and subsequent interests under a typical race-notice statute.22 Requirement (l)(b) of the Uniform Act (US) marks a significant change. representing all states of the United States. to the extent the use or occupancy would be revealed by reasonable inspection or inquiry. whose use or occupancy i s inconsistent with the record title. If he fails to do so. his priority becomes vulnerable. Typical race-notice statute: (1) Prior interest must be: (a) recorded before the subsequent interest is recorded. but it is not lost unless the holder of the subsequent interest satisfies the statutory requirements imposed on him to gain priority. The latter provisions will be briefly outlined here in order to show what value judgments the Commissioners.15 Because of its sweeping objectives. rights of persons in possession are singled out and given affirmative protection. 3. approved by the Commissioners on Uniform State Laws (United States) in 1976. and must be (c) recorded before the prior interest is recorded. his initial priority is preserved. who was (b) without notice of the prior interest (which includes constructive notice).21 The recording system proposed is in the race-notice category. determining whether a person is in possession of land and claiming rights inconsistent with the record title is probably the least . the Uniform Act (US) contains many unique features in addition to its recording provisions. Based on this functional explanation. or (b) a n interest of a person using or occupying the real estate. and under the Uniform Act (US). the prior interest entered the contest with priority because it was first in time. A recording statute does not change this. who had (b) no knowledge of the prior interest. but constructive notice is closely pruned to eliminate elements which most impede facility of transfer. In order to understand the functional operation of a recording statute. If the holder of the prior interest complies with the statutory requirements imposed on him. (2) Subsequent interest must be acquired by: (a) a purchaser for value. 3. one must remember that under the common law. Instead of requiring the subsequent purchaser to inquire concerning possible rights of persons in possession of property a s part of his overall burden under constructive notice.

if the sale will involve fraud. or will be deemed to have acquired knowledge of i t through constructive notice. I n order to understand why this is so. on which he has knowledge that his purchase will involve participation in fraud. for it is possible. we assume that he has no knowledge of any prior interest. and 'without notice'. what conduct would prevent a subsequent purchaser from being bona fide. 3. or 'without notice' of the prior interest. but it is fraudulent if he purchases with knowledge that his purchase involves participation in fraud. Consider the example a t paragraph 3. First. he must not have had knowledge of the prior interest. We can now point out exactly where the Uniform Act (US) eliminates constructive . the purchaser is deemed to have knowledge of any prior interest a diligent investigation would have discovered. A judicially created solution is likely to create a n ill-defined hole in a statute and result i n uncertainty to the detriment of facility of transfer. Professor Scott was quoted a s saying that a subsequent purchaser is not bona fide if his conduct is fraudulent. However. the purchaser will probably either acquire knowledge of it through a search. The subsequent purchaser is not required to have been 'bona fide'. This will raise the purchaser to step 2. Rather. We assume. or by his counsel or agent while acting for the purchaser in the immediate transaction. how is constructive notice related to the bona fide issue. the purchaser will probably either acquire knowledge of this fact through his inquiries.16 of farmer X in possession of a family farm under a land-sale contract. the rights of persons using or occupying land have historically been accorded unique protection under English law. Constructive notice i s again applicable. 3.23 Requirement (2)(b)of the Uniform Act (US) is a radical deviation from the conventional notice provision. On step 1the purchaser is innocent.52. on which he h a s knowledge of the prior interest. I n terms of security of ownership.Chapter 3. In practice. 'good faith'. if there is a prior interest. Registration 53 onerous of the purchaser's slippery duties under constructive notice. but it does not eliminate the doctrine. whose rights would be destroyed under a race statute literally applied. it is not fraudulent if he purchases with mere knowledge of a prior interest. At paragraph 2. This will escalate the purchaser to step 3. A statute which anticipates the problem and which carefully circumscribes the perimeter of possessory rights is unlikely to seriously impede facility of transfer. for it imposes three magic-escalator steps to fraud. through constructive notice. we must quickly review two important topics covered in chapter 2. I n practice. and according to Uniform Act (US) $5 1-202 and 3-205. that the purchaser still h a s no knowledge that his purchase will involve participation in fraud. and secondly. or will be deemed to have acquired this knowledge through constructive notice. The shift from general phrases such a s 'bona fide'. knowledge means actual knowledge acquired by the purchaser. and the purchaser will be deemed to have knowledge of any substantive rights of the holder of the prior interest against the seller which a diligent investigation would have discovered.24 It is the equitable doctrine of constructive notice which so seriously impedes facility of transfer. to 'without actual knowledge' sharply curtails the impact of constructive notice. or in 'good faith'. It is suggested that few courts would tolerate this result.

that B was authorized to sell on behalf of X. Suppose that C had knowledge that T held Blackacre i n trust for E. that B was X's broker. the express trust is handled by specific provisions which protect C from the prior equitable interest of E unless C had actual knowledge that his purchase would involve participation in fraud. Or. the odds against these possibilities are overwhelming. it seems improbable that the choice would affect facility of transfer. he is a gnat's ankle (rather t h a n a country mile) away from knowledge that his purchase will involve participation in fraud. the application of constructive notice in this situation would require C to ascertain the terms of the trust. if the purchaser h a s actual knowledge of the prior interest. For this reason. and t h a t X had not recorded. and that X had not recorded. the disqualification based on actual knowledge of the prior interest could be somewhat more effective i n discouraging potential fraud for i t would provide a more objective standard for purposes of proof. if a potential purchaser h a s actual knowledge of a prior interest.25 Would the retention of this part of the doctrine of constructive notice materially affect facility of transfer? I n the case of a n express trust it would have a serious adverse effect. and that the first mortgage had not been recorded to facilitate this purpose. the purchaser is not deemed to have knowledge of a prior interest merely because a diligent search would have discovered it.26 With regard to most prior interests. 3. in a n effort to make certain that his purchase would not involve participation in a breach of trust by T. two exceptions: the purchaser will not obtain priority over prior interests protected by either recording or possession. The subsequent purchaser is protected unless he h a s actual knowledge of the prior interest. Because knowledge of the prior interest and knowledge of participation in fraud are likely to be concurrently present in the great majority of cases. Suppose that C had actual knowledge that B had conveyed Blackacre to X. of course. However. h e will not obtain priority if his purchase does in fact involve participation i n fraud.58. however. for a modern trust will usually confer this authority on a trustee. and that B had been left with record title to facilitate this purpose. 3. I t is possible that X had agreed to subordinate his mortgage to a subsequent mortgage to be granted by B. between steps 2 and 3 constructive notice remains applicable. I n reality. Nevertheless. Knowledge t h a t E had a n equitable interest i n Blackacre under a modern trust i s a country mile from knowledge that T had no authority to sell Blackacre. There are. it seems unlikely that the requirement t h a t the subsequent purchaser have no actual knowledge of the prior interest would materially affect facility of transfer. I t i s possible that the conveyance had not been recorded deliberately. suppose that C had actual knowledge that B had granted a mortgage of Blackacre to X. I n a situation other than t h a t of the express trust. and to interpret them a t his peril. and this eliminates the application of constructive notice between steps 1 and 2. However.54 Torrens' Elusive Title notice. Perhaps i t would be more conceptually sound to disqualify the purchaser only if h e had actual knowledge that his purchase would involve participation i n fraud. under modern legislation a s discussed in paragraph 2. Because actual knowledge of the prior interest is so likely to include knowledge that the purchase will be .

for the instrument must stand on its own merits under most existing recording systems. This does not mean that recording creates a presumption of validity. a n owner will not keep a safety deposit box full of title instruments. under recording systems.97) is also solved by recording systems. the latter interest has priority if purchased without fraud.97) is solved by recording systems. Under § 3-202 of the Uniform Act (US). Recall that the holder of a prior equity had no convenient method of preventing a subsequent purchaser of a superior interest from taking this interest free of the prior equity by achieving bona fide status. a prior legal interest is vulnerable to being divested by a subsequent interest unless the former i s recorded. will virtually always be cured at the time of the next succeeding transaction. L o s t I n s t r u m e n t s Supporting Seller's O w n e r s h i p 3. under a recording system this search must include the public records. If the prior interest is protected by neither recording nor possession when the subsequent interest is recorded. that B was i n possession of Blackacre. For example. The important point is that once a n instrument is recorded. Recording statutes with a notice requirement simply incorporate the equitable philosophy of constructive notice. and of course C would record B's deed to him. Suppose that E took possession of Blackacre under a n oral contract to purchase from B. if the prior instrument is recorded. Such a n omission. rather than a race-notice statute. recording statutes take a more direct approach and by-pass the constructive notice route. to be framed and hung on the gameroom wall. The peremptory nature of the statutory approach is even clearer if the prior interest is legal. and this is usually adequate to solve the lost instrument problem. a statute such a s the Uniform Act (US) is really a race-fraud statute. and this means that a purchaser has notice of any recorded instrument. A purchaser must make a diligent search for outstanding equities.28 This problem (problem 6 from paragraph 2. recording creates a presumption that the original existed in the form recorded. d. this problem (problem 3 a t paragraph 2. Again. E had .27 For all practical purposes. Assume that A was the record owner of Blackacre. C would require that B record the A to B deed. 3.- - - - - fraudulent. Without a n instrument creating his rights. Before C purchased. the result is produced by statute. even if the holder were a BFP. the public records serve this purpose. I t is simply a matter of legislative fiat. Vulnerability o f Equities 3. Consequently. Under recording.29 Older recording statutes leave other bothersome problems which can be solved readily by a more comprehensive statute. rare in itself. the original is rarely more than a n object of sentimental value. and that B had a valid but unrecorded deed conveying Blackacre from A to him. c. At common law a prior legal interest could not be prejudiced by a subsequent interest. but operates in reverse. under 5 2-306 of the Uniform Act (US). the subsequent purchaser takes subject to the prior interest. Occasionally a n instrument forming a vital link in chain of title will not be recorded promptly after the completion of a transaction. and made improvements. In fact. in terms of functional operation.

56

Torrens' Elusive Title

nothing recordable under some statutes, and because his interest was equitable, it could not be protected. Suppose that L acquired legal ownership of Blackacre by adverse possession, that B remained the record owner, and that C purchased Blackacre from B. Without a n instrument creating his ownership, L had nothing he was required to record under some statutes, and because his interest was legal, it was not divested in favor of C even if C were a BFP. The Uniform Act (US) solves both problems. Section 2-301 permits the recording of any document which can be processed by the equipment available in the recording office, and which contains the required indexing information. Both E and L could record affidavits evidencing and protecting their interests. Under 5 3-202, both interests are vulnerable if they are not protected by recording.

e. Unknown Equities Binding Donee
3.30 The fact that a donee is not protected from prior equities is not generally perceived a s a problem, although it is listed a s problem 7 in paragraph 2.97. The author is aware of only one recording system, that of Colorado,17which protects a subsequent interest acquired by one who was not a purchaser for value. Under equitable doctrine, the donee would be unjustly enriched a t the expense of the owner of the prior interest, and the fact that the prior interest was not recorded does not alleviate the unjust enrichment problem. In addition, the basic object of a recording statute is to provide a system upon which individuals can rely when engaging in land transactions. A purchaser who had notice of a prior unrecorded interest is not protected because he did not rely on the system. Similarly, a donee is not protected because he does not acquire his interest in reliance on the system; he receives, usually with joy, what his donor had to give.

f. Summary
3.31 Based on the analysis in this chapter, we can safely conclude that a modem recording system can readily solve all but the first two common law problems summarized in paragraph 2.97. The extent to which a Torrens system can maintain this progress and also solve problems 1and 2 is the subject of the remainder of this study.
FOOTNOTES 1. Hogg, Registration of Title to Land Thruughout the Empire 2 (1920). 2. Cribbet, Low of Property 280 (2d ed. 1975). This anecdote is quoted in respect to its possible author, who also taught his students that law is a jealous mistress. Neither he nor w e would keep her i f she weren't fun. 3. 4 American Law of Property 5 17.5 (Casner ed. 1952). 4. 27 Hen. 8, c. 16. 5. 4 American Law of Property, supra, n . 3. 6. The remarkable similarity of Torrens legislation is discussed in chapter 5. 7. 4 American Law of Property, supra, n . 3, at 5 17.5 n. 25. 8. Le Neve v. Le Neve (1747) 1 V e s . Sen 6 4 . 9. 4 American Law o f Property, supra, n . 3, at 5 17.4. 10. Cribbet, supra, n . 2, at 282. 11. Marshall v. Fisk (1809) 6 Mass. 24. 12. 7 Anne, c. 20.

13. Blades v. Blades (1727) 1 Eq. Cas. Ahr. 3 5 8 , s 12.

14. 4 American Law of Property, supra, n. 3, a t 5s 17.4 n. 8, 17.5; Feeney, Registration and Land Titles in the Common Law (1964) 2 Col. I. Dr. Comp. 18. 15. As of 1978, no state had adopted this act. 16. Because of the complex organization of the Uniform Act (US), the author h a s extracted and summarized (at his peril) only those provisions deemed relevant for a comparison with a typical racenotice statute. 17. Eastwood v. Shedd (1968) 166 Colo. 136,442 P.2d 423.

CHAPTER 4

Fundamental Elements of a Torrens' System
a. Method of Analysis
4.1 The Alberta Torrens systems has its statutory base in the Land Titles Act.' Because the remainder of this study will be devoted primarily to this Act, future references in the text will be to sections of the Alberta Act. 4.2 One might logically assume that the fundamental objectives and elements of a system created by statute could be determined through inductive reasoning from the statute itself. Why not start with the sections of the Alberta Act, and from those provisions move from the specific to the general; determine the problems of the system, their solutions, the inherent elements of the system required for those solutions, the basic strategy of the system, and finally its general objective? Unfortunately, on the basis of over 100 years of complex litigation concerning the meaning of various key provisions of the Alberta Act and of similar statutes, the author believes that the inductive method is not feasible. The multitude of cases evidence not only problems which had to be resolved, but scores of related problems left unresolved. I n seeking solutions, the courts have been faced with statutes which frequently either contain ambiguous and inconsistent provisions, or are devoid of relevant provisions. 4.3 The courts themselves have quite generally reached appropriate solutions through deductive reasoning, a s will become apparent a s this study progresses. This means that a s a legal system, contrasted with a n administrative system, the Torrens system today is substantially a judicial creation. Although the same deductive method will be used in this study, the author can be more open i n his approach. Judges may use deductive reasoning in their private deliberations, but faced with what appears to be a governing statute, they are under a pressure dictated by the nature of the judicial process to articulate their decisions in terms of the statute before them. Writing a judicial opinion harmonizing a decision demanded by the perceived objectives of the Torrens system with the language of a particular statute not infrequently stretches the judicial skill of the most competent judge beyond the breaking point.

b. Objectives of a Torrens System
4.4 We can postulate that the goal of a Torrens system is to solve all of the common law problems summarized a t paragraph 2.97. To accomplish this goal it must establish a new relationship between security of

Insofar a s problems 3 through 7 are concerned. Curing these problems involves a radical shift in favor of facility of transfer. (1) Registered i n t e r e s t s 4. They are intimately related and together they constitute the strategy of the system. Assume that B claims to have acquired Blackacre by a deed from A. Strategy of a Torrens System 4. alias C. a Torrens system need be no more innovative than a modern recording system. C wants to be able to establish that B owns Blackacre in FSA. The administrative element i s a comprehensive set of records maintained by the state disclosing all possible interests in any lands covered by the system. Under a Torrens system the state assumes administrative responsibility for maintaining comprehensive records disclosing most types of possible interests in any lands covered by the system. or a condominium unit on it. to serve the needs of B and C. and the records are kept with respect to parcels of land. the Registrar. such a s a mortgage. and requires strong state-prescribed medicine. How these elements operate to produce enhanced facility of transfer can best be explained through a n example based on the most common real estate transaction. the transferee h a s the risk of determining not only the adequacy of the immediate transfer to him (problem 2). under common law and recording system conveyancing. A parcel of land may be a quarter-section.5 There are two deliberate fundamental elements in a Torrens system. a s he does under a recording system. The legal element is the limitation of legal interests to those conferred by the state. If there is a n outstanding interest. the official responsible for maintaining the records will be called the 'Registrar'. a lease. For purposes of this study. desires to purchase Blackacre from B free from any inconsistent interests. legal or equitable. under a Torrens system the Registrar does more than keep records of claims of interests in land. the mines and minerals under it.6 First.60 Torrens' Elusive Title ownership and facility of transfer. The base of the system is land. but the adequacy of all transfers (the title instruments) relevant to the transferor's derived ownership (problem 1). before the establishment of the system. It is precisely these title instruments supporting B's derived ownership under the common law that C does not wish to be obliged to evaluate a t his peril. in favor of the latter. c. C wants to know what i t is and who owns it. or a n easement. one is administrative. B was in possession of Blackacre and claimed ownership under the Crown . Suppose that Robert Torrens. and all official records relevant to the ownership of a parcel or of any interest in it will be referred to as the 'register' for that parcel. Hence. exercising the sovereign power of the state. confers ownership by decree. What any given jurisdiction chooses to use as a parcel for the base of its records depends on the needs of the society the system serves. Problems 1and 2 present the real challenge. Suppose that. and the other is legal. and that A claimed under a Crown patent from South Australia. With respect to each parcel of land under a Torrens system. and that he wants to be able to go to a government office to determine conclusively whether or not he can safely do so.

the Registrar would cancel B's registration a s owner of Blackacre in FSA and would confer ownership on C in FSA by registration. with a sworn affidavit of attestation by a witness to the execution of the transfer. 4. the 'transferor'. and of equal importance. then. Assume that C presented a transfer of Blackacre to the Registrar. the administrative element could provide a register comprehensive of all legal interests recognized in any parcel of land.7 How. It is a n instrument executed by the registered owner of a legal interest.9 The operation of the Torrens system in terms of its two deliberate fundamental elements can be readily summarized.Chapter 4 . The legal element is the foundation of the grand strategy. and not by private persons. C was the equitable owner of Blackacre. and both would be created through registration. the Registrar would be authorized to terminate R's mortgage if he received a discharge executed by R.8 Secondly. in theory. . Under a Torrens system. assume that B mortgaged Blackacre to R to secure a debt B owed to R. legal ownership of land or of a n interest therein can only be obtained through registration. The Registrar. would decree that B owned Blackacre in FSA. could B sell and convey Blackacre to C? Heretofore in this study 'transfer' has been used a s a generic word to express any common law method which would effectively pass a legal interest from one person to another. Upon this foundation. It is not necessary for C to evaluate A's deed to B. Legal interests are created by the state through registration. 4. and to terminate L's lease if he received a surrender executed by L. 4. a t B's request. C need only read the register for Blackacre to establish this fact. Under a Torrens system 'transfer' has a technical meaning. remain unaccounted for. however. Elements of a Torrens' System 61 patent and the deed referred to above. or any earlier instruments which constituted the chain of title under older systems of conveyancing. Insofar a s C is concerned. and if reasonably satisfied that it was valid. and that B leased Blackacre for a ten-year term to L. Equitable interests. We have just seen that B's transfer of the FSA to C authorized the Registrar to terminate B's ownership by canceling his registration. If satisfied that these instruments were authentic. For example. These interests. What interest in Blackacre did C have while driving to the office of the Registrar? If his instruments were valid. must be created by the same procedure described above for the FSA. the crucial point is that whether or not these interests exist as legal interests depends solely on whether or not they are registered. he does. Legal interests are terminated by a reverse procedure. C wants to be able to determine what other legal interests exist in Blackacre. If B became the legal owner of Blackacre through registration. purportedly executed by B and naming C a s the transferee. authorizing and directing the Registrar to alter or cancel his registration a s owner in favor of the 'transferee' named in the transfer. if the register states that B owns Blackacre. Similarly. if they are to exist as legal interests. private conveyancing of legal interests is abolished. The decree conferring ownership is called 'registration'. Both would be initiated by a transfer from B. would evaluate B's claim of ownership. by 'registering' his claim B becomes the 'registered' owner of Blackacre. and with like meaning.

characterized in this study a s a nonregistered interest. What affirmative benefit will E's interest obtain if it is caveated? If E's contract were unforceable because it was forged and therefore extrinsically invalid. and to abolish equitable interests. There are two methods of having a n interest entered in the register. The equitable interest remains a mere claim under a Torrens system. A caveated interest is. and is therefore accurately described a s entered in the register for Blackacre. The caveat in its entirety becomes part of the Registrar's official records. 4. Only the priority of a n equitable interest. E can secure protection for this equitable interest a s a contract purchaser by filing a n instrument with the Registrar called a 'caveat'. or a copy of the contract itself a s a n attachment. are in reality only claimants. A legal interest is created by registration. for whatever the claim may be worth under the general law. this requirement will be considered further in chapter 6. Whether or not this remains a viable option is discussed in chapter 7. it will not be enforceable against C if C purchases a n interest in Blackacre without fraud and has his interest entered in the register first. is preserved by caveating. The Registrar. How can the state guarantee. under a recording system. . it would not be improved by being caveated. At common law and under recording systems there is no state decree of ownership. The position of a caveated interest is enhanced in one respect. but not a s registered. and they have significantly different legal consequences. Equitable interests are currently recognized. therefore. for a very important reason. C would take any subsequently acquired interest subject to E's interest to the extent that the latter was valid under the general law.13 A caveated interest h a s carefully been described a s entered in the register. 4. a s will be discussed in chapter 5 . This subject is discussed in chapter 7. Unless E files a caveat to protect his equitable interest.10 Perhaps the original strategy of the Torrens system was to limit interests in land to legal interests acquired by registration. and it is necessary to introduce them in this overview of the operation of a Torrens system in order to show how the original strategy has been modified to accommodate them. A provision of law which precludes E from securing enforcement of his interest against C because E failed to have a caveat entered in the register operates with negative force. Similarly. whether legal or equitable. The requirement that one be a purchaser without fraud i s typically imposed upon one in C's position under a Torrens system. is required to enter the caveat in the register for Blackacre. either the contract or a summary of it must be recorded. the Torrens system simply incorporates a recording system.62 Torrens' Elusive Title (2) Nonregistered interests 4. 4.11 Assume that B executed a contract for the sale of Blackacre to E. in turn. owners of interests in land. for if E's interest were caveated. ownership is to some extent conferred by the state. for C's benefit. that the register for Blackacre discloses all claims of equitable interests? For this purpose.12 Under a typical system the caveat would include either a summary of the contract upon which the claim is based.

Although C can rely on the register to disclose all interests.a. everything done under the system affects the ownership of interests i n land. Most grand strategies fail. In fact. or excluded a s a n overriding category. Blackacre remained subject to the tax lien. the Torrens system cannot achieve its administrative goal of providing a register for Blackacre disclosing all possible interests. (4) A d m i n i s t r a t i o n o f the s y s t e m 4. they are not created a t the moment chosen by the parties. within the scope of the system. Overriding interests exist a s though the state had no Torrens system. but a t a time dictated by the administrative procedures of the state. Assume that C was registered a s the owner of Blackacre. 4. and rights under federal law in a federal system. The categories of overriding interests vary among Torrens jurisdictions. If C purchased Blackacre without fraud. Whether or not any given category of interests should be included in the system. the system reverses the three fundamental principles of English law discussed a t section 2. a t least in part. because they are grandiose. and that it was prematurely discharged by error. subject only to those interests disclosed by the register a t the moment of his registration. and they are created a t the volition of the parties only to the extent that registration actually reflects the intention of the parties.16 However. such a s mortgages.15 On the basis of this overview. the system will survive. a n d it was not entered in the register for Blackacre. h e cannot rely on the register to disclose overriding interests. even if it . and had his interest entered in the register. even with the incorporation of a recording system through the caveat procedures. If relatively few errors are made. public easements. a s it h a s i n most jurisdictions which have adopted it. his interest in Blackacre would not be subject to R's terminated mortgage. legal and equitable. either by a caveat protecting his contract. C cannot rely on the register a s disclosing interests which the register does not purport to include. that the mortgage was registered a s a charge against Blackacre.14 Unfortunately. legal interests are created for the state. I n fact. This means t h a t it is everything a s to interests required to be entered in the register.Chapter 4 . Hence this subject is discussed i n chapter 9. it overrides the register. The state is no longer passive. Elements of a Torrens' System 63 (3) O v e r r i d i n g i n t e r e s t s 4. the Torrens system i s overwhelmingly administrative in operation. An overriding interest is a n interest in land which exists independently of the Torrens register. a n d whether or not i t achieves its legal objectives depends on its administrative efficiency. frequently involves a difficult public policy issue which can be more readily analysed after the Torrens system h a s been studied. or through registration of his subsequent transfer. one can observe that the objectives of a Torrens system are legal. Assume that B granted a mortgage to R. The basic strategy fails in part because of what can conveniently be described a s overriding interests. It is frequently said that 'the register is everything'. a t that moment there was a county tax lien against Blackacre. but they typically include government tax liens. they require too much government commitment to the solution of one problem relative to the other problems also vying for attention.

however.c. Under a Torrens system ownership was conferred on B through registration. and secondly the administrative means of accomplishing them. Quite the contrary. they act for the public and their need for a n efficient. that subsequently B was registered a s the owner of Blackacre. Hereafter 'general law' will be used in this study to refer to the law of a jurisdiction. inescapable and interrelated elements. But the legal objectives of the system should be determined first. there could be no error. B's registration may not be defeasible in this situation. Moreover. and this reflects a change from the general law. or was legitimized by. the system. His own functional definition is that a n error is a n ownership decree inconsistent with the public policy embodied in the general law. The author h a s searched in vain for a definition of error under a Torrens system. this study will consider its administrative aspects only when they affect intended legal consequences. If the forgery had been committed by a rogue intermediary between A and B. Lawyers are primary users. we would feel compassion for B. However. 4. and that the administrative system should then be developed. the system will contain three inherent. for divesting A of his ownership without his intention under these circumstances is not a goal of public policy. which exists independently of its Torrens system. but will do so efficiently for users of the system. d. both statutory and of judicial creation. the common law conveyancing system could not malfunction for it simply manifests the general law. Despite the system's dependence upon sound administration. (1) E r r o r 4. Under the general law no interest would pass from A to B by a forged deed. in statutes. the . and that the transfer from A to B upon which the Registrar acted would have been void if it had been a conveyance a t common law. one who buys a zebra takes it with stripes. in cases. that divesting A of his ownership was a n object of. We can focus on the forged transfer for discussion purposes. flexible system can be said to encompass the needs of the public. The author firmly believes that these legal objectives should be established first. Skilled lawyers should be involved while a n administrative system is being designed or reorganized in order to insure that it will not only accomplish necessary legal objectives. for any of the reasons discussed in section 2.64 Torrens' Elusive Title fails to provide legal solutions for controversies resulting from errors or fair compensation for losses. This does not mean. a s we shall see in chapter 6. because the administrative system must be designed to achieve clearly defined legal objectives. a n d hence A may not regain his ownership.17 The state can maintain a comprehensive register of all existing legal interests in a n y parcel of land by restricting legal interests to those currently recognized by the state through registration.18 Errare humanum est. They are not a matter of choice. I n h e r e n t E l e m e n t s o f a T o r r e n s S y s t e m 4.19 Assume that A was registered a s the owner of Blackacre. If this is the strategy selected to make it possible for one to be able to rely on the register. and in texts. who had absconded with B's money.

. At common law B would have acquired ownership of Grayacre if A's instrument had been a deed. if honest. This definition of error is neutral a s to fault. but that the Registrar misread them and registered B a s the owner of Grayacre in the first example. Neither in fact nor in law is there a transfer authorizing this result.21 Assume that A made a contract for the sale of Blackacre to B. but named B's brother BB a s the transferee contrary to the intention of A and B. but equity would have recognized that this results was also erroneous because not intended by the parties. that A's lawyer prepared a transfer including both Blackacre and Grayacre contrary to the intention of A and B. The point is that because errors do occur. assume that the transfer prepared by A's lawyer and signed by A properly only included Blackacre. and to do what in theory is not authorized. A Registrar could establish administrative procedures strict enough virtually to guarantee that only authentic transfers would be honored. equity. that A executed the transfer. the problems were not created by the Torrens system. and BB a s the owner of Blackacre i n the second. The Registrar.22 Now. and in law it is not decreed to represent A's intention. There is no change in the substance of the problems created. However. In fact the piece of paper does not represent A's intention.20 In invalid transfer situations the Registrar acts on the faith of a piece of paper called a transfer which he presumes authorizes him to divest A of ownership. The difficulty is that the addition of one more step in the procedure for the creation of legal interests adds a further group of human beings in the Registrar's office who can make mistakes. and would have cancelled the deed to BB and thus restored ownership of Blackacre to A. efficient operation of the system absolutely requires the Registrar to take the risk of error. The divestiture of A's ownership in these situations is neither a n object of the system nor authorized by it.Chapter 4 . the Torrens system substitutes a n entirely new set of problems which did not exist at common law in order to achieve its objectives. Changing the above example slightly. but the resulting administrative bottleneck would strangle facility of transfer. Elements of a Torrens' System 65 Torrens system acknowledges that this result was not intended for its purports to relieve A of the financial burden of the error by providing compensation for his loss. recognizing that this result was erroneous because not intended by the parties. but a s explained in paragraph 2. 4. and that is exactly why it is a n error. At common law BB would have acquired ownership of Blackacre if A's instrument had been a deed.73. and A's remedies will be the same. would have rectified the deed and thus restored ownership of Grayacre to A. 4. will invariably believe that the transfer is authentic. There is no reason to believe that the remedies in these two examples are or should be changed in substance under a Torrens system. Consequently. because the mistakes in the two examples were made by one of the parties. 4. assume that in the two examples discussed above the transfers were correct. and that BB was registered a s the owner of Blackacre. and that B was registered a s the owner of both Blackacre and Grayacre.

characterizing ownership under the system a s inherently defeasible is heresy. and in books and articles. However. and the legislative scheme for the attainment of that object. Megarry and Wade said:6 It will be seen that the principle of indefeasibility is by no means unqualified. That end is accomplished by providing that every one who purchases. and that. it is contrary to the received and almost universally accepted manner of describing a 'title' under the religion. charges. in order to investigate the history of their author's title." retrospective investigation is cut off. The main object of the Act. He may not be completely alone in this belief. they appear almost pervasively in the literature of the system. in delivering the judgment of the Privy Council. each proprietor of the fee holds direct from the Crown subject to such mortgages. leasehold or other lesser estates a s may exist or be created affecting the land. and to satisfy themselves of its validity. The prophet himself described his first Act a s follows:2 Hence." and out of this again arises the necessity of providing a fund from which rightful heirs and others may be compensated for the value of land which they are debarred from reclaiming against persons who have acquired title by registration a s purchasers.5 I n their third edition. shall thereby acquire an indefeasible right. which invariably attribute the quality of indefeasibility to a registered title. The following statement by Edwards J. or otherwise through the operation of the law. upon registration of the title under which he takes from the registered proprietor. in the absence of fraud. has an indefeasible title against all the world. The author believes that the 'indefeasible title' usage is deceptive. such person. notwithstanding the infirmity of his author's title. mortgagees. from a registered proprietor. as a first principle. Messer. the South Australian Real Property Act creates "independent titles. they altered their text to read:7 The so-called principle of indefeasibility is by no means unqualified. or in the cases in which registration of a right is authorised. Indefeasibility of the title created by registration follows of necessity as a corollary to the principle of "independent title. Lord Watson. and enters his deed of transfer or mortgage on the register. K n o w l e ~ : ~ The cardinal principle of the statute is that the register is everything. In their fourth edition. The quotations from Lord Watson and Edwards J. potential defeasibility follows inevitably from the Torrens system strategy of legal ownership conferred by state decree. In one of the early and classic cases under the system. to the right registered. were not selected a t random. an indefeasible title to the estate or interest. Indefeasibility of title.. These requirements are provided for in the Act referred to. Gibbs v. said? Their Lordships do not propose to criticise in detail the various enactments of the statute relating to the validity of registered rights. a s in the case of easements of incorporeal rights. appear to them to be equally plain. in bona fide and for value. except in cases of actual fraud on the part of the person dealing with the registered proprietor. of the New Zealand Court of Appeal. Nothing can be registered the registration of which is not expressly authorised by the statute. .66 - - Torrens' Elusive Title (2) Defeasibility 4. Everything which can be registered gives. in judicial opinions.23 I t is essential that we recognize that because of the possibility of error. comes from Fels v. The object is to save persons dealing with registered proprietors from the trouble and expense of going behind the register.

Unless C were assured that he would be able to retain Blackacre. 4. and one who was a registered owner but who was divested through error (A). They demonstrate quite clearly that the primary objective of the Torrens system was to eliminate the necessity of verifying the seller's derived ownership. the title of the registered owners must be protected if the system is to achieve maximum effectiveness. which is typical of Torrens statutes. The question posed above is important because errors do occur.25 Robert Torrens was a n administrator. His system did include a compensation fund. he would be compelled to 'go behind' the register before he purchased from B and to make a retrospective investigation of B's registered title.Chapter 4 .26 As Robert Torrens and his colleagues were preoccupied with defects in derived titles which existed prior to first registration. This means that in a contest between a registered owner (C). first in right. The object of the system was to save C the trouble and expense of investigating the history of B's derived title. it is understandable that they claimed indefeasibility for their registered title.24 The early quotations in the preceding paragraph are also significant because they disclose the historic environment in which the 'indefeasible title' tradition arose. that every error resolved in favor of indefeasibility for C's registered title becomes a condition of defeasibility for A's formerly registered title. Couldn't that be achieved by giving C the money and A the mud? 4. C may have wanted to be certain that he would be entitled to keep Blackacre in a contest with a prior claimant. Torrens' title is a n elusive ideal. were haunted by the danger of a prior superior owners. Robert Torrens and others of his generation. and they wanted the state to give them protection from this risk originating in the past. based on experience. however. and there is a very pragmatic reason for favoring C with the mud. the question posed by this example is. that B was subsequently registered a s the owner through error. is deeply embedded in the English legal culture. Assume that A was the best owner of Blackacre a t common law. Assume that A had been the first registered owner under the Torrens system. and that C (still Robert Torrens) purchased from B without fraud and became the registered owner. Elements of a Torrens' System 67 Some comfort can be taken from the fact that the word 'indefeasible' never appears in the Alberta Act. First in time. Surely A would have been a s deserving of protection a s C. but one wonders if he seriously thought that there would be errors a n d that compensation would be necessary after all land was safely ensconced in the new system long enough for old system claims to have expired under statutes of limitation. no legislature can work this miracle. 4. I t is obvious. or C may have distrusted the compensation system. and there is no evidence to indicate that he suffered from modesty. Blackacre may have had a unique commercial or sentimental value to C. his title is subject to defeasibility . and still would be registered but for the error. and to give C indefeasible title to the land (the mud). A registered title cannot be indefeasible against errors occurring both before and after its creation. who gets the mud and who gets the money? It is obvious from the quotations above that the system was designed to give A compensation for his loss (the money). and perhaps more deserving because he was registered first. Assuming a n adequate compensation system.

A's registered title had to be defeasible through error. Assume that Torrens was the best owner of Blackacre before the establishment of his system. the Registrar. As the purpose of this example is to emphasize that it is essential that the Registrar have power to accomplish the unauthorized. By becoming the registered owner of Blackacre.29 The basic example used throughout this chapter can serve to tie together the related inherent elements of error. and 'probably' means that Torrens could never have been sure that he had more than possessory ownership. he probably would have obtained the best ownership. (3)Power of Registrar 4. If Torrens had made a thorough title investigation a t common law before he purchased Blackacre. the expense of transactions is greatly reduced. In paragraph 4. The maximum scope of the Registrar's power (jurisdiction) is considered in chapter 5. and that C purchased from B without fraud and became the registered owner. However. that B was subsequently registered a s the owner through error. he is vulnerable to losing that interest to a successor through the same error repeated after his registration. and for this example it makes no difference how the error occurred. or from fraud on the part of B. because of the heavy responsibility he had carried over the years. Torrens will be entitled to compensation to the extent that the compensation system is established fairly. but sooner or later the paint will wear off. He registered . Under the Torrens system he can obtain a registered title with far less expense. It might have resulted from the negligence of A. or the Registrar. His ownership under the common law was a s indefeasible a s any legal system can make it. the worst will be assumed. Moreover. and if the unlikely error occurs.68 Torrens' Elusive Title through error inherent in any human system. 4. probably far less than the common risk that he had only possessory ownership. but if the system is administered efficiently. by that time one may not only have become very fond of the beast. and thereby can obtain protection from possible superior claims of predecessors.27 One can purchase a zebra with the stripes painted over. C's registered title should prevail. To whatever extent Torrens can acquire a n interest from a predecessor through error. the Registrar must have the power to make errors. 'thorough title investigation' means expense. B.25 it was suggested that in this situation. h e has worth the price. 4. and the power of the Registrar to make unauthorized ownership decrees. and because of the unreasonably low salary his cares had earned. To achieve this result. stripes and all. Torrens traded a n indefeasible title for a defeasible title. or another rascal.28 Under a Torrens system. The Registrar had grown restive. Torrens' registered title is potentially defeasible if a n error occurs after his registration. Assume that A was the registered owner of Blackacre. To say that the Registrar must have the power to make unauthorized ownership decrees does not mean that he must have the power to do anything. and which is therefore unauthorized. However. defeasibility. but may well have concluded that. the post registration risk of error is slight. he must have the power to make a n ownership decree which is inconsistent with a t least some rules of the general law.

It is essential to a Torrens system that the public be able to rely on the integrity of the register without inquiry as to the authority under which entries were made or removed. in Turta v." He also suggests that existing funds are frequently so guarded by statutory procedural hurdles which a claimant must surmount. Torrens referred to the necessity of providing a fund from which persons deprived of interests through the registration of others might be compensated. and the fraudulent couple absconded with the sale proceeds. If C. Co. for B would never have been the registered owner. Assume that B was a n employee of the Registrar. or an assistant deputy registrar. . or ineffect~al.23. of course. C could not have purchased Blackacre from B a s the registered owner. The registered title of C must still be preserved. 4. His ultimate responsibility. but voidable until the transaction with C occurs. could C purchase from B in safety relying on the register? Or. B sold to C. 'Void' is defined as "Having no legal force. It seems not open to doubt that it was the wise intention to confine the wide powers contained in the section to a registrar as defined by the Act. 424 were made by a registrar as defined by the Act.P.31 There is another problem closely related to that of the power of the Registrar to make unauthorized ownership decrees. is C responsible for determining whether or not a n entry in the register was validly entered? Consider the following statement by Egbert J. and are so closely . cites several jurisdictions which he states operate title registration systems quite satisfactorily without any provisions for compensation for loss. The necessary conclusion is that the Registrar must have the power to confer ownership of any legal interest in land recognized by the general law of the jurisdiction. There is no evidence whatsoever before me that the alterations made in certificateof title C. Canadian Pacific Ry.:9 It should also be noted that sec. invalid. act through his staff. a registrar of titles. a s authorized by section 24 of the Alberta Act. a deputy registrar.Chapter 4 . and Imperial Oil Ltd. 4. The Registrar must. Elements of a Torrens' System 69 his accomplice B a s the owner of Blackacre. . This serious and practical problem can be readily avoided if B's registration is both characterized and clearly recognized a s valid."~ Unless B's registration were effectual. 174(2) confers the powers thereby created upon the registrar who is defined . as an inspector of land titles when acting as registrar. however is to maintain a register upon which the public can rely. and that is the conclusiveness of the register to the extent that it contains entries within the scope of the Registrar's powers.10Simpson. Such funds are a n almost universal feature of Torrens systems.30 I t serves only confusion to characterize B's registration as void. and a s will be seen in chapter 6. however. and that he registered himself a s the owner. perhaps a layman.R. and not to permit of their exercise by an officialof lesser rank. C's registered ownership may be defeasible in this situation. that he gained improper access to the register for Blackacre. Compensation for Loss 4. legally null. purchased a photographic copy of B's certificate of title bearing the Registrar's seal. e. This would mean that A was the former registered owner immediately preceding C.32 In a quotation a t paragraph 4.

97). documentary requirements imposed on users of the system to insure the authenticity of transactions submitted for registration fall on all users. Because the risk is created by a state imposed title registration system. he can tailor protective requirements to meet only risks of sufficient frequency to justify them.13 One can accept the proposition that a n indemnity feature is not essential to the effective operation of a system of title registration. However. (2) That economic interest is subject to a defined peril. the cost to the society of increased documentation could be far in excess of the cost of accepting risks and paying for them on a n insurance basis. and if no compensation system existed to meet it.34 A second reason for a compensation system based upon sound insurance principles is that such a system could contribute to the efficient administration of the registration process. Society can seldom derive benefits without paying a price.14 (1) The registered owner h a s a n economic interest which can be valued in monetary terms. f. on the other hand. The author believes that the system can a t least relieve a purchaser of the necessity of verifying his seller's derived ownership (problem 1 a t paragraph 2. (3) A large group of registered owners are subject to the same peril. where almost all land i n private ownership h a s been covered by a Torrens system for decades. (4) The peril will strike infrequently and randomly. if the Registrar knows that a n insurance fund is available and will be utilized on sound insurance principles. The Registrar h a s the responsibility for determining whether or not transfers are authentic. defeasibility through erroneous conflicting registration. 4.33 I n a jurisdiction such a s Alberta. and still conclude t h a t the inclusion of compensation provisions strengthens the operation of the system. There seems little doubt but that stringent registration procedures could reduce the incidence of errors. political pressure would develop urging the establishment of such a system. however.35 This chapter h a s attempted to strip away some of the received mythology of the Torrens system. it seems imperative that the indemnity system designed to distribute that risk be provided by the state a s a n integral part of the title registration system. I t is believed t h a t if the actual risk involved were generally known to the public. As most transfers are in fact authentic. that their existence is a mockery. virtually the only remaining risk to a properly registered owner is defeasibility through error. Summary 4. I t is.70 Torrens' Elusive Title defended by the state. necessary that the inherent elements of the system discussed i n this chapter be recognized in order to permit the enactment of a Torrens statute which accurately . I n short. and that the benefits in terms of facility of transfer justify accepting the relatively slight risk to security of ownership inherent i n the potential defeasibility resulting from the power of the Registrar to make erroneous ownership decrees.12 Ruoff. (5) The economic loss inflicted on any single registered owner from the peril would frequently be disastrous. 4. considers that the 'insurance principle' is one of the three fundamental principles of registration of title. One reason for applying the insurance principle to this risk is t h a t it is a classic example of the type of risk generally distributed through insurance.

at 254. 1970. [I8911A. 604. 2.D. (N. (1906)26 N. FOOTNOTES 1.) 529. 12. c. judges. Land Law and Registration 179-83 (1976). at 563 (Alta. I1 The Shorter Oxford English Dictionary 2487 (3d ed. (1952)5 W. 9. Ruoff. Megarry and Wade. Anderson. 198. 5.L. but i f such should be his due. 3. 1966). T h e author does not wish to be burned at the stake as a heretic. 10. at 620.C. T h e Land Titles Act. 8.S.R. 4.). . Real Property 1084 (4th ed. 11. Id.S. 14. 1975). Elements of a Torrens' System 71 informs lawyers.H. 13.A. Vance on Insurance 1-7 (3d ed. Id.Z. 7. T.Chapter 4 . Torrens. Real Property 1066 (3d ed. R. 1951). Megany and Wade. and the public of the rights and liabilities of registered ownership. 1973). Simpson. The South Australian System o f Conveyancing by Registration o f Title 9 (1859). 248. 6.W.A n Englishman Looks at the Torrens System 13 (1957). h e would like company.

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C must assure himself that the transfer was intrinsically effective. that it was a legally valid conveyance to transfer some interest to B. For simplicity. and possible unknown legal interests.3 (1)Extrinsic validity. it is impractical to discuss the subjects of defeasibility and compensation for loss. Chapter 6 will then consider the circumstances in which conferred ownership is defeasible. C has four separate tasks. C needn't pursue his inquiry any further. C would obtain B's registered interest.7 In chapter 4 we concluded that under a Torrens system the state could decree.4 (2) Intrinsic effect.2 Suppose that C wishes to purchase some legal interest in Blackacre from B. and that B claims to have acquired the interest in question from A. if C acquired Blackacre from B.e. subject to no . 5. somewhere? Chapter 5 will consider these questions. through registration.6 (4)Unknown legal interests. 5. 5.c.5 (3)Adequate legal description. Consequently. and the related problem of compensation for loss. As explained in chapter 2.CHAPTER 5 Conferring Ownership by Registration a. for B has no interest in Blackacre. 5. and that collectively they form the interest C wishes to purchase. C must assure himself that the transfer was extrinsically valid. Introduction 5. This organization is based on the proposition that until the extent of ownership conferred under a Torrens system is determined.. C must assure himself that the legal description was adequate to transfer a n interest in Blackacre to B. that somebody (B) owned something (the FSA) somewhere (in Blackacre). 5.). C must assure himself that there are no outstanding legal interests held by other persons which are inconsistent with and superior in priority to the interest C wishes to purchase (see section 2. If the transfer to B were void for any of the reasons discussed in section 2.1 To what extent is it both possible and feasible for the state to confer ownership by registration? What is the scope of the legal ownership acquired by registration? What substantive rights does somebody obtain if he is registered a s the owner of something. and that C's only concerns are the transfer from A to B. that the rights it purported to transfer to B are valid under the general law. the FSA in Blackacre. assume that A owned Blackacre. and that no other legal interests existed in Blackacre. 5. The interest is 'in question' under common law and under recording system conveyancing because C must make certain that B owns the interest.

However. under a Torrens system A's registered ownership would presumably have been cancelled.74 Torrens' Elusive Title inconsistent legal interests. and that is precisely what the general law intended. One of the two registrations must of necessity be defeasible.28-30). that C's registered ownership will not be defeasible in favor of A if C purchased without fraud from a registered owners. B does not receive his legal interest by a transfer from A. b. misleading to refer to registration a s curing a n otherwise void transfer. and it is not feasible for the state to confer ownership of certain types of interests through registration. I t is possible for the state to confer ownership of a n interest on B through registration. The immediate problem is whether or not B's registered ownership will be defeasible. for B's registered ownership is not acquired through the transfer a t all. The system has malfunctioned because it does not intend this result. however. no interest passed from A to B. for both B and C are assured that B owns the interest for which he is registered. If we assume. then B's registration is the result of error. The Torrens system creates a new problem. In theory.8 Assume that B is a legal entity recognized under the general law of the jurisdiction. for if the transfer would have been void under the common law system of private conveyancing.10 Assume that B is not a legal entity recognized under the general law of the jurisdiction. (2) Recipient not a recognized legal entity 5. and this would leave the interest in A (see paragraphs 2. Under a Torrens system. a n unincorporated club. If the transfer were void. the problem will be whether or not his registered ownership will be defeasible. Although this . If C subsequently becomes registered a s the owner of the interest. but it is beyond the power of the state to confer the same interest in the same land exclusively and contemporaneously on both B and C. A transfer from A to B would be void if B were not capable of receiving the interest under the general law. There are both absolute and practical limitations on the state's power to confer ownership by registration. Limitations Related to the Recipient of the Registered Interest (1) Recipient a recognized legal entity 5.9 These difficulties are not. the state could confer ownership of Blackacre on B and C as concurrent owners. or a company not yet incorporated. The difficulties related to the extrinsic validity of a transfer a t common law. such a s a fictitious person. Who would own the interests? A solution must be supplied for this problem if a Torrens system is to function efficiently. however. I t is. eliminated by a Torrens system. referred to in paragraph 5. therefore. There are. are tremendously ameliorated. 5. and such ownership decrees are necessary for they are a deliberate fundamental element in the strategy of the system. To begin with a n obvious example. more difficult problems which must be explored. it can be seen how important it is that B was a registered owner. In some situations it is not possible for the state to confer ownership by registration a t all. it is conferred on B by the state through registration. however. there was no problem a t common law.3.

Assume that X forged a transfer from A to fictitious B. Solutions (1) and (2) come closest to carrying out the intention of the parties. or to the promoters of a n intended corporation in trust for those persons who furnished the consideration for the purchase. the registration of B would mean registration of the officers of the unincorporated B club. Assume that the interest was registered to the children of X. because the construction remedy is of limited applicability. for C could deal with the Public Trustee as trustee for X's unborn children. and C would be the immediately subsequent registered owner through error. 5. who was alive and who had had no children. but they furnish no solution if B were a fictitious person. Normally the register would contain a n entry such a s 'B Club'.14 There appears to be no functional solution if B were a fictitious person. a t least for purposes of receiving a n interest in land. Solution (3) is adequate for this situation. 5. This would warn C that he must obtain a valid transfer from the persons legally authorized to act for the registered owner. nor the Crown would be aware of the true facts. This presents a classic defeasibility problem which will be discussed in chapter 6. (4) Legislation could provide that the registration of any nonexistent recipient conferred the interest on the immediate prior registered owner in trust for whomever justice indicated the interest should be held.Chapter 5 . 5. Solutions (1) and (2) are adequate for the situations in which they are applicable. (1) Legislation could adopt the construction remedy a s a solution for all club and intended corporation cases. Consequently. Ownership by Registration 75 study can neither present nor evaluate all of the possibilities. If so. Neither solutions (3) nor (4) would help. 5. that a second transfer was forged from B to C. C.12 Legislations could solve the problem in several different ways. For example. could be recognized a s a legal entity. and a n unincorporated B club. of which the following are only examples. or the promoters of the intended B corporation. courts have frequently construed conveyances a s having been intended to transfer the interest to the officers of a club in trust for its members. some suggestions will be offered. Legislation is necessary. The Crown or A would be the statutory registered owner.11 Construction eliminates the problem under the general law in cases in which the facts make this remedy possible. (2) Legislation could change the general law. (3) Legislation could provide that the registration of any nonexistent recipient conferred the interest on the Crown in trust for whomever justice indicated the interest should be held. . and that C became the registered owner. for neither A. it does not provide a n adequate solution for the problem under a Torrens system. a n alternative solution along the lines of (3) or (4) would also be required. However. or 'B Company'. The situation will normally result from fraud. that B became the 'registered owner'. or a n intended B corporation.13 The seriousness of the nonexistent recipient problem becomes even more obvious if C wishes to purchase the interest.

5.76 Torrens' Elusive Title c. Land in Which the Registered Interest Exists 5. eliminated. d. the state cannot confer ownership of a legal interest in land without describing the parcel of land in which the interest is to exist. Legal descriptions are frequently ambiguous. the register constitutes a comprehensive record of all legal interests recognized by the state with respect to any given parcel of land within the system. often with the aid of rules of construction.5. B cannot have any legal interest in land unless it is created by the state through registration. and that this interest was canceled by error before C purchased Blackacre and became the registered owner. B acquired his interest in both parcels if both were owned by A. for just a s a registered interest may have been erroneously created. but nevertheless susceptible to interpretation. . 5. Obviously. for the register will disclose all legal interests which are inconsistent with and superior in priority to B's interest. and the extent to which C's registered ownership will be protected is discussed in chapter 6. The difficulties related to unknown legal interests.6. C would like the register to disclose whether or not the interest B claims is in Blackacre. a n integral part of the creation of interests. referred to in paragraph 5. are greatly ameliorated for C. a s stated in paragraph 5. the transfer was void. The Torrens system creates a new problem. This reiterates the basic reality that no interest in land can be created without a description of the land to which the interest is to be attached. The Torrens system can accommodate this need because of the inherent legal consequences of the register created by the system. Therefore. and only in Blackacre if only Blackacre were owned by A.15 It is possible for the state to terminate any legal interest in land by canceling a registration. functionally. If the Registrar canceled the registration of L's lease. and is therefore necessary in terms of the basic strategy of the Torrens system. The termination of interests is. If the legal description were so ambiguous that it could not identify any part of Blackacre. and that L was registered a s the owner of a leasehold interest in Blackacre.17 Because the state creates legal interests in land through registration under a Torrens system. and the territorial extent of any legal interest is defined by the description of the land in which it is created.18 At common law. the register will of necessity disclose whether or not the legal interest B claims is in Blackacre. so one may have been erroneously terminated.16 These difficulties are not. If the legal description unambiguously defined both Blackacre and adjacent Grayacre. and B's legal rights would be correlatively increased. Assume that L was the registered owner of a leasehold interest in Blackacre. and B acquired no interest in Blackacre. Termination of Registered Interests 5. making it possible for one to determine what land the parties intended to describe in the instrument.19 In our example. C must assure himself that the transfer from A to B contained a legal description adequate to describe Blackacre. 5. however. Assume that B was registered a s the owner of Blackacre. L's legal interest would be terminated.

Chapter 5 . The Registrar must also terminate A's ownership of Blackacre. if a transfer from A to B were forged. If this legal description.20 Assume that A was the registered owner of Whiteacre. for B's title to it was the result of error. then Blackacre was the subject of a n erroneous ownership decree.22 To sharpen the example. the transfer from A to B included this legal description. Paragraph 5. would not be adequate as a legal description to serve future generations after the fence fell down. assume that Grayacre was included a s part of Blackacre by error. or Grayacre could be included by error in the legal descriptions of both Whiteacre and Blackacre. trees holding a stretched string carried their line further. A and B decided precisely what portion was to be sold to B as Blackacre. . Blackacre was a Grayacre.21 Assume that A and B were registered a s the respective owners of the newly described parcels. The Registrar under a Torrens system does not perform the neutral function of merely recording such a transfer a s B's claim of ownership for what it is worth. and also included by error a s part of Blackacre. it can be assumed that G did not intend this result. although unambiguous. and functionally Grayacre means a parcel of land which is the subject of a n erroneous ownership decree. Ownership by Registration 77 (1) Erroneous ownership decree resulting from a mistake in a legal description 5. Whiteacre and Blackacre. Grayacre could be included in the legal description of G's Greenacre. describes the exterior boundary of Blackacre in a manner differing from the old legal description of Whiteacre. and that B desired to purchase Blackacre. Grayacre could be included by error as part either of Whitacre or of Blackacre. Such crude and approximate markings. being the product of a new survey. 5. Rather. that the mailman could readily deliver mail addressed to B a t the street address for Blackacre. and the rocks were scattered. and this requires a new legal description for the portion of Whiteacre to be retained by A. While walking over the land. part of the dividing line they selected was a n old fence. and piles of rocks were used to delineate the remainder of the agreed boundary. although adequate for A and B. The error concerned a strip of land we shall now call Grayacre. the Registrar must satisfy himself that the new description does not conflict with the existing registered description of G's adjacent Greenacre. and B applied to be registered a s the owner of Blackacre so described. through registration the Registrar will confer ownership of the parcel of land identified by this legal description on B. that the easterly portion of Whiteacre was known in the community a s Blackacre.9 focused on the problem of a n erroneous ownership decree resulting from a n invalid transfer. and if the Registrar conferred title to Blackacre on B. the trees were cut. If so. that a house existed on Blackacre and was rented to B. in either event a result inconsistent with the intentions of A and B with respect to the strip. 5. In effect. and that B was thus registered a s the owner of Grayacre contrary to the intentions of A and B. and that one of the legal descriptions. contained a mistake because it did not describe the parcel a s intended by the relevant parties. A surveyor prepared a legal description of Blackacre. Grayacre was the subject of a n erroneous ownership decree resulting from a mistake in a legal description.

Assume that B was erroneously registered a s the owner of Grayacre because of a mistake in a legal description. In a n earlier era the survey monuments were posts. a s will be seen in chapter 6. containing approximately 640 acres. and that controlling this risk was one of the Registrar's most difficult tasks. and that A will be entitled to compensation for his loss. The units of the system are established by official survey monuments on the ground. each containing 36 sections. it would be necessary to prepare a more accurate legal definition than the phrase used in this sentence.24 In point of fact. 5. 5. a Grayacre situation resulting from a n error in a legal description would seldom occur in Alberta today. If the state wished to develop a Torrens system in which the risk of a n 'erroneous ownership decree resulting from a mistake in a legal description' would be carried by any party whose registration followed the mistake. and sections are surveyed into quarter-sections of approximately 160 acres each. township 24. Each section is approximately one mile square. or by autharized subdivisions. to attempt to differentiate between mistakes originating in legal descriptions and mistakes originating in other areas of the administration of the system? 5. today iron posts are used.78 Torrens' Elusive Title Grayacre would be the subject of a n erroneous ownership decree if B were registered a s the owner because of a mistake in a legal description. The inhabited part of the province is surveyed either in accordance with the rectangular grid system prevailing in Western Canada and most of the United States. or because of a mistake a s to the nature of the intended interest. Section 165 of the Alberta Act quite specifically provides for compensating any person deprived of a n interest in land by the registration of another person by 'misdescription'. is there any reason. Thus. or because of a mistake a s to the identity of the intended recipient of the interest. The new boundary between the two lots.25 Basically. the province is divided into quadrilateral townships. or pits. a legal description of the southwest quarter (SW ]A) of section 35. 5. or because of a n invalid transfer. frequently marked by dirt mounds. a s well a s the exterior boundaries of both . there could be a practical reason for placing legal descriptions in a separate category for administrative purposes. range 2 west of the 5th meridian. If the mistakes in all of these situations would result in a n erroneous ownership decree. and that C purchased Grayacre from B without fraud. I t is probable that in the past most erroneous ownership decrees resulted from mistakes in legal descriptions. As the SW 'A of a section is established relative to the SE lA of the section by the same monuments.26 The example under consideration concerns a subdivision of Whiteacre into two new lots. lot Whiteacre and lot Blackacre. However. is in law a reference to that quarter-section a s it is established on the ground by official survey monuments. insofar a s the functional legal elements of a Torrens system are concerned. I t is most likely that C's ownership decree will not be defeasible.23 From the Registrar's point of view. the author knows of no Torrens system based on the Australasian model which avowedly attempts to avoid this risk. it is impossible for any two defined units of the system to include the same land.

such a s trees. it remains possible for the Registrar to decree that A owns the W l/i of section 35. and. Griffith C. a s fo1lows:l Before dealing with the facts of the case it is necessary. which a s a matter of law would refer to the survey monuments.29 I n order to analyze the operation of these legal construction rules. or the Jones farm. the author is not aware of a n y functional reason why legal consequences under a Torrens system should depend on whether a mistake in a legal description was caused by a clerk.J.27 However. it must be construed in accordance with the ordinary rules for the construction of documents of title. emphasized this point i n Overland v. (5) Distances. The legal rules applicable to the construction of a legal description in a common law conveyance are also applicable to the construction of a n instrument included i n the Torrens register. to point out that a certificate of title does not rest upon a pinnacle by itself. As the same survey monuments would establish Blackacre relative to Whiteacre. the Registrar could decree that A and B both owned lot Blackacre. and the possible descriptive elements of a legal description. Admittedly. or a secretary. one might understand the purpose of a legal description. and that. or a lawyer. and mounds or pits. but is a n ordinary written instrument. it would be impossible for the two defined lots to include the same land. and the corner of a building. (2) Artificial monuments. 5. and t h a t B owns the N z of section 35. and in some respects exceptional. Without extrinsic evidence to identify its subject matter it has no intelligible meaning. (6) Statements of area. Extrinsic evidence is. such a s the boundary of a n adjoining tract. would be established by survey monuments on the ground and the new legal description of Blackacre would be 'lot Blackacre in subdivision plan number (here number)'. (4) Courses. must be applied in precisely the same way a s in the case of any other document of title.28 Legal descriptions are often ambiguous. Lenehan. the NW lA of section 35 would be a Grayacre. and whether or not there is a Grayacre a t all will frequently depend on how the legal description in the state's decree conferring ownership by registration is interpreted. and streams. although its operation is farreaching. The purpose of a legal description is to provide a method of identifying land. In both of these examples a n erroneous ownership decree would have occurred because of a mistake in a legal description. in order to dispel a mistaken notion which seems to be the foundation of much of the argument addressed to the Court in this case. 5. as well a s other man-made objects. described a s lot 17. the mistakes i n these two examples were mistakes in linguistic expression rather than mistakes i n surveying. Ownership by Registration 79 lots. such a s the side of the road. and virtually all legal descriptions will be based on monuments which can be located on the ground. However. admissible. As well. rocks.Chapter 5 . The doctrine expressed in the wordsfalsa demonstratio non nocet is just a s applicable to it a s to any other instrument of title. and lot Blackacre would be Grayacre. a s opposed to a surveyor. pipes. when admitted. which refers to the quantum of land . such a s surveyor's stakes. (2) Ambiguous l e g a l descriptions 5. The typical descriptive elements in a legal description are as follows: (1)Natural monuments. and must be admitted. If this Y happened. I think. (3) Abutting boundaries. therefore.

32 Assume that A was the registered owner of that portion of section 35 lying south of the Bow River a s shown on a plan made by Deville. when it simultaneously defines both parcels. and that B was the registered owner of that portion of section 35 lying north of the Bow River a s shown on the same plan. Under The Surveys Act (Alberta): survey monuments now control over statements of area and dimension a s a statutory rule. Although the actual intention of the parties i s the ultimate test of the meaning of a legal description. In denying the claim. In the . 5. The exterior boundary of section 35 presented no problem.G the controversy concerned the boundary between two registered lots. such a s 160 acres. 1B to the west. there is a judicial presumption that the possible descriptive elements have a priority of reliability in the rank order stated in the preceding paragraph. the holding was quite consistent with the common law constructional preference that monuments on the ground control over statements of area. the ambiguity cannot create a Grayacre situation with two registered ownerships of the same land. it can often be rendered unambiguous if one of the conflicting elements is disregarded through judicial construction of the instrument. Regi~trar. in substance. Burns & Co. and not to its acreage. P.80 Torrens' Elusive Title purportedly enclosed by the legal description.33 In Overland v. regardless of where the river banks actually were. This was.~ purchased a parcel of land from B registered to B. more or less. that was established by the survey monuments. a natural monument. The issue concerned the interior boundary between the two parcels. in substance.2 C 5. with element (1) being the most reliable. As the NW l/i of a section is established by survey monuments. a natural monument. The conflicting descriptive element was not so obvious. the court held that the Registrar only certified title to the parcel. overrode the conflicting descriptions identifying the boundary by lines on the plan called the river bank. and element (6) being the least reliable. and the legal descriptions of both parcels contained the identical two conflicting descriptive elements. surveyor. and containing 27 acres. and those lines were a descriptive element identifying the boundary between the parcels by courses and distances. and 10 to the east. One descriptive element was the Bow River. However. As the parcel contained only 17.31 In Burden v. C sought compensation for his loss of acreage from the Alberta assurance fund. Lenehan.9 acres. the situation in Hextall v.30 A legal description will be ambiguous if it contains conflicting descriptive elements. Lines marking what the surveyor thought were the banks of the Bow River were drawn on the plan.5 The problem arose from the f a d that the Bow River was considerably further north than a s shown on Deville's plan. a s all that portion of the NW l/4 of a certain section lying south of a river. It should be seen that when a n ambiguous legal description is common to the adjacent parcels. The court held that the descriptions identifying the boundary as the river. (a) Ambiguous kgal description defining both adjacent parcels 5. (b) Ambiguous legal description defining one of two adjacent parcels 5.

a n d that left a n unambiguous legal description of lot 1B with no possible overlap with lot 1 0 . Based on this transaction. both of which were originally owned by A. As A's transfer stated that lot 15 as altered was to have a frontage of 79' Y' on Main Street. In fact. lots 14 and 15.Chapter 5. a s the two lots a s altered were shown on a survey plan. and lot 14 would have retained the residue of frontage of only 74'. 5. In fact the distance between the western boundary of lot 10 and the Boggo Road was only 212% links. Ownership b y Registration 81 registered description of lot 1 0 . and this boundary was established by survey pegs. the new abutting boundary must have been established by survey or other monuments on the ground. any ambiguity would have been resolved against A a s the transferor.The court held that the description of the eastern boundary of lot 1B a s the abutting boundary of lot 1 0 . the boundary between the two lots was identically described. and the legal descriptions of their lots consisted of a plan on their certificates of title delineating the lot boundaries. He sold lot 15. If the 250 links distance descriptive element in the legal description of lot 1B controlled. and on the east by lot 15. was more likely to have represented the true intention of the parties in the legal description than was the 250 links distance description. Assuming that the abuttal boundary was marked. which had been pegged. In fact lot 10 had been sold a s part of a subdivision. But. so good. a n established abutting boundary would have controlled over statements . Lot 14 was bounded on the north by another lot. The plan stated that lot 15 had a southern frontage on Main Street of 79' 9". to B. the maximum possible frontage on Main Street for the two lots was 9" less than the combined total of their frontages a s shown on the plan. The litigation resulted from a dispute concerning the boundary between two adjacent lots in a registered subdivision. and owned by both A and B. and a border strip of lot 14.~ decided by the High Court of Australia. Moreover.35 Construing the legal description of lot 14 as retained by A after his sale and transfer of lot 15 to B would not have been difficult. there would be a Grayacre of 37% links width registered as part of both lots 1B and 10.34 The case of Dempster v. the northern boundary of lot 1B was stated to be 250 links from lot 10 along Stanley Street to the western boundary of lot 1B established by the Boggo Road. and that lot 14 had a southern frontage on Main Street of 74' 9". and its four comers were marked by survey pegs. The latter descriptive element was thus eliminated by judicial construction. under the normal constructional preference. If the frontages of both lots on Main Street as shown on the plan overrode the conflicting description of the lots a s abutting. The facts will be simplified in the following summary. although the opinion is silent on this point. reinforced by the fact that A was the transferor. Ri~hardson. on the south by Main Street. there was a 9" strip Grayacre registered a s included in both lots. and a new survey showing this alteration in the boundary between lots 14 and 15 was registered. its western boundary was stated to be the eastern boundary of lot 1B. was quite similar to the Overland case. 5. A and B were registered a s the respective owners of lots 14 and 15. on the west by Peltro Street.So far. its registered description stated its eastern boundary to be the western boundary of lot 10. Although lot 1B was not part of the subdivision.

Mrs. established the controverted boundary a s the abutting boundary of lot 15 where it could be identified on the ground. She wanted to be able to rely on the 74' 9" distance element. Dempster found. it was held that B owned lot 15 with 79' 9" of frontage on Main Street.19 it was stated that one in the position of D can rely on the Torrens register a s disclosing the territorial extent of the interest sought to be purchased. The deficiency must be ascribed to that title because her neighbours derived their title through a transfer by the plaintiffs predecessor in title of land with a .36 Subsequently. A sold lot 14 to C. In substance. there was no ambiguity in the legal description for lot 14. but whenever a legal description shows a boundary a s a n abuttal. D could not rely on both of the conflicting descriptive elements in the legal description of lot 14. unfortunately. The court denied D's claim. her contention was that under a Torrens system. and what can a 'guaranteed boundary' be really worth if a landowners cannot completely rely on what is shown on the plan actually drawn on his land certificate? In the event. under a Torrens system. she did not want to. There was no erroneous ownership decree. the deficiency must be ascribed to the plaintiffs title.38 In commenting on the Dempster case. The foregoing analysis is based on modem pragmatic jurisprudence.82 Torrens' Elusive Title of distance. if the latter is correct in terms of accepted legal principles. This is true. one need go no further. the holding was correct. 5. D owned lot 14 a s defined in her registered legal description which. one relies a t her peril without sound professional advice. who in turn sold it to D. In litigation between D and B. The following quotations are from the concurrent judgment of Rich and Dixon JJ. This may sound harsh. one can rely on the descriptive element most favorable. 5. This means. on the basis of accepted construction rules. does not purport to define the land in which a registered interest is located. but a s the Dempster case illustrates. In fact. the distance descriptive element was surplusage. and not to be required to rely on the abutting boundary element. one is on notice that this boundary must be established on the ground before the legal description can be relied on with safety. and this means that in the legal description in A's title for lot 14. One can look a t the facts and at the holding. Dempster) then brought the action under consideration seeking damages for the Tasmania assurance fund for the loss of the 9" strip she claimed a s a registered owner. and there was no 9" Grayacre strip registered a s owned by both A and B. and disregard the others.37 D (the plaintiff Mrs. and on accepted legal principles. As stated in the Overland case. considerable language in the opinion suggesting that the state. There is. In paragraph 5. As properly construed. that the court's opinion need not be taken too seriously. In truth. a t the cost of two lawsuits in the High Court. 5. A and C. Simpson said? But surely the whole incident was the result of the error in the plan.:9 We do not doubt that if there is less land between the true western boundary of lot 16 and the true comer of Peltro Street than the sum of the frontages given in the diagrams upon the plaintiffs and her neighbours' certificates. D was registered a s the owner of lot 14 by the same legal description held by her predecessors. a legal description in a registered Torrens title is subject to common law rules of construction. that the so-called 'guaranteed boundary' was just a snare and a delusion. Based on the facts. of course.

. it does not recognize the true issue under a Torrens system. If there is a deficiency it must therefore be in the residue of the land. belonging to the vendor. purport to decree that they both owned the 9" strip. or his surveyor. The state could. lll/z in. This she got. with respect.39 The thrust of these statments appears to be that a s D's remote predecessor A retained only the 'residue'.40 I t is one thing to say the D had the risk of interpreting the ambiguous legal description in C's title and of discovering on her own that the state did not purport to decree that C owned the 9" strip. Glenorchy. Obviously both D's predecessor C. because legal descriptions would have determined what title had passed down the chain to her. . Starke J. . the Tasmania assurance fund should have been liable to compensate D for any loss she might have sustained. a s follows:10 Assume. that the appellant [Dl only acquired title to 73 ft. and should be assured that they will receive either the land or compensation for loss. Ownership by Registration 83 frontage of 79 ft. 125 and 128. out of that predecessor's certificate of title to lots 14 and 15. where one's ownership must be derived from the ownership of his predecessors in title. 9 in. If the error or misdescription in the title be due to a n error in measurement. and all she purchased. . a s shown by her title . could not own the 9" Grayacre strip simultaneously and exclusively. but to a predecessor in title of the appellant. 9 in. the state cannot work such magic.. D acquired a n original title from the state. D could acquire no more from her immediate vendor C. and if so. . however. in point of fact. rather than by a n abuttal with lot 15? Then there would have been unambiguous state decrees purporting to confer ownership of the 9" strip on both B and C.what omission. and Torrens doctrine dictates that purchasers such a s D should be able to rely on such a decree. and it was the Registrar who was charged with the responsibility of determining whether or not a legal description he used was proper. Under a Torrens system." She acquired and intended to acquire Pinkerton's [C's] land. I t is submitted that if the Registrar had conferred ownership of the 9" strip on both B and C by unambiguous legal descriptions. or misfeasance can be attributed to the Recoraer of Titles or his officers? The appellant acquired all the land which her transferor had any title to convey to her. of concluding that the state should not have decreed that C owned the 9" strip. and her neighbor B. omission. made a statement even more inconsistent with fundamental Torrens system philosophy. Upon these facts we think the plaintiff cannot fall within the description in secs. I t is quite another thing to suggest that D had the risk of searching C's derivative title in order to discover whether or not a n historic mistake had been made in a legal description. This is perfectly good analysis under the common law. At common law D would have assumed the risk of a mistake in a legal description in her chain of title. that is an error in survey and not in title. instead of 74 ft. But what if the eastern boundary of lot 14 had been described by a course and a distance. Such a n error is not due to any mistake. "a person deprived of any land. was the property situate a t the corner of the Main Road and Peltro Street. or misfeasance on the part of the Recorder or his officers. mistake. 5. however. 5.Chapter 5 . but.

Moreover. and which was accurately described in his immediate transfer. presumably. such as a street address.12the historic practice is essentially retained. 5. it would have been defeasible in this situation. As Simpson points out. and by reference to a filed plan or general map. the defendant built a portion of his house on land claimed by the plaintiff. streams and roads. his adjacent neighbor. for it involves the title to a strip of land. Barrey. it is usually described by a verbal description. for the defendant was only entitled to the lot which he contracted to buy.13even the width of a line on the map at the scale used for urban lots represents a foot on the ground! This is of no real consequence. the English system. The parcel is identified by lines on the map either coinciding with physical features or drawn relative to them. based on a topographical ordinance map depicting physical features on the ground. When land is brought under the English system. At the point of some undetermined quantity of land. to a Blackacre known and identified i n the community by a street address. and that the defendent had trespassed on the plaintiffs land. Even if the defendent's registered title had been under a Torrens system fixing precise boundaries.14 the line on the plan on the defendant's land certificate (his registered title). The court suggested that if the divergence between the land certificate plan and the actual boundary a s determined by the general law became too great. 5. and would be very costly to produce.41 Some reference should be made to the English approach to legal descriptions in title registrations.44 The author subscribes to the view that it is logically impossible for the state to confer ownership of a n interest in land without precisely . The court admitted that a 'boundary dispute' is conceptually a property dispute. they are generally left for resolution under the general law. it would not longer be sensible to use the phrase 'boundary dispute'. in paragraph 5. Simpson quotes the English Royal Commission Report of 1870 for the conclusion that the first English title registration system failed in large part because of the expense. I t was i n anticipation of this subject that the author referred. and no attempt is made to fix precise boundaries by survey. The very long period of settled land ownership in that country h a s resulted i n the description of most parcels of land by means of such monuments a s hedges.42 Under the Land Registration Act. deviated 10 feet a t a crucial point from the line on the transfer plan pursuant to which he purchased from his vendor. The court held that the boundary between the lots of the plaintiff and of the defendant was determined by the transfers received from their common vendor under the general law. and controversy among formerly happy neighbors. is not a valid test of the English system. walls. however. Relying on his land certificate. recognizes t h a t one h a s been deprived of the title to registered land.ll 5.43 I n the leading English case of Lee v. Precise surveyed boundaries are seldom available. engendered by the attempt to fix precise boundaries. neighbors have lived peacefully with imprecise boundaries for generations.20. 1925.84 Torrens' Elusive Title (3) General boundaries under the English system 5. The Lee case. ditches. a s the English decree of title does not purport to define exact boundaries.

Ownership by Registration 85 defining the land in which the interest exists. It must be emphasized. C must determine what specific rights in Blackacre it purports to transfer. and precisely what legal interests exist which might conflict with B's interest. This is a serious conceptual problem for anyone who takes conceptual problems seriously. and because the form itself contains only the tenant's covenant to pay rent. however. e. C must ascertain the intrinsic effect of all instruments in B's chain of title relevant to the interest B claims. The problem is greatly simplified under a Torrens system. With regard to each instrument examined.45 The example introduced at paragraph 5. They are said to 'muddle through' with pragmatic solutions. and with extremely little litigation. rather than by the state. for C will not have to examine instruments evidencing expired interests. However. Limitations Related to the Type of the Registered Interest 5. C's task will be eased because the register will contain only instruments currently relevant to B's claimed legal interest. and whether or not these purported rights are valid under the general law.46 It is still necessary for C to determine what specific rights in Blackacre a registered instrument purports to create. unless the instrument itself became part of the register? Moreover. if the instrument were not part of the register. Indeed. whether or not there are any other legal interests inconsistent with and superior in priority to B's interest. C would like the register to disclose precisely what legal interest B owns.Chapter 5. that C must still evaluate the instruments included in the register! Is his qualitative task altered by a Torrens system? 5. Quantitatively. referred to in paragraph 5. The ultimate measure of a system is whether or not it works efficiently. This form contains space for the addition of special covenants. At common law. owns a legal interest. and whether or not B's legal interest is in Blackacre.47 The foregoing paragraph assumed that registered instruments are part of the register. C must examine B's lease before he purchases it in order to determine precisely what rights it purports to confer and what duties it purports to impose. C would be required to search outside the register in order to determine the precise nature of the registered interest.South Australia: . In the preceding sections of this chapter it has been established that C can rely on the register to determine whether or not B. and the evidence is all to the effect that the English system has p e o r m e d very well.4. Assume that B was the registered owner of a n Alberta Act Form 16 Lease. Under a system in which the territorial extent of the parcel is defined by the transfer between the parties. through registration of a n instrument of lease defining the interest. However. the interest is created by that transfer. the author knows of no scholar who has ever suggested that the English have any propensity to emulate Napoleonic administrative or legal precision. if a legal entity. 1886-1969. it is difficult to imagine a lease which would be adequate without special covenants. how could the Registrar confer ownership of a leasehold interest on B. As a matter of elementary necessity.2 stated that C wishes to purchase some legal interest in Blackacre from B. 5. Most statutes based on the Australasian model contain a provision similar to section 57 of the Real Property Act.

the decree confers those rights which are included in the FSA under the general law. Recommended forms have been widely accepted by the legal profession in many jurisdictions. . A committee of competent lawyers selected to represent the interests of lenders and of borrowers could produce a recommended form fairly balancing the legitimate interests of both of these groups. Every instrument shall. can C assume that. 5. and doubtful lawyers may question the legal validity of some provisions of the form. is it feasible for the state to grant the Registrar this power? The state. they leave two problems. the Alberta Act contains no comparable provision. public or private. However. when registered. its provisions are legally valid. As the statutory instrument is created by a n act of the legislature. (b) Legal interests defined by statutory instruments 5. Does this mean that the Alberta Torrens system is intended to be fundamentally different from a conventional Torrens system? (1) Legal interests in land recognized by the general law 5. I t is feasible for the state to grant the Registrar this power because a FSA decree cannot possibly confer rights which are not permitted by the public policy of the state. be deemed part of the register book. defines the rights which it will permit persons. and they contribute both to economy and to certainty in real estate transactions. and the legislation will always authorize the statutory provisions to be incorporated by reference into the instrument executed by the parties.49 The Registrar has the power to decree that B owns Blackacre in FSA. they have enhanced advantages in Torrens jurisdictions. The instrument prepared for each transaction must physically incorporate the form. however. I t would be feasible for the state to grant the Registrar the power to decree that B owned a Province of Torrens .48 After examining a n instrument in order to determine what legal rights it purports to create. because the instrument is registered. and the residential property mortgage furnishes a good example. The statutory instrument is normally devised to accommodate high-frequency transactions. Why. The statutory instrument solves both of these problems. and the maximum group of rights permitted under the general law in jurisdictions which received the English common law is the FSA. Suppose that the statutory instrument were designated 'Province of Torrens Form 19 Mortgage'.86 Torrens' Elusive Title Section 57.. If the Registrar decrees that B owns Blackacre in FSA. all of these rights have been validated under the general law by registration? (a) The fee simple absolute 5. through its general law.51 Although statutory instruments are common in jurisdictions without a Torrens system.50 In recent years it has become reasonably common for legislatures to enact statutory instruments designed to facilitate the transfer of interests in land. However. and it is highly unlikely that such a form would contain any provisions contrary to the general law. . to own in land.

and that A would have no interest. First. if valid. that B would have a FSA.53 The Alberta Act Form 19 Mortgage is not a statutory instrument because it contains no substantive mortgage provisions beyond the creative words "I hereby mortgage to the said m y estate and interest in the land above described". (emphasis added) Should the words "become operative according to the tenor and intent thereof' be construed a s impliedly qualified to mean "insofar as permitted by the general law"? If a n instrument contains a provision contrary to public policy a s reflected in the general law. if any". and that A was registered a s the owner of a right of entry for condition broken. what if any special covenant were inserted? (2) Undefined l e g a l i n t e r e s t s 5. but usually related. There is a blank for "special covenants. would subject B's fee simple to potential defeasibility might impose a n unreasonable restraint on alienation of Blackacre. 5. Secondly. the form contains printed text and blanks to accommodate the creation of a mortgage in real property of the mortgagor to secure the promissory obligation presumably to be created by use of the same form. Hence the Form 19 Mortgage with no special covenants inserted merely incorporates the general mortgage law of Alberta to the extent applicable to any potential controversy. But. enforceable a t law when the instrument was executed.55 Assume that B was registered a s the owner of Blackacre in fee simple subject to a condition subsequent. and thereupon creates. charges or discharges. the land or the estate or interest therein mentioned in the instrument. Did registration . If only this part of the form were executed. the mortgagee would obtain a legal mortgage. surrenders. Upon registration of the instrument. Ownership by Registration 87 Form 19 Mortgage in Blackacre because such a decree could confer only rights conforming to the general law a s defined by the statutory instrument. the form contains printed text and blanks to accommodate the creation of a nonnegotiable promissory obligation. The execution of this part of the form would create a n equitable mortgage in the mortgagee. legal interests. or it might induce B to use Blackacre for a n immoral purpose. So soon as registered every instrument becomes operative according to the tenor and intent thereof.Chapter 5 .52 Under the Alberta Act. I t is feasible for Alberta to grant its Registrar the power to decree that B owns a Form 19 Mortgage in Blackacre if no special convenants are inserted because such a decree could confer only rights conforming to the general law. a n unsecured contract right to recover a debt. it might impose a n unreasonable restraint on marriage by B. does registration validate such a provision? 5. Also assume that under the general law of the jurisdiction the condition subsequent would be void. the promisee would obtain a chose in action. transfers.54 Section 57 of the Alberta Act reads a s follows: 57. as the case may be. It is a form designed for the creation of two distinct. 5. the Form 19 Mortgage is not a statutory instrument of the type just described. The condition subsequent which.

and did not become a n interest in land through registration. . . that. In Hoar v. when the RegistrarGeneral registers a lease it is only the title which the parties by their words have themselves described which is thus registered and to which the RegistrarGeneral thus gives his certificate. The court ordered that the lease be registered. therefore. unless by registration some validity could be given to the instrument which it would not otherwise have. i f the RegistrarGeneral registers a lease which i s void for uncertainty of the term purported to be stated therein. according to its tenor and intent. which is nothing. In Smith v. 5.57 The interest was a lease with a term expressed to be for so long a s the lessee holds shares in a company. assume that B was registered a s the owner of a n interest in Blackacre a s defined in a registered instrument. the purchaser takes no more than the registered interest of the lessee. .88 Torrens' Elusive Title validate the condition subsequent and create what would otherwise have been a prohibited interest in A? Assume that the registered instrument. 5. 5. The court held that the option was a void and unenforceable clog on the mortgagor's equity of redemption under the general law.59 The interest was a mortgage.58 The interest was a licence contained in an instrument titled 'easement'. perhaps because it is the practice of many Registrars to refuse to register instruments containing possible invalid pr0visions. . no greater interest is conferred upon the purported lessee by the registration than he would have had apart from registration. the power of sale was void. 5. However. National Trust Co.20 the mortgage granted the mortgagee a power to sell the mortgaged property if the mortgagor defaulted on his secured obligations. and was not validated by registration. gave B a contingent remainder in Blackacre and gave A a n alternate contingent remainder. In Re Lehrer and the Real Property Act. The court held that because the power of sale granted rights to the mortgagee in excess of those permitted for a power of sale under the Real Property Act of Manitoba. The registration does not interfere with the ordinary effect of the instrument at law or i n equity.16 the issue was whether or not the Registrar could refuse to register a lease on the grounds that it was void because the term was not certain. .~5 5. .lg the mortgage contained a provision granting the mortagee a n option to purchase the mortgaged property for a specified price a t any time until the mortgage was discharged. .60 The interest was a mortgage. It follows. and that under the general law both contingent remainders would be void under the Rule Against Perpetuities and A would have a reversion in Blackacre. and was not validated by . . Did registration validate the contingent remainders and override the Rule Against Perpetuities? No cases answering the above questions have been found. I f the lessee purports to transfer the lease to a bona fide purchaser. MilZs. and that C purchased the interest and became the registered owner. and stated its reasons a s f0llows:~7 I do not consider that the Registrar-General ought to refuse registration of an instrument because he forms the view that i n law it is a void instrument.56 In each of the following examples. In Re Ridgeway and Smith's Contract.l8 the court held that the contractual rights of the licencee did not constitute a n interest in land under the general law.. The RegistrarGeneral by the registration cannot create a form of leasehold estate which is not known to the law. .

If such a mortgage is void under the general law created by section 106. Although legal interests in land are created by the state under the system. and the mortgage secured the mortgagor's promissory obligations under the purchase agreement. Does the inclusion of this section in the Alberta Act add credibility to the suggestion that section 57 might have been intended to be read and applied literally. perhaps because of the ambiguity inherent in section 57. but of that charge coupled with this power. that section 57 means exactly what it says and was not intended to contain any implied qualification. should be con~idered:~~ [Tlhe registration was not only a registration of the charge. then section 107 is redundant. Ownership by Registration 89 registration. Is it possible. and also became part and parcel of that claim which the mortgagees tendered and had irrevocably placed on record and is for that reason a part of that to which the mortgagee thereof acquired an indefeasible title. duly recognized by the officers on whom was cast. and contract rights are created by the . and that any provision in an instrument is validated by registration. the registration is ineffective. it has never been suggested that the Torrens system was intended to change the general law of contracts. (3) Contract rights 5.64 The relationship between contract law and the Torrens system has not been explored in any Torrens literature known to the author. the author believes that sections 107 and 52(4) of the Alberta Act were enacted in an excess of caution. the duty to pass upon and if need be reject what it is not within the provisions of the act. the dissenting opinion of Idington J. however.Chapter 5. 5. and such a statutory provision creates a rule of general mortgage law quite independent of the Alberta Torrens system. Section 52(4) of the Alberta Act states that if a restrictive covenant cannot be annexed to land. Section 107 of the Alberta Act provides that if such a mortgage is by inadvertence registered under the Alberta Act. . and was therefore not capable of being annexed to Greenacre under the general law. 5. . registration does not "make it run with the land". and that section 107 was carefully enacted by the Alberta Legislative Assembly to create an exception to the general doctrine enunciated in section 57? 5. The mortgage was annexed to a written agreement for the purchase of a tractor by the mortgagor from the mortgagee.that the Registrar has the power to confer ownership by registration only of a legal interest in land recognized by the general law of the jurisdiction. and that these sections reinforce the conclusion to be drawn from the cases cited at paragraphs 5. Section 106 of the Alberta Act provides that such a mortgage is void "not withstanding anything contained in any Act". .63 On balance. and if section 57 of the Alberta Act means that a registered instrument becomes effective only insofar as permitted by the general law.57-60.62 The interest was the benefit of a restrictive convenant registered against and expressed as burdening Greenacre for the benefit of Blackacre.61 The interest was a mortgage. . In fact the restrictive covenant could not benefit Blackacre. and this latter became of the very essence of the transaction. In order to emphasize the nagging uncertainty which a provision such as section 57 of the Alberta Act creates.

that is. it is a 'real covenant'. the 'real covenants' in a lease create property rights in land which derive their existence from and depend upon the creation of the leasehold estate in land. Assume that subsequently B transferred his registered interest to C by a n Alberta Act Form 23 Transfer of Mortgage. until B was registered a s the owner of the instrument. that no special covenants were included in the instrument.000 paid by C and received by B. under a Torrens system legal interests in land are only created by the state through registration. The question is. also enlarge A's contractual obligation from $5. B did not acquire a legal mortgage. 5. and many leases will 'bristle' with covenants. However. which was $5. who unquestionably conferred ownership of a legal mortgage on C through registration of the Form 23 Transfer.000 to B and mortgaged Blackacre to B to secure the debt. although C acquired B's contractual rights by means of the Form 23 Transfer of A's contractual obligation. Similarly. he also has the power to create any 'real covenants' contained in the instrument which are recognized by the general law. and equitable interests in land.90 Torrens' Elusive Title parties to a contract. and the rights and duties which it creates attach to and bind the reversion of the landlord and the leasehold of the tenant. that C was registered a s the owner of the mortgage. did the Registrar. by registering a n instrument which purported to create them? It may be helpful to approach this subject by first considering the 'real covenants' in a lease.000 (the amount of consideration . was created when A executed and delivered the Form 19 Mortgage instrument to B. 5. contractual obligations.66 The problem presented by the contractual obligation secured by a mortgage under a Torrens system is not only difficult. Assume that A executed a n instrument in the form of a n Alberta Act Form 19 Mortgage. and that B was registered a s the owner of the instrument. because they too are interests in land. Under a Torrens system. If a covenant in a lease 'touches and concerns' the leasehold estate.000. To what extent does the Registrar under a Torrens system have the power to create contract rights. which would not be recognized under the general law of contracts. if it affects the landlord-tenant relationship.65 Under the general law.67 It is clear that A's contractual promissory obligation.000 a t that time. it was not until C registered the Form 23 Transfer that he acquired a legal mortgage of Blackacre to secure A's promissory obligation. if the Registrar creates a leasehold by registering a n instrument of lease. For this reason. are created by the parties. Of course a lease will always contain at least a covenant to pay rent. that by it A both covenanted to pay $10. if supported by consideration. 5.000 to $9. the fundamental effect of a lease is the transfer of a legal leasehold interest in land to the lessee.22 Consequently. In short. a legal charge over Blackacre to secure A's contractual obligation. and that at the time C purchased the mortgage from B and registered his transfer the remaining balance of the debt owed by A was $5. that the transfer recited a consideration for the transfer of $9. but likely to become increasingly important a s its dimension becomes recognized. and then the more difficult problem presented by the contractual obligation secured by a mortgage. It is also clear that B acquired a n equitable mortgage over Blackacre at that time.

and that the validity and extent of a mortgage is derived from and depends upon the existence of a contract debt.68 I n Falconbridge on Mortgages. I n order for the register to contain entries showing the current balance of a mortgagor's promissory obligation. . the assignee stands in no better position than the mortgagee. Ownership b y Registration 91 paid by C to purchase the debt a s recited in the Form 23 Transfer). 5. but with this change. 5. and this would impose a severe administrative burden on both the mortgagor and the Registrar. manifestly . . The court quoted both Flaconbridge on Mortgages and the Nioa case for the fundamental proposition that a mortgage creates a n interest in land in the nature of a charge to secure a promissory obligation. C argued that the registration of the mortgage instrument and of its transfer to him created both a promissory obligation binding A. The court said that if registration of a n assignment of a mortgage debt under a Torrens system could not increase the balance of the contract debt under the decision i n the Nioa case. the authors ~ a i d : ~ 3 The mortgage debt is a chosein action and in accordance with the general rule. it is necessary that one make inquiries of the mortgagor a s to the actual balance of a secured promissory obligation before purchasing it. The court held that this statute means t h a t a registered instrument becomes operative according to its tenor and intent a s permitted by the general law.25 a case decided by the British Columbia Court of Appeal i n 1963. and that the mortgagor was entitled to a credit for all payments made to the original mortgagee. Bennett. . Bell. Quite naturally. It has been held that if nothing has ever been advanced upon a mortgage or the mortgage has been made without consideration. 5. and C took the risk that there was a $10. Even though the assignee may get the conveyance of the legal estate he can hold it as security only for what is properly owing by the mortgagor at the date of the assignment. In Nioa v. and subject to the state of the mortgage account between the original parties. the assignee takes subject to the equities affecting the subject-matter. C relied on the British Columbia counterpart of section 57 of the Alberta Act. assume that the Form 19 Mortgage instrument was forged by X who impersonated A.000 promissory obligation and did not request a n acknowledgement from A of the amount owing on the debt (if any) until after he purchased the Form 23 Transfer from B. and that both B and C were purchasers without fraud. quoted a t paragraph 5. applicable both to assignments in equity and to assignments under the statute.71 I n effect. . not only before the assignment. B thought that he was dealing with A. or to $10.z4 the court held that a registered assignee of a mortgage acquired no more than a charge to secure the actual debt of the mortgagor. and a legal mortgage i n Blackacre to secure the debt thus created. but also before the mortgagor was notified of the assignment.000 (the original amount of A's covenant a s contained i n the Form 19 Mortgage)? 5. the mortgagor would have to notify the Registrar of each periodic payment he made. .70 Continuing the preceding example.54. Consequently.69 There seems to be no practical alternative to this legal rule. .Chapter 5 . This example states the basic facts present in Credit Foncier Franco-Canadian v.

C's registered ownership was held to be indefeasible under the circumstances. The relevant facts of the case can be stated in terms of the example under consideration. B transferred Blackacre to C under authority of the power of sale. that X. even though this ownership decree was erroneous because the mortgage was forged.26 In the existing literature. was forged by X who received the money loaned by B. The instrument containing both A's purported promissory obligation of £3. a s there was a valid contract debt. The mortgage contained a power of sale over Blackacre. and C was granted a n order for possession. however. for such provisions are valid under New Zealand law. and the securing mortgage. does there appear to have been any serious question but that C's ownership would prevail.000 from B.92 Torrens' Elusive Title registration could not create a contract debt where one had never existed at all. The court held that a registered assignee of a mortgage acquired no more than the actual interest the mortgage conferred upon the mortgagee. and that B was registered as the owner of the mortgage.000. for a moment.30 focused primarily on this question. I n fact. and that under the general law no mortgage interest existed without a debt. The issue which this example presents is whether or not the registered ownership obtained by one who innocently purchased under a forged transfer (B) will prevail over the .z7 which will be discussed in chapter 6. 5. 5. it was within the power of the Registrar to confer ownership on B of a mortgage interest in Blackacre to secure the debt. Walker. The Frazer decision. B exercised the power of sale and sold Blackacre a t auction to C for £5. Frazer v. in order to induce B to make the loan but with no authority from A.000 payable to B to evidence the debt. the importance of this case is based on the significance of both its holding and its dictum on the subject of defeasibility of title. C did not purchase a forged instrument purporting to create a debt secured by a mortgage. and in neither the Supreme Court.28 nor the Court of Appeal. 5. In this example. and a n example should demonstrate that these issues were significantly different.74 Although the Court of Appeal of New Zealand gave no decision as to the validity of B's registered mortgage. that A did borrow £3. Consequently. 5. A counterclaim was filed by A seeking a declaration that the mortgage was void. and a n order that the entries in the register in favor of B and C be canceled and that A's ownership be restored. also concerned the creation of contract rights by registration.75 One issue can be identified if we assume. and C commenced proceedings to obtain possession from A. C purchased Blackacre from B in reliance on a n entry in the register that B held a valid power of sale. It was quite within the power of the Registrar to register B a s the owner of a mortgagee's power of sale over Blackacre. forged A's signature on a mortgage of Blackacre to secure the note.000. Rather.29 nor the Privy Council.72 It now becomes necessary to discuss a n extremely important case decided by the Privy Council in 1967. and when A (not surprisingly) failed to make any payments on the nonexistent debt.73 The case arose in New Zealand. Unlike the situation in Credit Foncier. that A executed a nonnegotiable note for £3. C was duly registered a s the owner of Blackacre. with changes a s stated below. in a judgment delivered by Lord Wilberforce. the validity of B's mortgage involved two separate issues. the Privy Council.

and was in fact decided by the holding that the mortgage was valid.76 However. Private parties are not. no instrument is effectual to pass any estate or interest in that land (except a leasehold interest for three years or for a less period) or to render that land liable a s security for the payment of money. 5. M e s ~ e r . this subject will be considered in chapter 6. unless the instrument is executed in accordance with the provisions of this Act and is duly registered thereunder. it does not qualify for registration a t all.77 The author believes that the issue of whether or not the registration of a n instrument under a Torrens system is effective to create a personal covenant. As the promissory obligation of A was forged. f. the Privy Council held that B's registered mortgage was valid. The basic doctrine enunciated by the Privy Council in the clasic decision of Gibbs v. (1)The Registrar shall decide whether any instrument or caveat presented to him . however. or the creation of a legal interest in any manner they deem appropriate to a transaction. ~ l in 1891.Chapter 5. In Frazer. a s the case may be. The phrase 'independent personal covenant' is used deliberately to underscore the contrast between the real covenants in a lease which are dependent on the transfer of a leasehold interest in land. there was no contract debt to support a mortgage under the general law unless registration of a n instrument under a Torrens system was effective to create a n 'independent personal covenant' binding A. and the charge of a mortgage interest in land which is dependent on the existence of personal covenant to pay a contract debt. is extremely important and deserving of legislative attention. Ownership b y Registration 93 registered ownership of the victim of the forgery (A). the land becomes liable a s security i n manner and subject to the covenants. and not defeasible in favor of A.78 Section 56 of the Alberta Act embodies the fundamental Torrens principle that legal interests in land are created by the state through registration. 5. and therefore cannot serve as the basis for the creation of a legal interest. the Frazer case also involved another and more basic issue. As the conflict between the two cases presents a defeasibility issue. conditions and contingencies set forth and specified in the instrument or by this Act declared to be implied in instruments of a like nature. That section reads a s follows: 56. After a certificate of title has been granted for any land. is that the registered ownership obtained by one who purchased a forged transfer is defeasible in favor of the victim of the forgery. a contractual obligation not recognized by the general law a s a real covenant. Section 54 of the Alberta Act establishes this principle a s follows: 54. The issue decisive in Credit Foncier was inherently present in the Frazer case. Interests Qualifying for Registration 5. given the right to direct either the creation of any legal interests they choose. but upon the registration of any such instrument in the manner hereinbefore prescribed the estate or interest specified therein passes or. it was neither identified nor discussed in any of the judicial opinions throughout the litigation. Unless a n instrument presented for registration is 'substantially in conformity with the proper form'. The judgment appears to reflect a n unequivocal determination to reject the generally accepted interpretation of the Gibbs opinion. Unfortunately.

A similar definition of the duties of the Registrar was given by Stawell C. Evidently his concern was that the 'very great effect' of registration could validate a provision which would otherwise be a violation of the general law. The following examples are merely representative. . stated in Re Mutual Investments Ltd. Why. . I think that he may and. that he must register even a document which is a plain violation of the law and leave the person or company registering to take the consequences. the Registrar shall reject the instrument or caveat for registration if the condition is not satisfied a t the time the instrument or caveat would otherwise be registered.Riddell J. a s follows:33 The judicial duty is imposed on him of examining into the validity of instruments presented to him for registration.34 the court directed the Registrar to refuse to register a mortgage not executed on the prescribed form and purporting to operate a s a conveyance of the entire estate of the mortgagor rather than a s a transfer of a charge.94 Torrens' Elusive Title for registration is substantially in conformity with the proper form in the Schedule or not and may reject any instrument or caveat that he may decide for any reason to be unfit for registration. in dicta the courts have enjoined Registrars to guard against the registration of dubious instruments lest a n illegal provision be thereby validated. (2) Where any instrument or caveat i s presented to the Registrar for registration subject to a n y condition. in the early Victoria case of Ex parte Bond.. Hence. (1) Limit the risk of creation of interests inconsistent with the general law 5. however. where necessary. Such a mortgage would be contrary to the general law of Alberta. and say whether such instruments are valid or not. if limiting legal interests to those which can be submitted to the Registrar in instruments in substantial conformity with a proper form was intended to limit the risk of the creation of interests otherwise contrary to public policy.J.57-60 demonstrate that when the issue has been presented for decision. are legal interests limited to those which can be created on the basis of instruments 'substantially in conformity with the proper form'? Two possible answers to this question will be discussed below. When considering the duties of the Master of Titles (Registrar). should pass upon the legality of any document submitted to him. the fact that a traditional administrative practice is probably not required by a n obsolete objective does not solve the problem for the Registrar.80 However. and the court expressed the fear that .79 The cases cited in paragraphs 5. In Re Spokane and Eastern Trust's Mortgage. the prophylactic exercise is futile. for registration does not involve this risk. Although the cases have held that registration will not validate a n interest which is inconsistent with the general law when the issue has been squarely presented. 5. (3). I decline to accede to that argument: in view of the very great effect of registering such documents.:32 But it is said that the Master of Titles is a mere administrative officer. He is to investigate them a n d all the facts presented to him. the courts have uniformly held that registration does not validate a right or interest in real property which is contrary to the general law.

by use of which persons purposing to deal may be enabled to express distinctly the intention to which effect is to be given by registration. Statutory instruments have already been discussed in paragraph 5. Ownership by Registration 95 registration would have a validating effect. it is submitted that facility of transfer includes facility of registration and this cannot be achieved by the registrar if the door is opened wide to mortgages and leases.83 Torrens himself laid great stress on the need for plain and simple forms. and not a s a n uncompromising master in complex transactions.50. and to protect it by means of a caveat entered in the register. to secure simplicity by limiting the number and variety of instruments which would be registered. "that plain and simple forms be prescribed and provided. Thirty-eight years later. Thom ~ a i d : ~ 6 Registration under the Acts is accorded only to instruments in the form and executed in the manner required by the Acts. or the revival of circuitous and perplexing methods.Chapter 5 . containing pages of special clauses which may or may not on close examination reveal a further interest in land capable of registration. Whatever Torrens may have meant by the word 'prescribed'. the parties have no practical alternative but to let it remain in the equitable category. may not be availed of for the exaction of excessive charges. The efficient course would seem to be for a . is a worthy objective. A principle next in importance is. whenever permitted by a transaction. If a desired interest is denied entry into the legal category." Without this provision proprietors would remain under the necessity of calling in the conveyancer upon the most ordinary transaction. (2) Limit the number and complexity of permitted interests in land 5. 5. DiCastri summarizes the position taken by Registrars a s follows:35 That special covenants and powers may in some way be said to be "registered" is evident from the care exerted by the registrars to keep these classes of covenants off the register. for he ranked prescribed forms second in priority only to 'Indefeasibility of Title' in explaining his first Act98 Advantage of prescribed forms. DiCastri emphasized the goal of simplicity in these words? While it may seem that the registrar's duty to prevent the registration of instruments containing objectionable clauses is difficult to reconcile with the view that registration gives these clauses no special effect. This was part of the very essence of the legislation. and all available evidence indicates that they have been welcomed by both the public and the legal profession. However. It affords the best guarantee that the monopoly of business secured to the legal profession. his text emphasizes forms a s a useful servant in ordinary transactions.82 No author sensitive to the legitimate needs of the public would dispute the assertion that the creation of simple interests in land by clear expressive language. 5. whenever agency is employed in conducting transfers and other dealings. it is difficult to understand how limiting legal interests to those which are based on instruments substantially conforming to a proper form accomplishes anything beyond forcing the parties to create a n interest which cannot be registered a s a n equitable interest. to mention only two classes of instruments.81 In a n article published in 1924.

85 The Registrar and the public he serves are given some flexibility under the system. . Because B was the . The actual terms of the bargain are a totally different matter. However. We have therefore to distinguish between the substance of the transaction or bargain.84 The author suggests that limiting legal interests not only fails to achieve any objectives of a Torrens system. . the parties are left unfettered with respect to the stipulations they desire. which is left to the discretion of the parties. but hinders the realization of accepted objectives. These the parties are a t liberty to mould and settle for themselves. both produce inefficiency. and. Technical and immaterial departures from them do not deprive thedealing of efficacy.96 Torrens' Elusive Title jurisdiction to enact a sufficient variety of modern statutory instruments to meet usual commercial needs. and to refrain from efforts to force unusual transactions into inappropriate or obsolete forms through the denial of legal status. but that he cannot depart from the substance of the form.in Crowley v. Substantial compliance is sufficient. . which is not left to the parties. repetitious mumbling of 'Catch-22'. . One can only speculate a s to how many hours government officials and lawyers have consumed over the years arguing the issue of whether or not a change in the substance of a transaction from that prescribed in a form has a s well changed the substance of the form. when told that he can mould the substance of a transaction to meet the needs of the parties.86 Stating the second disadvantage of limiting the creation of legal interests can serve a s a summary of this entire chapter. but in giving it the legislature requires it to be exercised in a particular form. But a document offered for registration must show at least substantial compliance on its face. (3) Disadvantages of limiting legal interests 5. but contrary provision can always be made. and the substance of the form in which the transaction is embodied. one wonders if a lawyer. for the statute may be said to have forced them to attempt a n impossible clarification. Assume that A was the registered owner of Blackacre shopping center. . 5. No criticism of the Judges who delivered this judgment is intended. Two disadvantages will be cited.. so long a s the fair working of the Act is not impeded or embarrassed. The power to make it is specifically given . for a n instrument may be registered if it is 'substantially in conformity with the proper form'. and that C wished to purchase the leasehold interest from B. T e ~ n p l e t o n : ~ ~ Slavish adherence to the forms is not demanded. that B was the registered owner of a complex long-term lease of unit five in the shopping center.. 5. Short provisions are framed with full elaboration of effect. implied terms are enacted which are to prevail in the absence of contrary provision. suitable for ordinary occasions. . How does either a lawyer or the Registrar determine what constitutes substantial conformity? An example of the confusion this inquiry engenders is furnished by the joint judgment of Isaacs and Gavan Duffy JJ. The Torrens system has been established and maintained by the state to serve the needs of the society by facilitating the transfer of interests in land to the advantage of all users of the system. but is insisted on by the legislature a s one of the conditions of statutory operation. . might not lapse into a quiet.

Specifically.1122. supra.R.R. (1963) 44D. Limiting the creation of registered legal interests increased the number of equitable interests protected by caveats. at 590. (1930) 44 C. 1977). L. and the transfer from B to C. . C would have to evaluate the extrinsic validity of the lease. Id. 9. 122.L. s.L. Id.R. 3. 11.698. at 701. Simpson. (1913) 13 D. the transfer from A to B. n. 7.S.l D. Laskin. 22. 45 S.R. and produces a n environment conducive to the development of chains of title for valuable equitable interests in land. 2.J. Clark on Surveying and Boundaries 5 277 (4th ed.W. s.C. Grimes.545. 15.W.5 W. L. B does have a chain of title. and that B had a caveat entered in the register to protect the leasehold interest. 576.4 (4th ed. 12.. 5. 82.W.J. If D wished to purchase the leasehold interest from C. 21. at 376. 27. 5. [I9351 1 W. supra. The Surveys Act. 14.W.ed. 76.87 Assume that B's lease was denied registration a s a legal interest because it did not substantially conform with the proper form. Rayner and McLaren.W. 813. If C purchased the leasehold interest.R. (Imp.R. c. Land Law and Registration 139 (1976). Thorn's Canadian Torrens System 88-95 (2d ed. and the only link is the transfer of the lease from A to B. It is believed that this is inimical to the efficient operation of a Torrens system. a s well the intrinsic effect of the lease provisions. [I9571 Ch.576.422.L.S. 19.R. 119611 S. [I9301 Vict.R.l W. (1912) 45 S.R.A.R.) 15 & 16 Geo. 21. 1.W. 18. and to make certain that they comply with the general law.R. at 136. 23. 10. C. 1970. 8. If C wished to purchase B's leasehold interest. (1911) 38 W. 24. 1962). 1976). (1901) 27 Vict. 25.59. a s B's ownership of the leasehold interest in unit five was conferred by the state. 6. n. 1964). at 134. Cases and Notes on Land Law 180 (rev. R. 4. c.l W.R.C. and protected it by a caveat.(2d)186. (N. Simpson. In this example.A. 5. 8.A.43 W. (1901) 11 Q.W. for B has no chain of title. 111. 251 (C.at 1138.L. 8.R.L. or the adequacy of the legal description of unit five in the transfer.L. 358.)365.L. Id. 20. Falconbridge on Mortgages 5 11. at 586-87.).). 13. 17. and the adequacy of the legal description of unit five.R. 16. 59.Chapter 5 . Simpson. (1930) 44 C. D would have to evaluate C's chain of title back to A a s the registered root.L. C need only evaluate the intrinsic effect of the lease provisions to determine what rights and duties they purport to create.l U. FOOTNOTES (1901) 11 Q.R. 618. at 622. at 60.R. Ownership by Registration 97 registered owner of the leasehold interest. C need not evaluate either the extrinsic validity of the transfer of the lease from A to B. it is unnecessary for C to evaluate the instruments i n B's chain of title. 433 (Sask. there would be two links in C's chain of title.R. DiCastri.

a t 466-67 (Aust. Thom. 39. supra. 30.C. 457. 327. 458. The Caveat in the Torrens System. (1910) 15 West. 31. Hinde.R. at 249.L. a t 330. n.R. n. 37. 29. The New Zealand Torrens System Centennial Essays 33 (Hinde ed.C. 637 (Alta. Id. 38. at 462.C. 33. [I8911 A. . a t 1071-72 (H.D. 569.L. 35. 15. 248. 36. 1070.).98 Torrens' Elusive Title 26. (1880) 6 Vict. 56 O. 331. L. at 250. 28. at 31. (1924) 2 Can.R. Bar Rev.R. 15. 27. 29. Torrens. Lord Denning. 34. The South Australian System of Conveyancing by Registration of Title 9 (1859).R. 32. DiCastri.C. L. H. The author's textual summary of the Gibbs doctrine is discussed i n chapter 6. Walker.Z.). Lord Hodson. 1971).L. Lord Wilberforce and Sir Garfield Banvick. Indefeasibility of Title since Frazer v.L. DiCastri. supra. T. [I9671 1A. (1914) 17 C. [I9241 4 D. Viscount Llilhorne. [I9661 N.R.).

b.3 The current statutory provisions of the Alberta Act will be considered briefly in order to facilitate their subsequent discussion in connection with specific defeasibility problems. and when defeasibility should be based on modifying principles of law required by a Torrens system. and to the extent that. unfortunately.26. In this situation. 6. I n this chapter we must consider when defeasibility should be based on principles of the general law existing independently of a Torrens system. C u r r e n t S t a t u t o r y P r o v i s i o n s 6. that ownership under a Torrens system i s subject to defeasibility because of the possibility of error inherent in the system. As defined in paragraph 4. . and that subsequently B became the registered owner of more legal rights in Blackacre than were authorized by the general law.CHAPTER 6 Defeasibility of Ownership Conferred by Registration a. Introduction 6. Based on this premise.18. it was inconsistent with the general law. Error will necessarily produce a potential dispute between persons claiming conflicting legal rights derived from registration. This example merely reiterates the conclusion stated in paragraph 4. Section 63(1) will be quoted a t the outset in order to demonstrate the basic statutory approach to the subject of defeasibility. and that this basic rule should be modified only to the extent required by a Torrens system. the basic rule should be that ownership conferred under a Torrens system is defeasible whenever required by provisions of law existing independently of a Torrens system.2 Assume that A was the registered owner of Blackacre in accordance with provisions of the general law. or A's ownership was defeasible through error in order to achieve a n objective of a Torrens system.1 Under what circumstances should ownership conferred by the state under a Torrens system be defeasible? The author's analysis of this question is based on the premise that the basic objective of a Torrens system insofar as legal interests are concerned is the maintenance of a register comprehensive of all legal interests in land in accordance with requirements of the general law. B's ownership was erroneous because. either B's ownership is defeasible in order to make it possible for the Registrar to correct the register so that it will conform with requirements of law existing independently of a Torrens system.

Given the ambiguity within and the inconsistency between the sections. or (2) when the owner obtained registration by participating in fraud. perhaps the exceptions were intended to be cumulative. but sometimes what might be the same exception included in section 63(1) is phrased differently (creating a n ambiguity a s to the meaning of the exception).(1) The owner of land in whose name a certificate of title has been granted shall. sometimes a n exception contained in section 63(1) is omitted. 180(l)(a)(b)and (c). (3) Defeasibility of a registered interest to permit the execution of a transaction a s mutually intended by the relevant parties. on the basis of this section one should be able to say that a registered owner of a legal interest in land is defeasible a s to that interest only: (1)a s a consequence of the existence of a n encumbrance. estates or interests whatsoever except the estate or interest of an owner claiming the same land under a prior certificate of title granted under the provisions of this Act or granted under any law heretofore in force and relating to title to real property. As only three exceptions can be identified in section 63(1). the fact that they contain different exceptions creates a potential conflict between the sections.4 The problem is that one cannot rely on section 63(1). the effort is perilous. or (3) when the same legal interest was held by another owner under a prior certificate of title. As anyone familiar with Torrens legislation will immediately perceive. lien. (Emphasis added. both the summarizing phraseology and the statutory sources reflect the author's judgment. estate or interest to which the registered interest was stated to be subject.100 Torrens' Elusive Title 63. 6. There are several other sections of the Alberta Act which follow the same statutory approach. and to provide references to their statutory sources in the Alberta Act. the owner of land in whose name a certificate of title has been granted (which applies to the registered owner of a fee simple or of a lease) holds the land absolutely free from all other interests (has a n indefeasible title) subject to specifically stated exceptions. (2) Defeasibility of a registered interest to give effect to other interests to which it is subjected by entries in the register. absolutely free from all other encumbrances. and (4). 65(1) and 183. liens. estates or interests as are notified on the folio of the register that constitutes the certificate of title. hold it. 6.5 Because the ultimate issue is what indefeasibility exceptions are necessary. See sections 63. the author will ignore the potential conflict between the sections. See sections 50(1). (1) Defeasibility of a registered interest to give effect to overriding interests not entered in the register. which purports to be exhaustive. except in case of fraud wherein he has participated or colluded. See sections 64. they are based on the 'indefeasible title' concept and state specific exceptions. . liens. and 185(l)(a)(b)and (c). subject (in addition to the incidents implied by virtue o f this Act) to such encumbrances. and (4). and 185(l)(a)(b) and (c). or perhaps some priority among the exceptions was intended. but it is believed that the list is accurate a s to the meaning of the exceptions. 64(e). and will attempt to summarize the present statutory exceptions to indefeasibility. and sometimes a new exception not stated in section 63(1) is introduced. Because several of the sections purport to be exhaustive a s to the exceptions to indefeasibility.) The emphasized language discloses the statutory approach.

be computed with reference to the grant or earliest certificate of title under which he or any person through whom he derives title has held possession. ." 185. The prior certificate of title exception is variously defined in three separate sections. Section 167 merely contains a reference to section 180(l)(e).(1) ". . (5) Defeasibility of a registered interest obtained through error by a n owner who was not a purchaser for value. by misdescription of ". or whose claim is derived directly or indirectly from the person who was the holder of. any land included in a n y . . . are registered under this Act or under any such law in respect of the same land. . See sections 63. (6) Defeasibility of a registered interest to the extent that a conflicting interest is held by another registered owner under a prior certificate of title." 6. 65. 65.(2) Such priority shall. . .6 Having listed the statutory indefeasibility exceptions." 180. 180. . a s follows: 63. will not be followed. however.2-3 will be used. the earliest certificate of title granted. notwithstanding that the certificate of title has been surrendered and a new certificate of title has been granted upon any transfer or other instrument. .(2) For the purpose of this section that person shall be deemed to claim under a prior certificate of title who is holder of. 203. in favour of any person in possession of land. except so far as regards any portion of land by wrong description of boundaries or parcels included in the certificate of title. land or of its boundaries .(l)(f) The case of an owner claiming under an instrument of title prior in date of registration under this Act. Based on the postulated objectives of a Torrens system.7 If the basic objective of a Torrens system is the maintenance of a register comprehensive of all legal interests in land in accordance with requirements of the general law. Defeasibility Required by Principles of the General Law Independent of a Torrens System 6. . . 180(l)(d) and 185(l)(c)and (4). the deductive method of analysis a s stated in paragraphs 4. . That procedure. or a grant and certificate of title.(l)(e) ". or under the provisions of any law heretofore in force in any case in which two or more grants. . . and will then analyze the current statutory provisions in an effort to determine to what extent they satisfactorily define the required defeasibility conditions. Defeasibility of Ownership 101 (4) Defeasibility of a registered interest obtained by a n owner through knowing participation in fraud. c. See sections 167. any misdescription of land or boundaries. and 204. the study will first attempt to identify the conditions of defeasibility which are functionally required for a n efficient system.Chapter 6. (7) Defeasibility of a registered interest a s to any land included in a certificate of title by misdescription of land or of its boundaries. or two or more certificates of title. . . 65. 180(l)(d). .and 185(1)and (4). . . certificate of title the. 167. The misdescription exception is contained in the following sections in the language quoted. Rather. . one might proceed immediately to analyze them in terms of the existing authorities.(l)(a) . then one could state a s a statutory rule that 'ownership conferred by the state under this act is defeasible when . .

This approach must have been politically expedient during the late nineteenth century. for all situations in which one's initial indefeasible ownership is potentially defeasible must be specifically provided for. "without prejudicing rights conferred for value". for broad statutory references to the general (common) law would probably not have helped to promote the new Torrens system. the statute must provide for debits whenever someone else has a conflicting right in Blackacre." certain specified interests. The section is so bewilderingly verbose that quotation would only contribute to confusion. one might find that a functional and efficient Torrens system. except a s modified by this act'.10 The first five statutory indefeasibility exceptions contained in the Alberta Act. subject only to stated indefeasibility exceptions. most of the relevant sections of the Alberta Act are based on the principle that ownership conferred by the state is indefeasible. will now be repeated and discussed in order to demonstrate that they all apply to situations encompassed by the broader basic rule of defeasibility required by principles of the general law existing independently of a Torrens system but incorporated into the system. 6. 167. 6. by implication and without any special mention therein. it will be defeasible to the extent that such a conflicting interest exists. a s outlined in paragraph 6. section 185 of the Alberta Act takes a different approach. Section 64(1) of the Alberta Act provides that "The land mentioned in any certificate of title granted under this Act is.102 Torrens' Elusive Title required by principles of law existing independently of this act. 6. except a s provided by the quoted clause. . and depending upon how extensive those modifying rules were.14 in order to emphasize that the register cannot be comprehensive of all possible interests in land because it does not purport to include overriding interests. 65. and 180 all follow this pattern. One . The author will risk summarization. The difficulty with this approach is that it imposes a severe drafting problem. The act would only have to include those additional rules of defeasibility modifying the general law. and will conclude that the section authorizes the Registrar to complete or maintain the register by canceling or correcting any erroneous entry. and in accordance with principles of the general law applicable to the overriding interest. (1) Defeasibility o f a registered i n t e r e s t t o give effect to o v e r r i d i n g i n t e r e s t s n o t e n t e r e d i n the register 6.8 As has been pointed out a t paragraphs 6. Overriding interests are mentioned here because a s a registered interest is subject to overriding interests. Because a registered owner has a n initial credit of all possible rights in Blackacre. which hints a t a modifying rule of defeasibility required by a Torrens system.9 I n contrast. . As a n erroneous entry is a n entry inconsistent with requirements of the general law. the section in fact provides that any ownership conferred by a n entry inconsistent with requirements of the general law is defeasible. Sections 63. substantially improving facility of transfer.5.11 Overriding interests were discussed briefly in paragraph 4.4-5. subject t o . depends on relatively slight changes in the general law.

only the procedure for accomplishing this result is changed. A was formerly the registered owner of Blackacre. (2) Defeasibility of a registered interest to give effect to other interests to which it is subjected by entries in the register 6. I t seems somewhat incongruous to the author to think of A's ownership a s having been indefeasible. a s . B presented the transfer to the Registrar. the registered ownership conferred on A was defeasible in accordance with principles of the general law applicable to government tax liens. What should the Registrar do? The reader is asked to tolerate this elementary question with patience.3. I n this example. but subject to a condition of defeasibility. 6. shall be cancelled . which was sold to B under process of law to satisfy a government tax lien. Rather. Defeasibility of Ownership 103 overriding interest specified in section 64(l)(b) is the government lien for unpaid taxes.13 Section 63(1) of the Alberta Act. including mines and minerals (hereafter M & M). and a new certificate of title shall be granted to the transferee. estates or interests a s are notified on the register.12 Example A.15 Example C. illustrates this situation. and once understood. No objective of the Torrens system requires the alteration of the general law principle that a n owner can voluntarily transfer his ownership of a legal interest to someone else. A would have delivered a deed to B. and the transfer expressed the intention of both parties. can be applied in more complex situations to which their relevance might otherwise not be apparent. and requested registration a s the owner of Blackacre. a registered interest is defeasible in accordance with the general law in order to permit the Registrar to execute a transaction a s mutually intended by the relevant parties. and the court issued a vesting order transfering Blackacre to B in satisfaction of the debt. A defaulted in payment of the debt. A was the registered owner of Blackacre. for it provides that the registered owner of land holds it subject to such encumbrances.14 Example B. A executed and delivered a transfer of Blackacre to B. the certificate of title of the transferor . quoted a t paragraph 6. 6. he finds it more practical to say that the state never conferred more rights in Blackacre on A than ownership subject to the liabilities inherent in a mortgage in accordance with principles of the general mortgage law existing independently of a Torrens system. 6. (3) Defeasibility of a registered interest to permit the execution of a transaction as mutually intended by the relevant parties 6." Section 185 of the Alberta Act. B brought a proceeding to foreclose the mortgage.Chapter 6 . . . Manifestly. .16 But for the Torrens system. Section 50(1) of the Alberta Act thus provides that "Upon every transfer of ownership. therefore. subject to a mortgage in favor of B securing a debt A owed to B. In 1915. who would thereupon have become the owner of Blackacre. for fundamental principles can be best demonstrated by simple situations. . liens. A was the registered owner of Blackacre in 1909.

is a more appropriate phrase. two days after receiving the transfer from B the Registrar began to revise the register by carrying out the transaction. as before. The Alberta Act utilizes a profusion of words to describe the Registrar's operations. authorizes the Registrar to complete the register by canceling or correcting any erroneous entry. 188 and 194 by means of a n order directing the Registrar (the same profusion of statutory words quoted a t paragraph 6. I s it not obvious that until the Registrar 'completes' the register by 'canceling' A's ownership and registering B a s the owner of Blackacre. and by 'canceling' those issued. After the phone call. and two minutes later. he canceled A's registration as the owner of Blackacre.20-22. First he registered B as the owner of Blackacre including M & M.21 Continuing example C. by making 'entries'. but before he could complete the transaction by canceling A's separate registration a s the owner of the M & M. Can we not say a n order directing the Registrar to revise the register a s directed by the court? 6. the court would normally rectify or cancel the conveyance. However. and 'additions'. he was interrupted by a n absorbing telephone call. and thereby confer ownership of the legal interest on the party properly entitled thereto under the general law. and 4.104 Torrens' Elusive Title summarized a t paragraph 6. He 'completes' and 'corrects' the register. there were two . 6. because'statutory rectification' could be confused with equitable rectification. and by 'canceling' those made. the court exercises its power under sections 182.19 I t would appear that the exceptional intervention of equity to create and terminate legal interests in land through cancellation and rectification is the closest analogy to the Registrar's routine operations under a Torrens system.17 are used). there were exceptions through the equitable remedies of rectification and cancellation discussed a t paragraphs 2. Secondly. the register is 'erroneous' and requires 'correction'? 6. 'memoranda'.182 or 191 of the Alberta Act.17 The subject of the Registrar's duty to execute a transaction as mutually intended by the relevant parties is a convenient context in which to consider the basic nature of the Registrar's function under a Torrens system. 187. Are all of these words descriptive of administrative acts performed by the Registrar on the register which have the legal effect of creating and terminating legal interests in land. If one's ownership of a n interest in land a t common law was erroneous. 'endorsements'.72-74. 6. the author believes that 'statutory revision of the register'. However. and by 'issuing' instruments. as appropriate. hopefully in accordance with principles of the general law a s modified by principles of law required by a Torrens system? 6. Perhaps the most accurate phrase available in the legal vocabulary to describe the Registrar's normal primary duty of continually creating and terminating legal interests in land in accordance with the general law a s modified by a Torrens system would be 'statutory rectification of the register'. either because a conveyance was not intended by the relevant parties.18 At common law legal interests in land were created and terminated by private individuals.20 Where judicial direction is sought under sections 181.9. which is both descriptive and simple. or was procured by fraud.

the court said that A's certificate of title was blemished by B's caveat. but it did not utilize the analysis suggested above. should preclude the Registrar from revising the register in accordance with A's transfer? I n 1937.1 6. is there any reason why the mere passage of time. he can no longer complete his revision of the register by doing so? Must the Registrar now seek judicial assistance? If a question is absurd. B claimed that she first purchased Blackacre from K (who was not registered) in 1907. the matter slipped from his mind. If the Registrar remembered that the Blackacre M & M register remained erroneous two weeks later.5.24 The Fellger case included these collateral facts. C brought a n action seeking a declaration a s to who.45 years after the original transfer from A to B. Based on these facts. who was duly registered in accordance with this transfer. A held the prior certificate of title. and under a literal reading of sections 65(2) and 180(l)(f) of the Alberta Act. and whether or not A's prior certificate of title was 'blemished'. If A acquired Blackacre subject to L's contract with K. quoted a t paragraph 6. and the Blackacre registers were returned to storage. and if B acquired K's contract rights. I n 1960. and that K purchased from L (who was registered) around 1900.Chapter 6 . owned the M & M in Blackacre. Does the prior certificate of title exception mean that because the Registrar chose to register B a s the owner of the M & M before he canceled A's registration. B filed a caveat against L's registered title to protect this claim in 1908. and that C's registration was defeasible.2 With respect.23 I s there any functional reason why the acquisition of B's rights by C should preclude the Registrar from revising the register in accordance with A's transfer? A asserted that it had a n indefeasible prior certificate of title for the Blackacre M & M. to C. The court ordered the Registrar to cancel A's prior certificate of title. that would explain why A made the transfer to B. and hence was "not the kind of a prior certificate of title envisaged by The Land Titles Act". A or C. 6.22 The Registrar. is there any functional reason why he should not be permitted to revise the register by canceling A's registration as the owner of the M & M in accordance with A's transfer? What if the Registrar discovered the error in 1937. it is because there is a patently obvious answer. 22 years after it was made in 1915. for no objective of a Torrens system would be served by barring the Registrar from executing a transfer intended by the parties and conflicting with no principle of the general law. however. 6. B sold and tranferred Blackacre. Canada Trust Co. that the prior certificate of title exception could not reasonably have been intended to make the registered ownership of B or C defeasible a s to a n interest A intended to transfer to B. with no other change in the relevant facts. A's prior . Defeasibility of Ownership 105 certificates of title for the Blackacre M & M on the Registrar's desk. No legislature could conceivably have intended that the prior certificate of title exception apply in this situation. the author fails to comprehend how these collateral facts were relevant to the basic issue in the Fellger case. including the M & M. But whether or not A was contractually obligated to make the transfer to B. and when A obtained its certificate of title in 1909 pursuant to a transfer from L. B's caveat was endorsed on A's certificate of title. did not cancel A's prior certificate of title for the M & M. Example C now summarizes the relevant facts in Fellger v.

under the suggested rule C held the valid registration. for the system must provide clear rules for determining which of the conflicting registrations is defeasible. notwithstanding a subsequent conflicting registration. a title registration system should include rules making it possible for one to determine who owns any specified legal interest in land a t any given time. but erroneously registered B a s the owner of the M & M. There is logic in a rule which provides that if A is the registered owner of a legal interest. The prior certificate of title provisions of the Alberta Act certainly appear to select the first alternative. However. for neither will necessarily give valid registered ownership to the party who must ultimately have it on the merits. and clear resolution is required for both theoretical and functional reasons. Assume that A excepted the M & M from his transfer of Blackacre to B. he remains the owner until his registration is canceled. As stated a t paragraph 5.27 A rule defining the valid registered ownership in a contemporaneous conflicting registration situation is required for functional reasons. I t is imperative that C obtain this remedy before A transfers the M & M to D. There is equal logic in a rule which provides that if B is registered a s the owner of a legal interest. First. for if this happens. and thus define the valid registration a s the one which will ultimately prevail on the merits? The suggested rule would be just a s certain a s a n arbitrary one. a new rule modifying the general law to achieve goals of a Torrens system may alter the situation and leave C with the defeasible registration. 6. and the appropriate remedy is the cancellation of A's registration which is a threat to C's valid registered ownership.7. The suggested rule would operate with equal ease if the error in example C were reversed. When there are contemporaneous conflicting registrations.26 Theoretically.106 Torrens' Elusive Title certificate of title must be defeasible in order to permit the Registrar to revise the register by executing the transfer mutually intended by A and B in 1915. I n example C. I n the Fellger case.25 The Fellger case is merely the first case considered in this study in which the prior certificate of title exception was a burr under the saddle of a judge under pressure to reach a functionally sensible result under the Torrens system. it was metaphysically impossible for both A and B to own the M & M a t the same time. however. it is beyond the power of the state to confer the same legal interest in Blackacre exclusively and contemporaneously on two different persons. 6. his registration automatically cancels a prior conflicting registration. Both alternatives are arbitrary. 6. why not define the valid registration a s the one which conforms with the general law a s modified by rules required by a Torrens system. that the prior registration establishes the valid registered ownership. which would be the case if A's prior registered ownership were defined a s the valid ownership. that the Registrar properly left A's registration a s the owner of the M & M intact. C would not need to request a n order conferring legal ownership on him. Perhaps the prior certificate of title exception was intended to resolve this conceptual problem. Here the . a rule defining the valid registration is necessary in order to make it possible to identify the nature of the statutory revision of the register required to remedy the error.

A's registered ownership of the M & M was terminated. through erroneous entries in the register. a a new rule modifying the general law to achieve goals of a Torrens system will alter the situation and leave A with the defeasible registration. Defeasibility of Ownership 107 appropriate remedy is the cancellation of B's registration which is a threat to A's valid registered ownership.29 Example D.28 A second functional reason for defining the valid registered ownership in a contemporaneous conflicting registration situation is to make it possible for the parties and the courts to identify a potential adverse possession situation. and 180 all fail to acknowledge the functional reality that A's ownership was subject to divestiture through error. and registered B a s the owner of Blackacre. Section 185 supports the required solution for it authorizes the correction of erroneous registrations. and in further examples in this chapter which involve conflicting contemporaneous registrations. Section 50 provides negative support. however. for if this happens. and 180. The problem is that sections 63. Example D summarizes the early relevant factors in a long sequence of events in Alberta which led to the famous case of Turta v. 65.65.A executed and delivered a transfer of Blackacre to B. the functional analysis is the same.30 Although B's registered ownership must be defeasible. the Registrar canceled A's registration a s the owner of Blackacre. Upon receipt of the transfer. 6. Sections 63. introduce a n analytical morass. B's registered ownership must be defeasible. As stated in paragraph 4. 6.28. and registered ownership was conferred on B. exceptingM & M . B's registered ownership of the M & M was erroneous because it did not reflect the mutual intention of the parties to the transaction. and who might have obtained ownership by adverse possession extinguishing the otherwise valid registered ownership. and there was absolutely no transfer from A to B covering the M & M in this example. statutory analysis is difficult because of the indefeasibility notion inherent in certain key sections of the Alberta Act. This subject is considered in chapter 8. I n 1908. it was inconsistent with the general law. including M & M. . including M & M. and the same sections fail to recognize this functional necessity. Moreover. for unless the valid registered ownership is established. Co.Chapter 6. A was the registered owner of Blackacre in 1903. Example D does not present a contemporaneous conflicting registration situation. 6. for it only authorizes the Registrar to cancel A's registration based on a transfer. It is imperative that A obtain this remedy before B transfers the M & M to C. one of the inherent elements i n a Torrens system is the Registrar's power to terminate and create legal ownership by unauthorized entries in the register.3 As this example presents the same substantive issue a s example C. it is impossible to determine who might have a cause of action to obtain possession based on valid registered ownership. and the transfer expressed the intention of both parties. and it was not required by any principles of a Torrens system. Canadian Pacific Ry. and Imperial Oil Ltd. The necessity of defining the valid registered ownership in a conflicting contemporaneous registration situation h a s been introduced a t this point to make it possible to test the efficiency of the rule suggested a s a solution to the problem raised in example C.

'excepting M & M'. Co. I n 1907. Although none of the relevant parties were still alive. C's successors contended that had B and C known that B was the rightful 'owner' of the M & M. Secondly. the Registrar filed a caveat against C's registration to prevent further transactions unless subject to any rights A and B might have in the M & M. every opinion written in the Turta case. and conferred ownership of the M & M on C.33 At this point no one was registered a s the legal owner of the M & M. he struck the 'excepting M & M' clause from C's registration a s the owner of Blackacre. Example E now summarizes the relevant facts in Public Trustee for ~ Alberta v. the transfer would not have excepted the M & M. that the transfer of Blackacre to B. pursuant to a transfer from the Canadian Pacific Ry.). which excepted the M & M. 6. he struck the 'excepting M & M' clause from B's canceled registration a s the owner of Blackacre. as properly construed. stated that the register could be corrected and that ownership of the M & M could either be restored to A (which was correct) or had never left A (which was incorrect for the reasons already set forth). even though the certificate of title did not specify this fact.108 Torrens' Elusive Title 6. a s has been stated a s a n assumption. (and not the Crown) had owned the M & M. thus interpreting the transfer from B to C a s though it had not contained the 'excepting M & M' clause. and that the transfer should be rectified by the . 'excepting M & M to the Crown'. thus anticipating the previous assumption of what a court would conclude. 6. The Registrar discovered this fact during a routine review of the Blackacre register in 1932. (C. and that B should have been registered a s the legal owner of the M & M. Trial Division and Appellate Division. At this point there was still no one registered a s the legal owner of the M & M. which commented by dictum on the facts when only the rights of A and B were in issue. Because the C. and registered B a s the owner of Blackacre. A was the registered owner of Blackacre. The Registrar canceled B's registration in full. that the 1915 transfer from A to B. 'excepting M & M'. from the Supreme Court of Alberta. and had not excepted them from the transfer. The Registrar canceled A's registration in full.R.P. A's registration included the M & M. "who should have been registered?" The answer depended on the intention of the parties. and registered C a s the owner of Blackacre. through the Supreme Court of Canada. B executed and delivered a transfer of Blackacre to C.P. expressed A's intention to transfer all interests in Blackacre to B which A owned. In 1971. First. Assume that a court would conclude that the 'excepting M & M to the Crown' clause in A's transfer to B reflected A's belief that the Crown already owned the M & M.R. but he left B's registration canceled in full.35 The more important issue for this study concerns the controversy a s to whether or not the 1923 transfer from B to C. P y l y p ~ wI. and the substantive legal question was.n both the trial court and on appeal it was held. as properly construed. I n 1915.32 Example E. 6. I n order to correct all of his records. the Registrar made two revisons. and was not intended as a transfer to the Crown. transferred the M & M to B.34 In 1923. 'excepting M & M'. 6. correctly expressed the intention of the parties.31 Nevertheless. A executed and delivered a transfer of Blackacre to B.

and demonstrates that a registered interest. held that the 1923 transfer from B to C should be rectified.20.37 The Pylypow case is very significant in terms of the defeasibility of a registered interest. However. and although he stated no reasons for this conclusion. but left C's registration a s the owner of Blackacre. I n fact. The Appellate Division opinion assumed. is defeasible to permit the execution of a transaction mutually intended by the parties. for the transfer excepted the M & M. I t should be added that Sinclair J. Trial Division. involved questions of law which should not have been decide by the Registrar. 6. the Pylypow case is quite similar to the examples used in paragraph 4. unaltered. although there was evidence to support the finding of fact that the parties would have intended t h a t the M & M be transferred if they had known that B 'owned' them. Sinclair J. and this may be seen more readily if we assume for a moment that the Registrar registered B a s the owner of the M & M in 1932 pursuant to a court order interpreting the transfer from A to B. Rectification of the transfer would have left the register erroneous. I n short. and that consequently C's registration a s the owner of the M & M was not erroneous. . 6. and this emphasizes the point made in paragraph 4. the transaction intended by the parties in 1923 would not yet have been executed by the Registrar. 'excepting M & M'. it is worthy of reemphasis. this is precisely what the Registrar had already done in 1932 when. that a functional definition of error should be neutral a s to fault. for he would merely have executed the transfer a s it was tendered to him. Defeasibility of Ownership 109 court accordingly. there was no evidence to support a finding of fact that they had actually agreed to transfer them.36 I n the Supreme Court of Alberta. the court was asked to exercise its classic equitable jurisdiction. held that the 1923 transfer from B to C did not correctly express the transaction mutually intended by B and C. however. that a registered interest would be defeasible if equitable rectification were applicable. and the applicability of equitable rectification to the 1923 transfer from B to C. previously discussed i n paragraphs 2.Chapter 6.72-73. to rectify a n instrument of the parties based on mutual mistake. they seem relatively obvious. Indeed. for a s B would still have been the registered owner of the M & M in 1971. The Registrar would not have made a mistake. stated that the Registrar had lacked the authority to rectify the transfer in 1932. even when that mutual intention was not expressed in a transfer until the latter was equitably rectified decades after the transaction was to have taken place. Both the legal interpretation of the effect of the 'excepting M & M to the Crown' clause i n the 1915 transfer from A to B.38 The decision of the trial court in Pylypow was reversed by the Appellate Division on the grounds that. 6. was a n exercise of the court's equitable jurisdiction to rectify a n instrument of the parties. i n 1971 Sinclair J. The register would then have accurately reflected the execution of the 1923 transfer from B to C. and that the transfer should be rectified.21. he registered C a s the owner of the M & M. This. i n spite of the 'excepting M & M' clause in the 1923transfer from B to C. and that for this reason the transfer which expressly excepted the M & M should not be rectified. here B's ownership of the M & M.

a s appropriate. a purchaser of a legal interest was bona fide if he had not knowingly participated in a breach of trust or other fraudulent conduct. the holder of a subsequently acquired legal interest would not be subject to the enforcement of a prior equity. it seems most unlikely that this phrase was intended to impose a higher standard of business morality on a n owner than to refrain from knowingly participating in fraud. in substance. 180(l)(d) and 185(l)(c) and (4). 6.18).42 Any common law jurisdiction. and any subsequently acquired equity will be enforced against the holder of a prior legal interest and will be accorded priority in enforcement over any prior equity. which of course include the doctrine of constructive notice (see paragraph 3. and would be accorded priority of enforcement over a subsequently acquired but otherwise superior equity (see paragraphs 2. Under both a race-notice and a notice statute.78-83).69. the subsequent interest must be recorded before the prior interest is protected by recording (see paragraph 3. if the holder of the subsequent interest satisfies the requirements of the statute. the subsequent interest must be acquired by a bona fide purchaser for value in accordance with generally accepted equitable principles.17). could enact legislation substantially increasing facility of transfer by restricting the perimeter of fraud.39 Sections 63. and thus making it easier for the purchaser of a subsequent interest to achieve bona fide status. unless a t the time of acquisition of the subsequent interest the purchaser was not guilty of fraud. Although sections 167 and 180(l)(d)say that the owner must be bona fide.20-26 for two reasons. in equity the terms were synonymous. and 203 of the Alberta Act all provide. This means that a fraudulently acquired legal interest would be defeasible through the enforcement of the equitable remedies of specific performance. a prior equity would be enforced against the subsequent purchaser of a legal interest (see paragraphs 2. The recommendations contained in the Uniform Act (US) were discussed a t paragraphs 3.110 Torrens' Elusive Title (4) Defeasibility of a registered interest obtained by an owner through knowing participation in fraud 6. and 2. for as shown in paragraph 2. and a fraudulently acquired equity might not be enforced a t all. rectification. 65.50-52. or cancellation.52. and a subsequently acquired superior equity would be accorded priority in enforcement over a prior equity. it will be disregarded here. with or without a statutory system incorporating principles of conventional recording.41 Modern recording systems increase facility of transfer by enlarging the category of prior interests which will be subordinated to a subsequent interest acquired by one who satisfies the requirements of the relevant statute.40 Under the common law system of conveyancing. The net effect is that any prior interest will be subordinated to the extent inconsistent with any subsequent interest acquired by one who satisfies the requirements of the statute. 2. Stating these equitable rules conversely. 6.73-74). Under a race-notice statute. 6. . that a registered interest obtained by a n owner through knowing participation in fraud is defeasible. What are these requirements under recording statutes in common use? As the race statute i s infrequently used. if the subsequent interest had been acquired by a bona fide purchaser for value. A subsequently acquired legal interest will divest a prior legal interest to the extent that the legal interests are inconsistent.

it would have merely incorporated generally accepted equitable principles defining fraud. When a purchaser with no more than actual knowledge of the existence of a prior interest was held to be fraudulent.43 The sections of the Alberta Act which provide that a registered interest is defeasible if acquired through fraud were referred to a t paragraph 6. the reader may wish to review paragraph 3. First. therefore. to what extent does section 203 redefine fraud? Section 203 appears to provide that the fact that one who deals with a registered owner h a s knowledge of the existence of a prior unregistered interest shall not of itself be imputed as fraud. be guoted in full: 203. one was not fraudulent merely because he purchased with actual knowledge of the existence of a prior interest. I n order to appreciate the probable functional meaning of this provision. then knowledge that his acquisition would involve participation in fraud was imputed to the purchaser. simply because he purchased with actual knowledge of the existence of a prior interest. they demonstrate that a statutory redefinition of fraud involves a n alteration in the general law quite distinct from any changes required by a Torrens system. because of its extreme importance.39. they illustrate a modern attempt to decrease substantially the scope of the doctrine of constructive notice. and secondly. But if a purchaser had no knowledge that his acquisition would involve participation in fraud.) There are two distinct questions to be answered. Under accepted equitable principles. to what extent does section 203 alter the pre-existing judicial definition of fraud. and hence a registered legal interest would be defeasible under the same circumstances a s would a common law legal interest. encumbrance or lease from the owner of any land in whose name a certificate of title has been granted shall be bound or concerned to inquire into or ascertain the circumstances in or the consideration for which the owner or any previous owner of the land is or was registered or to see to the application of the purchase money or of any part thereof. 6. without eliminating it completely.Chapter 6 . Defeasibility of Ownership 11 1 First.44 Beginning with the first question. of any trust or unregistered interest in the land. any rule of law or equity to the contrary notwithstanding and the knowledge that any trust or unregistered interest is in existence shall not of itself be imputed as fraud. it was because of the top aspect of the doctrine of constructive notice. 6. I t seems reasonable to conclude.24 a t this point. If the Alberta Act had stopped there. that section 203 eliminates the top aspect of the doctrine of constructive notice. which imputed knowledge to the purchaser of any substantive rights of the holder of the prior interest which a diligent investigation would have disclosed. which quite frequently imputed knowledge to a purchaser that his acquisition would involve participation in fraud. to what subsequently acquired interests does this new definition apply? 6. mortgage. no person contracting or dealing with or taking or proposing to take a transfer. implied or constructive. the acquisition was not fraudulent. The Alberta Act did not stop there. it includes section 203 which must. and if a diligent investigation would not have disclosed this fact.45 Section 203 also provides that one who deals with a registered . (Emphasis added. Secondly. nor is he affected by notice direct. Except in the case of fraud. If a diligent investigation would have disclosed that the holder of the prior interest had rights which would be prejudiced by the purchaser's acquisition of the subsequent interest.

(c) Acquisition of a n interest with knowledge that a conflicting prior nonregistered interest does exist. and not by his mere notice of the prior unregistered interest? 6. if section 203 eliminates the top aspect of the doctrine of constructive notice. Elimination of the bottom aspect of constructive notice leaves section 203 tidy. However. and hence the categories. which imputed knowledge to a purchaser of the existence of any prior interest which a diligent investigation would have disclosed.5 . so that knowledge that a purchase will involve participation in fraud will not be imputed from actual knowledge of the existence of a prior interest. The author also concedes that this method of legal analysis is highly pragmatic. for not infrequently judicial opinions will leave reasonable doubt a s to what facts were found to exist. presents no serious legal problem. are a s follows: (a) Independent fraudulent conduct. for it focuses primarily on the facts and holding of a case.47 With the exception of the problem discussed in the preceding paragraph. (b) Knowing participation in the fraudulent conduct of another. consideration of section 203 cannot stop here. admittedly. which will be used for the internal organization in this subsection. each reflecting a basic factual pattern.112 Torrens' Elusive Title owner is not affected by constructive or direct notice of any prior unregistered interest. rather than on the reasons offered for the decision by the judicial opinions. This provision eliminates the bottom aspect of the doctrine of constructive notice. 6. (d) Acquisition of a n interest with knowledge suggesting that a conflicting prior nonregistered interest may exist. 6. for it also provides that one is not affected by direct notice of any prior unregistered interest.48 Organizing cases into basic factual patterns is. it would seem that the statutory redefinition of fraud contained in section 203. The factual patterns. and in similar statutes in other Torrens jurisdictions. then whether or not one is deemed to have knowledge of the existence of a prior interest is functionally irrelevant. However. whether or not this is so depends on how functionally the new definition has operated when applied by courts to complex facts in actual litigation. the category in which a case properly falls must sometimes involve a value judgment. which of necessity he had or he could not have known that the sale by the registered owner was fraudulent? Or. can the purchaser be held to have participated in fraud because to do so would affect him by his knowledge that the sale to him by the registered owner was fraudulent. Does section 203 mean that the purchaser of the subsequent interest cannot be held to have participated in fraud because to do so would affect him by his direct notice of the prior unregistered interest.46 Unfortunately. Hence. difficult. The four categories. The author believes that the fraud cases can conveniently be analyzed in four categories. Suppose that one purchased a n interest from a registered owner with actual knowledge that the sale by the registered owner was fraudulent a s to the holder of a prior unregistered interest. we can conclude that section 203 completely eliminates the doctrine of constructive notice. differ in terms of the nature of the conduct which might be considered fraudulent.

Shortly thereafter.Chapter 6 . Section 203 contains no language limiting its application to the holder of a registered interest.49). that usage will be avoided because under the general law the conduct exemplified in category (b) also constitutes 'actual fraud'.. City of Calgary. and a s will be seen when the cases are discussed.51 This category includes those cases in which a n interest was procured by a n owner through conduct which was independently fraudulent. but it should be emphasized that this was irrelevant to the issue of whether or not the interest was procured by fraud (see paragraph 6. Fialkowki. the section says that no person contracting or dealing with a registered owner is affected by notice of an unregistered interest. which was neither a registered interest nor a n interest protected by caveat. Dupmeier? I n both of these cases a transfer from B to C was forged by C. One may contract with a registered owner and acquire a n interest which he does not register. who became the registered owner of Blackacre. 6. C obtained registration a s the . and where relevant facts in any given case deviate from the model.50 Example F.43 must be considered. I n both cases C subsequently granted a mortgage to D. those facts will be noted.G and De Lichtbuer v.49 Before examining the cases. a right to be reregistered as the owner and to have C's registration canceled. C was the owner of the subsequent interest from B. Although the term 'actual fraud' might be used to describe the conduct exemplified in this category. and subsequently over a period of several weeks of negotiations. and B reacquired his registered ownership subject to D's mortgage.53 Zbryski v. i.8 E had acquired a statutory right under section 73 of the Alberta Act to be registered a s the owner of two lots on the basis of adverse possession against B. Lulled into a false security.e. that is. 6. C's registration was held to be defeasible.52 Fialkowski v. E was the owner of the prior interest from B (the interest created first in time). C (City of Calgary) annexed B (atown). fraudulent irrespective of the conduct of anyone else. For purposes of simplicity and ease of comparison. Defeasibility of Ownership 113 6. to what subsequently acquired interests does the redefinition of fraud contained in section 203 apply? The title of this subsection refers to defeasibility of a registered interest obtained by a n owner through knowing participation in fraud. In both cases. who was a BFP. and in other cases it was protected by a caveat. 6. assured E that his ownership claim would be considered on the merits. the second question posed in paragraph 6. The model cast of characters for example F is a s follows: B was the registered owner of the interest from which all other interests were derived. E neither sought registration nor filed a caveat to protect his claim. in some cases it was registered. In neither case was it even questioned that C's registration procured by his forgery was fraudulent. Quite the contrary. however. the cases will be analyzed in terms of a basic model. (a) Independent fraudulent conduct 6. the courts have applied the statutory redefinition of fraud to evaluate the conduct of holders of subsequent nonregistered as well as registered interests. leaving B as the owner of the nonregistered interest.

who became the registered owner.55 The crucial additional fact was that C expressly agreed to honor E's equitable interest. Cases of this type will be considered in category (b). C denied E's rights and attempted to evict him. B contracted to sell a 10 acre portion of a large tract which he owned to E. nothing in the contract with C disclosed this fact. B breached his trust to E. who had remained the registered owner of the entire tract. Swettenham Rubber Co? This case was a 1911 decision of the Privy Council.61). and by telling C that the sale was subject to E's rights. L'Arrivee and Vince. that C was not a purchaser. and that C's registration was therefore fraudulently procured.54 Loke Yew v. however. and that the sale was subject to E's rights. that trust obligations will be enforced against one who has promised to perform them. . B did not expressly except E's rights in the small portion from the transfer to C. C would have acquired his registered interest by knowingly participating in B's breach of trust. The case thus demonstrates the fundamental trust principle discussed in paragraph 2. In fact C did assign the contract to D. Subsequently B sold and transferred the entire tract to C. 6. The court held that D's conduct was fraudulent. B told C that E 'owned' the small portion of the tract.56 Gyger v. and thus made himself a trustee for E on the same terms a s those which bound B. C became the registered owner of the entire tract. Later D disavowed any obligation to E. 6. the court held that C's representations deceived E into believing that it was not necessary for him to take precautions to protect himself. and contended that its registered ownership extinguished E7snonregistered interest. would extinguish E's prior interest. for C acquired a written contract which. Subsequently B contracted to sell the entire tract to C. Before the sale and transfer. The Privy Council held that C's conduct was fraudulent. However. and that E was entitled to specific performance of his contract against B. and that C held his registered ownership subject to E's nonregistered rights. that D's contract rights were subject to E's prior nonregistered contract rights. held his registered ownership of the portion of land subject E's nonregistered equitable interest on trust for E (see paragraph 2. B.51. D was not only told that E 'owned' the 10 acre portion. By making the unqualified transfer to C. who protected his interest by filing a caveat. therefore. 6. B acknowledged that his transfer was in breach of trust. and although B told C that the sale was subject to E's rights. Although B may have been attempting to protect E's rights in this manner. There were other issues latent in the case. Based on nonregistered documents obtained from B. As in Loke Yew. and in addition. it could be argued that C was no more than B i n a new governmental form. After obtaining registration. without the inclusion of any reference to E's rights on the register. D acknowledged E's rights and agreed to respect them.114 Torrens' Elusive Title owner of the lots. Had nothing more taken place. E was the 'owner' (in equity) of a small portion of a larger tract of which B remained the registered owner. if assigned to a subsequent BFP.1° This quite modern case applied the same principle of trust law illustrated by Loke Yew. The breach of trust by B was evident. and because of the unqualified transfer.

and a s a n officer of B had signed the contract between B and E which created E's nonregistered . . Howlett.57 In all of the cases included in this category. Saskatchewan and Battle River Land Development Co. 6...13 Scandia Meat Market Ltd. for in that case C had agreed to act a s E's agent to procure the lot in issue from B. The conduct of C illustrated by these cases was dicussed in paragraph 2.17 In all of these cases C had actual knowledge that he was participating in a breach of trust by B. and C had actual knowledge of B's breach of trust and consequently of his own participation in that breach of trust by acquiring the subsequent interest.46.14 Ruthenian Greek Catholic Church v. The author believes that the statement of Richmond J. The problem of whether or not conduct of this type was intended to be legitimized by section 203 of the Alberta Act was introduced in paragraph 6. or 'knows that the transfer will unjustly deprive the true owner of his property'. but that he is affected by knowledge that the trust is being broken. then C h a s knowingly participated in B's fraudulent conduct? 6. Fetsyk. identifies the basic principle of law accurately: I t may be considered a s the settled construction of this enactment that a purchaser is not affected by knowledge of the more existence of a trust or unregistered interest. and in all of them C was held to have procured his subsequent interest. National Mortgage and Agency Co. or 'intends to deprive another of his just rights'. v. which was registered. discussed the problem as follows: In many instances the rule of equity that notice is fraud must be recognised a s consentaneous with the principles of common morality. National Mortgage and Agency Co. I t may be that unnecessary confusion h a s been created by the tendency of courts to use a variety of different expressions to articulate a single fundamental principle.. National Bank of New Zealand v. it clearly would have been fraudulent under generally accepted equitable principles entirely independent of the equitable doctrine of constructive notice.52. Are these expressions all formulations of a basic rule that if C enters into a transaction with B with actual knowledge that it involves a breach of B's trust obligations to E..58 In a n early New Zealand case. Only Sydie warrants further comment.l5 Sydie v. Gardiner. I t is said to be fraud if the subsequent purchaser 'knows that the registered owner has no authority to dispose of the property'. The Act does not go so far a s to shelter a purchaser who takes with full knowledge that the transfer to himself will unjustly deprive the true owner of his property without adequate compensation.59 Independent Lumber Co. in the subsequent case of Locher v.12 and the emphasized language in particular.Chapter 6.. for it may be an act of downright dishonesty knowingly to accept from the registered owner a transfer of property which he has no right to dispose of. by fraud.. B breached a trust obligation which he owed to E by entering into the transaction with C.ll Richmond J . Defeasibility of Ownership 115 (b) Knowing participation in the fraudulent conduct of another 6.16 and National Bank of New Zealand v. v. KDS Investment Co. or that that owner of the unregistered interest is being improperly deprived of it by the transfer under which the purchaser himself is taking.

statutes such a s section 203 of the Alberta Act have rejected it in order to further facility of transfer. for in neither situation will C have fraudulently procured his subsequent interest. or only had knowledge suggesting that a prior interest might exist. and B brought a suit seeking a n order that the register be revised to subject C's registered ownership to E's lease on the grounds that C's conduct was fraudulent. The two categories are thus based on a factual difference which does not constitute a legal distinction. When reading the cases.61 Categories (c) and (d) differentiate cases depending upon whether C had knowledge that a conflicting prior interest did exist. and the contract expressly stated that Blackacre was sold subject to existing tenancies. B showed the lease to C before the contract for the sale of Blackacre to C was made. even under this doctrine E had to prove that he had a prior interest. however. Stuart. and he must introduce hard evidence which a court can accept a s proving C's fraudulent conduct without resort to quasipresumptions and inferences. But having done this. C sought to eject E. 6. if C had either actual knowledge or a strong suspicion of E's prior interest. E must both allege and prove that C fraudulently procured his subsequent interest. Without the benefit of constructive notice. would be imputed to C under constructive notice unless C could establish that a diligent investigation would not have disclosed these facts. and consequently knowledge of whether or not B's transaction with C would violate E's rights. contained no exception protecting E's lease. knowledge of E's substantive rights. E must now allege that C procured his subsequent interest fraudulently. held that C had not fraudulently procured his registered interest. there appeared to be no question but that C had actual knowledge of B's breach of trust.26. .116 Torrens' Elusive Title interest. Consequently. he probably also had actual knowledge that his acquisition of the subsequent interest would involve participation in fraud in the great majority of cases. but the effort will be worthwhile if it underscores the burden of proof cast on E by the elimination of the doctrine of constructive notice. one frequently draws a n almost instinctive inference that C must have known that he was participating in B's fraud.ls E held a written lease of Blackacre from B. and that his registered ownership should not be subjected to E's lease. I n practice. After securing registration.60 Munro v. Although that is the not unreasonable attitude which supported the doctrine of constructive notice. Determining the proper category for a case requires a difficult evaluation of the facts actually found by the court. and for this reason B breached his trust to E by making the unqualified transfer to C. The cases included in both categories (c) and (d) demonstrate that the courts have insisted that E meet this new burden of proof imposed on him. The pragmatic problem was discussed a t paragraph 3. C had to prove that he was bona fide. the Sydie case could properly have been included as a category (a)case. As C had breached his own agency obligation to E by buying the lot from B for himself. Harvey J. On the facts. (c) Acquisition of an interest with knowledge that a conflictingprior nonregistered interest does exist 6. The actual transfer from B to C. Of course.

seeking a declaration that C had procured the mortgage by fraud. This seems perfectly reasonable. the primary life beneficiary under the marriage settlement agreement. 6. for C could hardly have been fraudulent unless he had known. therefore. W. The Union Bank. without having carried out the agreement to create the trust. a s a matter of law. Cugnet. Before granting the lease. and that C was. However. the court said that C's purchase at the sheriffs sale and subsequent registration was not fraudulent. C knew that a conflicting prior nonregistered interest did exist.66 First. knowingly participating in B's fraudulent conduct.20 C. remainder to the children of the marriage a s B or W should by deed or will appoint. Under the Victoria statute. bought Blackacre a t a sheriffs sale in execution of his judgment against B and became the registered owner. B mortgaged Blackacre to C to secure loans C made to B. 6.Chapter 6. and in fact E had already paid the purchase price and was in possession. 6. B told C's agent that Blackacre. a judgment creditor of B. a suit was brought on behalf of two infant children of the marriage (less then three years old). C's conduct was tested by the statutory redefinition of fraud. rights of persons in possession were protected. Keith. However. The opinion proceeded on the grounds that B had breached his obligations under the marriage settlement agreement by mortgaging the land to C. and it is clear from the facts that even the sheriff was not aware of the law. The crucial factual issue was whether or not C also knew that B was violating a trust obligation.63 Canadian Superior Oil v. Defeasibility of Ownership 117 6. in trust for his intended wife (W) for life. I n 1893. The case has two interesting features. then to B for life if he survived W. had been sold on contract to E. I t should also be noted that although C's lease was protected by a caveat rather than by formal registration.lg B and E were brothers. 6. before the mortgage was granted B showed the marriage .62 I n the category (c) cases. therefore E prevailed and C's registered ownership was defeasible. including the M & M. and that the mortgage bound only B's contingent life estate (should he survive W) in Blackacre under the agreement. I t is one thing to say that one is presumed to know the law. I n 1891. The court held that C's lease had not been procured by fraud. that the sheriff was not authorized to sell Blackacre other than subject to E's possessory rights.64 Robertson v. but agreed to transfer property of her own as additional security for the loans from C to B. I t should be noted that the infant children had a contingent remainder in Blackacre under the agreement a s members of the class to be benefited by the special power of appointment to be held by B and W. the opinion contains no facts which would have even suggested to C's agent that the grant by B was fraudulent because not authorized by his brother E. E protested and told both C and the sheriff that he had contracted to purchase Blackacre. and consequently C knew of the existent of E's conflicting prior nonregistered interest. not only knew of the mortgage to C. Before the sale.65 Cooke v. and C's agent who procured a n oil and gas lease from B for C was 'well and favourably known' to the brothers.21 B made a marriage settlement agreement in 1891 pursuant to which he promised to transfer Blackacre to trustees. it would be quite another thing to hold that one was fraudulent if he did not.

C . no legislative definition can ever mark its precise dimensions. which they no doubt hoped would be long. W (a beneficiary who had acquiesced in B's fraud). declined to find that C's conduct was fraudulent. 6. 6. If Manning J. the crucial factual issue was whether or not C actually knew that a conflicting prior nonregistered interest did exist! Unless the evidence could support a finding that C knew that a conflicting prior nonregistered interest did exist. it exists.67 Secondly. Fraud. would have enjoyed Blackacre for the rest of W's life.54).69 Maurice Demers Transport Ltd. in Cooke B and W were also E to a n overwhelming economic extent. under a statute comparable to section 203 of the Alberta Act. which they had defrauded. knowledge of B's authority under the agreement would have been imputed to C. However. a search of the title revealed neither a registered lease nor a caveat filed to protect E's leasehold interest. and Demers v. however. had found that C had fraudulently procured the mortgage. C knew that a conflicting prior nonregistered interest did exist. The court.22Prior to purchasing Blackacre.68 In the category (c) cases. but the facts did not demonstrate that C knew that B (or the sheriff in Robertson) lacked authority to enter into the transaction. C could deal with B as a n absolute owner. the issue of whether or not C knew that he was knowingly participating in B's fraudulent conduct could not arise in these cases. Fountain Tire Distributors (Edmonton) Ltd. not surprisingly. the primary fraud in the Cooke case was committed by B. which eliminates the doctrine of constructive notice. (d) Acquisition of an interest with knowledge suggesting that a conflicting prior nonregistered interest may exist 6. relative to the conduct and rights of others. C made a n inspection and saw that E was occupying the warehouse and the office space on the premises. therefore. and was acquiesced in by W.118 Torrens' Elusive Title settlement agreement to C's bank manager. If the court had then ordered B to carry out the marriage settlement agreement. in its broader context. who 'perused' it. if at all. Moreover. However. The pleasure of life would have been enhanced every time they walked past the C bank. The court said that a s the rights of the beneficiaries under the agreement were not endorsed on B's certificate of title. fraudulent conduct does not exist in a vacuum. The court. Unlike the typical fraud case in which the interests of B and E were held by different persons. it can be argued that C was not required to study and evaluate a late nineteenth century marriage settlement agreement at his peril. is a flexible doctrine. and presumably B as her spouse. I t is suggested that the crucial point was that there was no finding that C knew that the mortgage of Blackacre exceeded B's authority under the agreement. B (the primary fraudulent party) would have evaded the mortgage he had created. that C knew of the existence of the conflicting prior nonregistered interests of the beneficiaries under the agreement. made no finding of fact that C knew that mortgaging Blackacre would constitute a violation of B's agreement. I n the category (d) cases. I t seems clear. no matter how ambiguous the agreement may have been (see paragraph 2. Under the doctrine of constructive notice.

As all of the available evidence would have led C to believe that any interest held by E had come from H. Hackworth. could it have supported a holding that C had knowingly participated in B's fraud by purchasing from her? A majority of the Court of Appeal of Saskatchewan held that the facts did not support a conclusion that C's conduct was fraudulent. Subsequently B sold and transferred the land to C without protecting E's leasehold interest in the transfer. wrote to E's husband. B acquired registered ownership of Blackacre without the knowlege of his fellow partners. Although he was one of the partners. C checked the title to the lot and found that B was and for years had been the registered owner. and protected his interest by filing a caveat. and that she was under a complete misapprehension a s to her supposed ownership? If the evidence could not have supported a finding that C knew of E's existing rights. E did not allege that C's purchase was fraudulent. C. ~ 3 Because the facts of this famous case are so familiar to Western Canadian lawyers in terms of the names and situations of the relevant parties. BennetLZ4E was a partnership which held a nonregistered lease of Blackacre. During the same month.72 Wicks v. there was no evidence to support a finding that C knew that a conflicting prior interest actually existed. In October 1934. one of the partners told C that E had a nonregistered interest in the land. C could not have known its termination date. did the available evidence indicate that it was much more likely that C believed that E had no interest in the lot at all. and hence could not have known that it was actually a conflicting prior interest.71 The trial judge held that C had purchased the lot with the designed object of cheating E of her known existing rights. and no evidence which would have led C to believe other than that E had acquired the lot from H. and asked if the lot were for sale. Defeasibility of Ownership 119 purchased Blackacre by means of a n agreement for sale. and although the evidence that C knew that E was in possession of the premises might have supported a finding that C knew that E held a lease. 6.Chapter 6 . who was taking care of H's estate for B. and a s the register disclosed that B had owned the lot for years. 6.70 Hackworth v. Although there was evidence . a s there was no evidence that C was informed even of the nature of the interest claimed by E. and that E had no interest in the lot disclosed by the register. B transferred the lot in issue to E (Mrs. both E and her husband told C that E owned the lot. there was no evidence that C knew the terms and conditions of E's lease. However. I n April 1934. H (her husband) died in the early fall of 1933. There was no evidence that C had any knowledge of the actual transfer from B to E. that it was not for sale. was there any credible evidence to support a finding that C even knew of E's existing rights? Or. and that E's son was going to farm it. B (the widow Halcro) was blind and about 80 years old. Without knowledge of the terms of E's lease. B ~ k e r . I n November 1933. and E's son told C that H had transferred the lot to E. more detail will be included in this case summary. C purchased the lot from B and became the registered owner. Shortly before C's purchase. and C became the registered owner. The court held that C had not procured the subsequent interest fraudulently. one of B's children). 6. believing that the lot had been owned by H and that it formed part of his estate.

W. and that B would protect E's interest. In fact. 1901.73 Rounsevell v. which of course they had done. The lease upon which E founded his claim was signed only by H. and the two sons were registered a s the owners of Blackacre under the Torrens system a s their interests are stated above. remainder 1/3 to H and 1/3 each to two sons of W. On August 15. contained no entry of the supposed lease. 6. E conspicuously failed to file a caveat to protect his alleged lease. E held a valid written lease from B.26 I n 1898. Hordern. however. 6. With the greatest respect. Ryan & Sons. With respect to this point. H granted a lease of Blackacre to E. beyond this there was no evidence to indicate that C believed other than that B was authorized to act on behalf of E. In March 1899. H and W transferred Blackacre to C. The court held that C's conduct was not fraudulent.60). with the authority of his wife W. the . and on August 13.Blackacre. there was no evidence to suggest to C that H and W had fraudulently withheld the lease from the Registrar-General. giving H legal ownership of the entire remainder. This lease. all of the decisions in the cases discussed. On these facts. and Rounsevell would have been a category (a) case. and emphasized the following facts in support of his decision. The court held that C's purchase was not fraudulent. could have convinced C that H and W were acting honestly. a s there was no evidence that C knew the terms of the written lease. In July 1901. are consistent with the conclusion that statutes such a s section 203 of the Alberta Act were intended to negate the doctrine of constructive notice. and C neither knew that the written lease existed nor agreed to honor B's obligations under it. no more and no less! The author concedes that many of the Australian cases cited are replete with statements to the effect that the decision in Munro was correct.120 Torrens' Elusive Title that the price C paid was unreasonably low. there was no evidence that he knew that it was a conflicting prior interest and that B was breaching his obligations to E.25Before C purchased Blackacre. who owned the life estate. B told C that E held a verbal lease. The fact that the registered title. and that E's claim was unfounded. which was issued after the date that the lease was granted. but E's lease was not registered. I n September 1899. 6. who became the registered owner in September 1901. the fact that even after E learned of C's contract to purchase Blackacre. was not signed by W. could have reinforced C's conclusion that the lease was invalid for it suggested that the RegistrarGeneral had formed this opinion and had refused to register the lease. H and W contracted to sell Blackacre to C. E notified C of the details of his lease. which was not under the New South Wales Torrens system. held that no actual fraud could be imputed to C. Moreover. was owned by W for life.J. C would have assumed those trust obligations himself.74 Oertel v. if B had had equitable obligations to E under a verbal lease. and C promised to honor E's verbal lease if E had any rights under it.76 The author believes that.H. 6. and this could have caused C to believe that E had no valid interest in Blackacre.1901.75 Simpson C. on the basis of the facts disclosed in the opinions. with the exception of the Munro case (paragraph 6. Finally. The remainder of each of the two sons was mortgaged to H.

[The] Courts have consistently drawn that implication . .78 The Alberta Act is typical of statutes based on the Australasian model. held that interest subject to any prior equity (see paragraphs 2. for it provides that the Registrar may complete the register and correct any error 'so far a s practicable without prejudicing rights conferred for value'. it provides that a registered interest acquired by a purchaser bona fide for valuable consideration is not defeasible. or a n otherwise superior equity. including M & M. . each of which purport to contain all of the statutory in defeasibility exceptions. rather. I n 1919. . 6. Defeasibility of Ownership 121 author holds the opinion that these statements were not required to resolve the actual issues presented by the facts in those cases. . if a donee. (5) Defeasibility of a registered i n t e r e s t obtained t h r o u g h error by a n o w n e r w h o w a s not a p u r c h a s e r f o r value 6.46-49.Chapter 6 . and because neither party intended that B . and a donee does not rely on a recording system for assurance that he will in fact acquire the interest given to him (see paragraph 3.73-74. Section 167 operates negatively. Is this rule of the general law changed by a typical Torrens system? The answer is 'no'. the Registrar canceled A's registration a s the owner of Blackacre. A can not only eject B. Sections 63 and 65.78-83). in many of them it has simply been left to necessary implication . Section 185 is completely contrary. there is no need to protect him. The registration of B a s the owner of the M & M was erroneous because the transfer excepted the M & M. . including M & M. Its aim is to facilitate the transfer of land as a commercial commodity by removing most of the risks of financial loss which beset purchasers under the general law. would be unjustly enriched if he were not subjected to the prior equity.29. 2. 2. but narrower in sweep. A executed and delivered a transfer of Blackacre to B. Similarly. and were thus dicta.69. which means that any entry in the register which is inconsistent with the general law can be revised unless the holder of the rights under the entry is a purchaser for value. one who acquired a legal interest.79 Example G. contain no provision suggesting that the registered interest of a donee is defeasible.77 Under accepted equitable principles. But the Torrens statutes have not always said so in plain words. As a transferee who does not give value for his land is not exposed to that risk. and 2. A was the registered owner of Blackacre. Upon receipt of the transfer. section 180 provides that if A has been deprived of any land because of the registration of B a s a result of B's fraud. excepting M & M. This rule has been almost uniformly incorporated into modern recording systems. and registered B a s the owner of Blackacre.30). Example G is now identical to example D a t paragraph 6. 6. and the transfer expressed the intention of both parties. recording systems are designed to facilitate commercial land transactions. Baalman summarizes the situation a s follows:27 The Torrens System of land registration is predominantly a purchaser's system. The reason for this rule is that the holder of the subsequent interest. with a n additional supporting reason. it does not provide that a registered interest of a donee is defeasible. but A can also eject C if C h a s derived his title a s a transferee from B other than a s a transferee bona fide for value. other than as a purchaser for value.

The problem is that E was the equitable . are bound by the execution. I n 1924. B executed and delivered a transfer of Blackacre. The question posed by example H is.4 of the Alberta Act. . I n 1972. Therefore. At this point it is clear that the register should have been revised and that ownership of the M & M should have been restored to A.000. A or C. who was duly registered in accordance with this transfer. . No caveat was filed by E to protect his equitable interest in Blackacre a s a contract purchaser.122 Torrens' Elusive Title should acquire the M & M. (Emphasis added. to C. During that year. which was delivered by Martland J. A brought a n action seeking a declaration a s to who. C was not a purchaser for value. all legal and equitable interests of the execution debtor in any lands there or thereafter registered in his name and including his interest. B purchased goods and services from C for $50. executed by the execution debtor of the land is effectual except subject to the rights of the execution creditor. E had paid the contract price for Blackacre in full.(2) Upon and from the receipt by the Registrar of the copy of the writ. 'encumbrance' means any charge. including M & M. 6. . Consequently.. but had not yet received a transfer from B. Of course E had a contractual right to a transfer of Blackacre from B.) 6. the court held that it should be revised against C for the same purpose. and this issue was squarely presented to the Supreme Court of Canada in Kaup v. and the contract provided that no transfer would be issued to E until the full purchase price was paid. 180.28 The unanimous opinion of the Supreme Court. B was the registered (legal) owner of Blackacre. and includes executions. B contracted to sell Blackacre to E for $200. B was the registered owner of Blackacre. no certificate of title shall be granted and no transfer . and there was no entry in the register qualifying B's ownership. Imperial Oil Ltd.81 Assume for the following analysis that section 128(2) means precisely what it says. At the time C's writ was entered in the execution register. but suppose that E had received a transfer and had submitted it to the Registrar. as the register should have been revised against B in order to restore the M & M to A. and that a registered owner under the Act who was not a purchaser for value acquired only the rights held by his transferor.000. . owned the M & M in Blackacre. The issue inherent in the inconsistent sections of the Alberta Act discussed above is raised by example G. said that sections 167. that they prevailed over sections 63 and 65. I n 1971. The transfer from B to C reflected a gift from B. did C's writ of execution give him a charge against Blackacre which was not subject to E's prior contract rights? The legal effect of C's writ of execution is defined in section 128(2) of the Alberta Act a s follows: 128. I n 1970. I n 1962. and C had the sheriff deliver a writ of execution to the Registrar of the Land Titles Office. Section 128(2) directs the Registrar to issue a certificate of title to E subject to C's rights. based on the debt B had incurred in 1970 by purchasing the goods and services.000. other than C's writ.000 on credit extended by C. Under section 2. C had a statutory right to a charge on Blackacre for $50. a s a n unpaid vendor of land. . and a right to have this charge continued on the certificate of title issued to E. who duly entered the writ in the execution register in accordance with section 21(3) of the Alberta Act.80 Example H. or subjecting it to any conflicting interest. if any. and from and after the receipt by the Registrar of the copy. C obtained a judgment against B for $50. and 185 of the Alberta Act reflected the true legislative intent.

83 I n Jellett v. and there was no need to consider whether or not C was a purchaser. If C's charge were subordinated to E's right to a n unqualified certificate of title. .82 Under section 2. it means 'all legal interests of the debtor (but subject to equities binding the debtor). The facts in the Price case. a s B had no beneficial interest in Blackacre when C's writ was entered in the register. B had no beneficial interest and held his registered (legal) title on trust for E (see paragraph 2. it conflicted with E's nonregistered (equitable) ownership to the full extent of the $50.61). and all equitable interests of the debtor'. C obtained no charge against Blackacre a t all under section 128. although rather complex. there was no conflict between the interests of C and E . Defeasibility of Ownership 123 owner of Blackacre before C's writ was entered in the register.000 charge. Materials Testing Laboratories Ltd. and under section 58 instruments have priority according to the time of registration under section 20. Rather.29 If C's charge encumbered B's unqualified registered (legal) title. and under the holding in Kaup. and a s E's claim of equitable ownership was not. C had priority unless he was not entitled to gain priority over E through his first entry in the register for some reason. As the initial premise was incorrect. Wilkie. As C's writ was entered in the register.30in 1896. Consequently. I t should now be emphasized that the foregoing analysis was based on the initial premise that section 128(2)means what it says. and a s E had paid the full purchase price. 6. This created the conflict between the interests of C and E. and that C's charge encumbered B's unqualified registered (legal) ownership. Wilkie was no longer the law of Alberta. and this raises the issue of which interest has priority. There is a reason.49). the Supreme Court of Canada held that the statute which was the historical predecessor of section 128 was only intended to give a judgment creditor a charge on the beneficial interest of a judgment debtor.31 decided in 1976.. for C was not a purchaser of the charge based on the writ of execution of his judgment (see paragraph 2. C must be a purchaser in order to qualify for the benefits of first entry in the register under the Alberta Act. there was no priority problem. The contention that equitable interests are not recognized and protected in lands included under the Alberta Act has been so completely rejected that it will not be considered here.Chapter 6. 6. the foregoing analysis is irrelevant to example H. Under the general law E's equitable interest would be entitled to priority of enforcement against B because C was not a purchaser. and the priority issue presented the final question of whether or not a donee can enhance his position under the Alberta Act. presented the issue posed by example H. C did not have a registered charge over Blackacre which was subordinated to the prior nonregistered interest of E because C was not a purchaser. reviewed the authorities since the Jellett decision. C's charge could not be enforced against Blackacre a t all. The court held that the charge based on a writ of execution applied only to a n interest in land to which the judgment debtor was both legally and equitably entitled. I n Price v. Thus although section 128 says 'all legal and equitable interests of the debtor'. 'instrument' includes a n encumbrance (which includes a charge). and stated that no legislative changes reflected in section 128 justified a conclusion that Jellett v.9 of the Alberta Act. the conflict raised the priority issue.Laycraft J.

84 Continuing example H. I t would seem to follow inevitably from this decision that a subsequent interest acquired by a donee and protected only by a caveat would be subordinated to any prior interest.49). 6. To the world.88 Example I. and C had a writ of execution entered in the register. his interest was defeasible under principles of the general law independent of a Torrens system. Neither A nor B intended that B become the owner of the NE %. C would be entitled to collect this sum from E under judicial process.86 Whether or not a jurisdiction chooses to give a judgment creditor a charge over any property of a judgment debtor. A was the registered owner of a section of wooded and hilly land. a s the charge is given to the judgment creditor by law. and i t is clear that A was entitled to have the transfer rectified and to have the register revised in . Given the vulnerability of the ownership of a donee. The transfer described the N lh. statutes almost uniformly limit the charge to interests the debtor holds for his own benefit. its definition of the interests of a debtor which are subject to the charge of a writ of execution is part of the general law of Alberta.32 But. and do not extend it to interests held in trust for someone else (see paragraph 2. are public policy questions quite independent of either a recording system or a Torrens system. I n 1970. the state does not confer any ownership on the claimant of an interest entered in the register by a caveat. A executed and delivered the transfer to B. and if so. and was crucial to the judicial interpretation of the meaning of section 128. a s C's writ only attached to the debt E actually owed to B. insofar a s the register was concerned. a latent priority problem which example H does not go far enough to present. there was still no conflict between the interests of C and E. I t should be emphasized. valuable primarily for recreational purposes. over precisely what property. 6. but with the following change. however. and there was no priority problem under the Alberta Act.87 The Kaup case held that unless a registered owner was a purchaser for value.85 There is. the author believes that a comprehensive review of the operation of a Torrens system should consider. however. 6. for unlike registered ownership.124 Torrens' Elusive Title 6. for E's equitable ownership claim was not protected by a caveat. assume that E still owed B $25.000 of the purchase price of Blackacre when C's writ was entered in the register. it looked a s though C's judgment debt was secured by a charge on Blackacre. that although section 128 is in the Alberta Act. whether or not the purchaser requirement should be retained. and it was a n uncontested fact that a mistake was made in the law office in which the transfer was prepared. and B was registered a s the owner of the N lh. B was the unqualified registered (legal) owner of Blackacre. A and B made a n oral contract for the sale of the NW to B. The fact that a judgment creditor is not a purchaser is probably the crucial factor supporting a legislative decision to limit the charge to interests the debtor holds beneficially. C did have a judgment debt against B. However. Suppose that C assigned his judgment debt to a purchaser for value? 6. as a matter of functional public policy. Most common law jurisdictions deem that it is sound public policy to give a judgment creditor a charge over some property of a judgment debtor in order to facilitate the collection of just debts.

and C paid the same assurance fund fees under section 161 of the Alberta Act to secure registration that a purchaser for value would have paid. 6.90 This discussion is concerned only with the defeasibility of a registered interest resulting from the fact that that registered owner was a donee. Suppose that the deed from A to B had been forged by B. If C would not have obtained any legal interest in the N lh under the general law. I n example I. whether or not they are protected by caveating. the conventional conclusion is that A's security of ' ownership should be respected. I n example I. it is assumed that the registered owner was not fraudulent. C's registered ownership of the NE lh will be defeasible a s a consequence of the equitable rectification of the transfer from A to B. A donee is seldom concerned with checking the title to land received a s a gift. C built his retirement home on the NE 'A.37-38). Should the purchaser requirement be eliminated a s a separate condition precedent to protection under a Torrens system? Several reasons supporting such a change are suggested. and so might C as B's successor by transmission. and that the NE A should be restored to A. however. I n 1976.92 There is. the legal description in the deed from A to B would have been changed to the NW lh by equitable rectification.89 Because the purchaser requirement is intact in Alberta. The mistake was discovered in 1977 when A. returned to Alberta. A would have delivered a deed to B. In example I. with loving care and attention to detail. 6. Throughout this study the Torrens system objective of increasing facility of transfer has been emphasized. another objective of a system of land ownership which is a t least as important a s increasing facility of transfer. the registered interest of a donee is subject to conflicting prior nonregistered interests. a registered interest obtained through error by a donee is defeasible in accordance with principles of the general law.91 The purchaser requirement makes it necessary for a' prudent donee to make a derivative investigation of his registered ownership before he can safely develop land. under a forged Torrens transfer. C became the registered owner of the N %. and a t a cost of $80. it may be said that increasing facility of transfer is primarily a means of achieving the goal of promoting the use and development of land. who had been working in Australia in the oil fields since 1975. his registered ownership will be defeasible. The land was seldom used by B. and pursuant to B's will passed by transmission to his son C when B died in 1974. through this deed and B's will C would have acquired legal ownership of the N l/z. and C would have been divested of his ownership of the NE lh. However. therefore. 6. Because Torrens systems retain the purchaser requirement. 6. At common law neither B nor C would have acquired any legal interest in the N Yz. If C had acted on . I n this situation. Indeed. and that is promoting the use and development of land.Chapter 6. B might have obtained registered ownership of the N l/z. for it can safely be assumed that C would have accepted the transmission of the NE lh under B's will even if he had suspected that B's registered ownership was tainted. however. Defeasibility of Ownership 125 order to regain ownership of the NE VI (see paragraphs 6. translated into common law conveyancing.000. facility of transfer would not be promoted by protecting C's registered ownership.

Assume that B was not erroneously registered a s the owner of the NE lh. As the prior equity was first in time. A donee may not check the title to land when it is received a s a gift. the administrative machinery of the system is not geared for searches. Under the general law. I n example I. C should not be required to sustain a loss in order to spare A from suffering one. he will not be precluded .000 invested on a n irrigation system for inherited agricultural land. Example I concerned a retirement home on recreational land. Moreover. and that the home was destroyed by a fire caused by C's negligence. The Torrens system. that C procured fire insurance on the home. one who acquires a subsequent interest a s a donee takes the interest subject to a prior equity in order to prevent his unjust enrichment relative to the holder of the prior equity (see paragraph 2. whose security of ownership would promote the use and development of the NE lh. C will not be precluded from recovering indemnity for his financial loss on the grounds that he would be unjustly enriched because he was a donee! Indeed.46). Neither solution would result in unjustly enriching C. or to compensate C for its loss. for C would not be enriched a t A's expense if either A's registered interest were protected or A were compensated for his loss.93 The purchaser requirement is inconsistent with the modern philosophy of distributing appropriate types of financial risks through insurance (see paragraph 4. the Torrens system h a s failed to accomplish one of its primary objectives. however. but the example could just a s easily have been framed a s $200. he would have investigated B's derived title before he invested both his time and $80. but a prudent donee will investigate the title to land before he invests large sums of money in developing it. and a s the subsequent interest was not acquired for value. but in example I the question remains.32). It may be that the phrase 'security of ownership' encompasses the objective of promoting the use and development of land.126 Torrens' Elusive Title sound legal advice. But C will not be entitled to compensation for his loss if his registered ownership is defeasible. Therefore. and this creates practical problems when one conducts such a search. that of A. This equitable doctrine has its roots in the fifteenth century. for either A or C can be compensated from the assurance fund. the purchaser requirement has the necessary effect of requiring a prudent donee to make a derivative investigation of his registered ownership before he invests any significant amount of capital in the development of land. that C inherited the NE lh from B. Eliminating the purchaser requirement would make it possible either to protect C's registered interest. A would have been entitled to compensation for his loss if C's registered ownership were protected. or that of C? If A had invested money in the development of the NE % before C became the registered owner through the medium of the erroneous registration of B. and has been accepted over the centuries a s a just method of determining which of two innocent parties should sustain a loss when one of them must sustain it.000 in building his retirement home on the NE %. that B constructed a lovely home on the NE lh. should be operated on sound insurance principles. it has always seemed proper to impose a n equitable burden attached to land on a gratuitous recipient of the land. because the system pretends that derivative investigations relative to registered interests are unnecessary. To the extent that a donee must check his chain of title. 6.

Of course if B and C were careful rogues. and that C became the registered owner of the NE 'A.94 The purchaser requirement detracts from both the certainty and the simplicity of a Torrens system. they would have manufactured bogus evidence to prove that C was a purchaser for value. from classic commercial fire insurance through benefit systems under the aegis of the modern welfare state. the Torrens system incorporates the principles of the general law defining the purchaser for value. and is extremely complex. for one procures insurance to protect himself from losses frequently caused by his own negligence.Although C's registered ownership is defeasible in favor of A because C knowingly participated in B's fraudulent conduct. that he fraudulently executed and delivered a transfer of the NE 'A to his son C. However. Although a donee does not furnish consideration for his transfer. it might be considerably easier to prove that C was a donee. albeit usually pursuant to the instructions in a transfer from the former registered owner.97 Any insurance scheme. it might be very difficult for either A or the guardian of the assurance fund to prove fraud on the part of either B or C because the factual issue is what knowledge each had. One of the objectives of a Torrens system is to define clearly the circumstances under which one's registered ownership is potentially defeasible in order to create a s simple a system a s reasonably possible. which is equitable. it is a t least possible that the defeasibility of C's registered interest in a fraud case could be based on the more readily provable fact that he was a donee. Defeasibility of Ownership 127 from obtaining indemnification a t all. rather than simple. one must furnish more than nominal consideration for the interest acquired. one's ownership of a legal interest in land is conferred by the state.Chapter 6 . and that is subjective. for the author is aware of no reasons why a n innocent registered owner should not be permitted to purchase protection for a registered interest. that C knew that B's registered ownership of the NE A was defeasible in ' favor of A. if the purchaser requirement were retained. 6. whether or not C was a purchaser for value depends on objective facts. rather than certain. which were very briefly summarized a t paragraphs 2. By retaining the purchaser requirement. Under the common law system of conveyancing. In order to qualify as a purchaser for value. but he need not pay full value for the interest acquired! I t may readily be seen that the purchaser for value doctrine. it is a tenable proposition that all registered owners under a Torrens system are purchasers. it is a sensible proposition if the Torrens system and its assurance fund are operated on sound insurance principles. Conceptually. he does pay more than a nominal sum to the assurance fund operated by the state in order to secure his registered ownership. the fraud example under consideration merely . one's ownership of a legal interest in land was derived from his predecessors. Functionally. Nevertheless. Under the Torrens system.96 I t should be anticipated that eliminating the purchaser requirement could increase the possibility of fraud.95 There are reasons supporting the proposition that the registered owner under a Torrens system is a purchaser. assume that B learned of his erroneous registration a s the owner of the NE lh. and if the purchaser requirement were retained. is vulnerable to fraud. Altering example I. 6. 6.47-49. is very flexible. Indeed. 6.

that is. and the first is relatively obvious. and because A has the right to reimburse C. A will be entitled to recover. (2) The person entitled or required to retain the land shall pay such compensation as the court may direct. A can reimburse C and recover his ownership. 6. 6. differ from those which are imposed on one who acquired a n interest through fraud. his lost ownership of the NE 'A i n example I in order to prevent the unjust enrichment of C relative to A. if the registered owner of such a n interest obtains neither protection for the interest nor a right to compensation for its loss under the Torrens system. The important point is that no credible body of opinion suggests that the insurance approach should be rejected because it is subject to fraud.98 Suggestions for reform can be offered if the purchaser requirement is retained.99 If the purchaser requirement is retained. If A thinks that the house which C constructed is worth a t least the amount of C's expenditures. that is. but it is likely that A will have the whip hand. however. i t is clear that C h a s a lien on the NE 'A for the amount of his expenditures.128 Torrens' Elusive Title demonstrates what is described in the insurance industry a s the moral hazard. However. and then either keep the NE 'A or sell it a t a profit.100 An approach comparable to that taken in section 183 of the Alberta Act might be useful in resolving the practical problems which arise when a donee's registered ownership is defeasible.33 Although the law on this subject is complex and beyond the scope of this study. he or his assigns (a) are entitled to a lien upon the same to the extent of the amount by which the value of the land is enhanced by the improvements. The author referred only to the approach taken by section 183 a s he doubts . Administrators of both commercial insurance and government welfare systems are constantly plagued by the dilemma of developing administrative procedures for the payment of claims which are sufficiently simple and expeditious to deal justly with most claims which are honest. to obtain restitution of. Users of insurance systems absorb the costs of payments procured by fraud in order to secure the benefits of risk sharing produced by these systems. C will probably want to keep his home on the NE 94. Section 183 provides a s follows: 183. or (b) are entitled to or may be required to retain the land if the court is of opinion or requires that this should be done having regard to what is just under all the circumstances of the case.3~ The right to reimbursement gives C some protection.(1) Where a person at any time has made lasting improvements on land under the belief that the land was his own. If the registered interest of a donee is defeasible in accordance with principles of the general law. The equitable principles applicable to restitution from a donee to prevent his unjust enrichment. 6. and that A will not be entitled to restitution unless C is reimbursed for those e~penditures. it would seem that a donee should not be required to contribute to the assurance fund in order to secure his registered ownership. and which are still sufficiently protective to maintain some control over the moral hazard. A will probably be able to force C to pay a n inflated price for the NE 'A in order to settle the matter.

d. for his loss does not result from the Torrens system.103 Example J.Chapter 6 . An additional problem related to the limitation of actions and to adverse possession is considered in chapter 8. it h a s been unnecessary to consider the question of whether or not the owner whose registered interest was defeasible should be entitled to compensation from the assurance fund. a s modified by conventional recording systems. (2) to give effect to a n interest to which it is subjected by a n entry in the register (such a s a mortgage). the defeasibility or subordination results from the application of principles of the general law adopted by a Torrens system.102 Section 6. I t is suggested that section 183 could readily be amended i n order to make i t expressly applicable to lasting improvements made on land under a defeasible registered title. and that therefore C had made lasting improvements on the NE l14 under the belief that the land was his own. (6) Summary 6. (3) to permit the execution of a transaction a s mutually intended by the parties. is the heart of this study. Manifestly he should not. Defeasibility of Ownership 129 very seriously that the section was intended to be applicable to a case i n which one made lasting improvements on land which was actually his own. One functional problem which results from characterizing the registered ownership of a recognized interest in land a s void was introduced a t paragraph 4.30. Occasionally courts have said that a n erroneous registration under a Torrens system was void. If a registered interest is defeasible because of. summarized a t paragraph 6. I n the preceding pages the author has attempted to identify the boundary between the general law. B obtained what for the moment will be referred to a s a n invalid transfer of Blackacre from A. or (5) because i t was obtained by a donee. B was a bona fide purchaser for value. have been discussed i n section 6. The transfer was referred to a s invalid because it would have been either void or voidable if it had been a conveyance under the general law.c.101 The first five statutory indefeasibility exceptions contained i n the Alberta Act. Defeasibility Required by Principles of Law Necessary Under a Torrens System 6. (4) because it was obtained by fraud. I n quantitative terms. For this reason. A was the registered owner of Blackacre. If this practice were followed. (1) Defeasibility of a registered interest based on an invalid transfer from the immediately preceding registered owner 6. Example J is . and a Torrens system. a conflicting prior interest: (1) to give effect to a n overriding interest (such a s a government tax lien). But the few unique rules of Torrens law which are required to secure these improvements are a thin veneer on the general law. or subordinated to. but under a defeasible registered title.d. and on the basis of this transfer became the registered owner of Blackacre. the court could hold that ownership had never passed from A. and is discussed more fully in section 6. the profound improvements in conveyancing which can be achieved under a Torrens system require a n extensive administrative structure.5.d. Moreover.

6. and he was not fraudulent. at his peril. the transfer was voidable because A will not be bound by his intent a s a matter of public policy. the transfer divesting A was void because it was not supported by either a judical or a n administrative procedure conforming with law. for a s the transfer would have been either void or voidable under the general law. the author finds it more functionally expressive to ask simply whether or not B's registered ownership is defeasible in a n example J case.104 Example J poses the question of whether a registered owner gains immediate or only deferred indefeasibility (to use the orthodox description of the problem) under a Torrens system.105 If B's registered ownership is defeasible in all of the example J situations. 2. the transfer was void because it was not intended by A. 2.130 Torrens' Elusive Title based on the series of examples discussed a t paragraphs 2. no new rule of Torrens law is required.17 Dower of spouse not released by transfer. B's defeasibility results from the application of principles of the general law. 2.19 Mental incapacity to execute transfer. The functional significance of this choice should be emphasized.S5Looking a t the issue from B's point of view.c. it means that a n innocent purchaser such a s B retains the general law burden of evaluating the validity of the immediate transfer upon which his registration is based. and they are summarized below for ease of reference.25 Invalid tax lien sale. Although the language chosen is a matter of style.26 Invalid mortgage foreclosure sale. in the examples a t paragraphs 2.25-27. B was a purchaser for value.27 Invalid expropriation. one could formulate a rule that registered ownership based on a n invalid transfer from the immediately preceding registered owner is defeasible. 2.12 Forged transfer. In the examples a t paragraphs 2.12-17. I n the examples a t paragraphs 2. 2. for B fully intended to become the registered owner of Blackacre.16 Improper execution of company transfer.13 Unauthorized delivery of transfer. 2. 2. 2. for it will not be a condition of defeasibility required by the Torrens law of the jurisdiction.12-27.19-20. If a jurisdiction chooses this solution for the issue posed by example J .. 2.20 Minority. B's registered ownership was not inconsistent with the mutual intention of A and B. 2.14 Unauthorized execution of transfer by agent. 6. the condition of defeasibility must be shifted back to section 6.15 Mistake a s to nature of instrument. Moreover. I t also means that a jurisdiction . It results from neither a n overriding interest nor a n interest to which B's registered ownership was subjected by a n entry i n the register. 2. This defeasibility is not based on any of the grounds previously discussed i n this chapter. Nevertheless. B is said to have gained immediate indefeasibility if his registered ownership is not defeasible in favor of A in a n example J case.

106 The classic case supporting this interpretation of the objectives of a Torrens system i s Gibbs v. and that for this reason the transferee should have this responsibility.107 If B's registered ownership is not defeasible in any of the example J situations. the author believes that the philosophy behind the Gibbs decision is stated in a quotation from the judgment which is reproduced in paragraph 4.Chapter 6. 6. even though it was based on a forged instrument. which is . 6.97 under its Torrens system. which were summarized a t paragraph 5. decided in 1967. relating to possible common law infirmities i n A's title. and of satisfying themselves of its validity. The Gibbs case. The Board found statutory support for its decision in section 63 of the Land Transfer Act 1952 (N.4). A's registered ownership was defeasible to the extent required to enforce B's registered mortgage. relating to possible infirmities in the immediate transfer from A to B. Messer. and which is worthy of review.75. The relevant facts of this case.108 I n Frazer v. However.36 which was decided by the Privy Council in 1891.).Z. one could formulate a rule that registered ownership is defeasible if a n immediately succeeding innocent purchaser obtains registered ownership on the basis of a n invalid transfer. The facts in the Gibbs case were complex. it will have chosen to solve problem 2 a t paragraph 2. from the trouble and expense of going behind the register in order to investigate the history of a registered title. I t is A's registered ownership which is defeasible.23. no Canadian legislature has made amendments to a Torrens statute with the intention of rejecting the Gibbs philosophy. Their Lordships believed that the object of a Torrens system was to save persons'such a s B. In Frazer. and a s principles of the general law would not produce this result. The author will not enter the lists on this issue. presented the issue posed by example J . They viewed a Torrens system a s designed to solve problems 1 and 3-5 a t paragraph 2.97 under its Torrens system (see paragraph 4. A functional reason supporting the Gibbs approach is that a transferee is normally in a better position to determine the validity of the transfer to him than is the Registrar. Defeasibility o f Ownership 131 following this rule has chosen not to solve problem 2 a t paragraph 2. and the problem now under consideration. It is clear that the Canadian courts have held that B's registered ownership is defeasible in a n example J and although the Gibbs case was decided in 1891. but not to solve problem 2. were introduced in paragraph 5.97.75. 6. and a n innocent purchaser such a s B will not have the general law burden of evaluating the validity of the immediate transfer upon which his registration is based. a rule of Torrens law is required. when dealing with a registered proprietor such a s A. If a jurisdiction chooses this solution for the issue posed by example J . and whether or not the decision actually supports a broad rule that one's registered ownership is defeasible whenever it is based on a transfer from the immediately preceding owner which would have been either void or voidable if it had been a transfer under the general law is debatable. the Privy Council held that a registered mortgage was not defeasible. The necessary consequence of this approach is that the transferee will not have a right to compensation from the assurance fund when his registered ownership is defeasible because the transfer was invalid.

thorough consideration of each type of invalid transfer is beyond the scope of this study. Mistake a s to nature of instrument. As regards all such instruments it established that registration is effective to vest and to divest title and to protect the registered proprietor against adverse claims. . and none of them even remotely suggests that B's registered interest is defeasible in a n example J situation. Therefore. 6. Under the Frazer decision. A's registered ownership is defeasible pursuant to a n invalid transfer. . Both the forged transfer and the mistake as to nature of instrument situations will probably result from the fraud of a third person. Basically. and therefore A should have a right to compensation from the assurance fund for his loss. the solution to the issue posed by example J which is outlined below is offered as a tentative proposal in order to demonstrate the possibilities which are available if a flexible approach is taken to the resolution of the issue.110 B's registered ownership would be defeasible without compensation in the following situations: Forged transfer.132 Torrens' Elusive Title virtually identical to section 180 of the Alberta Act. although obtained pursuant to a void expropriation procedure. (Emphasis added. In Boyd it was held that the registered ownership of the City of Wellington. As the policy reasons supporting the general law position that the transfers listed in paragraph 6. and that there are more flexible options available than blanket adherence to either of the two extreme positions. They consider that Boyd's case was rightly decided and that the ratio of the decision applies a s regards titles derived from registration of void instruments generally. was not defeasible. except in any of the following cases . Minority. in support of its conclusion a s to the interpretation of the New Zealand Act. Mayor of W e l l i n g t ~ na~ ~ case decided in the . The Board cited Boyd v. The problem is that no section in either the New Zealand Act or the Alberta Act provides that A's registered interest is defeasible in a n example J situation. but vary to some extent with each type of transfer. and A . He also suggests that each type of invalid transfer justifies separate consideration. 6. it is proposed that the risk of a registration based on a n invalid transfer be imposed either on the party in the best position to prevent the problem.) Five statutory exceptions follow.109 The author believes that the conflict between the opposing policies reflected in the Gibbs and the Frazer cases requires legislative resolution. 1924 Court of Appeal of New Zealand by a majority of three to two.103 are invalid are not only complex. a rule of Torrens law is required to produce this result. . Mental incapacity to execute transfer. 1952 which they have examined. as follows: 180.(1) No action of ejectment or other action for the recovery of any land for which a certificate of title has been granted lies or shall be sustained against the owner under this Act in respect thereof. The judgment in Frazer contains the following broad dictum:40 Their lordships are of opinion that this conclusion is in accordance with the interpretation to be placed on those sections of the Land Transfer Act. or on the assurance fund if facility of transfer would be too adversely affected by imposing the risk on one of the parties to the tainted transaction.

shall for the purposes of this Act be deemed to be sufficiently executed if it is sealed with the corporate seal of the corporation and countersigned by a t least one officer of the corporation. A n A company transfer is valid if it carries the corporation seal and was countersigned by at least one corporation officer. or the statutory dower interest of A's spouse.Chapter 6. 6.114 A's registered ownership. If A executed a transfer which his agent delivered to B without authority. and under the proposal i s treated i n the same manner a s a forged transfer under paragraph 6.11 1 are similar. 6. Section 178(d) follows logically.111 A's registered ownership would be defeasible without compensation in the following situations: Unauthorized delivery of transfer. and provides that the assurance fund is not liable if the corporate seal i s improperly used or the cbrporation lacks capacity to execute a n instrument. . the proposal assumes that section 158(2) will not be changed. I n the mental incapacity and minority situations. and for this reason A will not be entitled to compensation a s his registered interest is defeasible to permit the execution of a valid transfer. However.112 The improper execution of company transfer will be considered first. A is not bound by his intent a s a matter of public policy. Defeasibility of Ownership 133 therefore will be ignorant of the purported transaction.110. Unauthorized execution of transfer by agent.41 6.1 13 The first two situations listed i n paragraph 6. or if A's agent exceeded his authority by executing a transfer i n favor of B. The proposal makes these transfers valid under the general law. charter or memorandum and articles of association incorporating the corporation. Invalid tax lien sale. Improper execution of company transfer. Invalid mortgage foreclosure sale. the invalid transfers remain invalid. The proposal follows the Gibbs philosophy. 6. notwithstanding anything to the contrary in the Act. a company transfer which is not validated by this section remains a n invalid transfer. Section 158(2) provides: 158. for i t converts previously invalid transfers into valid transfers. for it is believed that the Alberta Act already follows the proposal i n this situation. Invalid expropriation. and B will not be entitled to compensation a s his registered interest is defeasible because it was based on a n invalid transfer. The proposal requires changes of the general law in the first two situations. This section makes a significant change i n general company law. and requires B to assume the risk of ascertaining that either A or someone authorized to act for him executed the transfer with the requisite intention. the previously invalid transfers become valid transfers. it can be argued that the risk of a registration based on the invalid transfer should be carried by A rather t h a n by either B or the public through the assurance fund. statute. The proposal requires no change in the general law. for in both of them A set the stage for the invalid transfer.(2) Any document executed by a corporation. would be defeasible with compensation i n the following situations: Dower of spouse not released by transfer. Consequently.

Section 14 provides that a spouse who cannot obtain satisfaction of a judgment recovered pursuant to section 12 may apply for payment of the judgment from the assurance fund under The Land Titles Act. and the defrauded spouse will be entitled to compensation in recognition of the fact that the transfer divesting the dower interest was invalid. As A's registered ownership is defeasible on the basis of a transfer founded on a n invalid judicial or administrative procedure.115 The problem under The Dower of Alberta will be considered first. However. in the Kos case A granted a mortgage against Blackacre to B without obtaining the required consent of A's spouse. and if B became the registered owner of Blackacre with a certificate of title. A's registered interest is defeasible in spite of the invalid transfer. therefore. Consequently.decided in 1964. and held that B's registered mortgage was defeasible and that B was not entitled to compensation from the assurance fund. 6. without obtaining the required consent of the spouse. 6. and therefore A will be entitled to compensation for the loss of his registered interest. the dower interest of A's spouse in Blackacre would be divested. An innocent purchaser of a registered interest has no practical means of determining whether or not his vendor is married. This is consistent with the proposal. and is.117 The last three situations listed in paragraph 6. v. K O S . and therefore ceases to be subject to the dower interest of a spouse. when a transfer of the land by the married person is registered. A rule of Torrens law is required to produce this result. As limiting this protection to the situation in which the innocent purchaser obtains a registered 'title' seems highly capricious. It requires no change in the general law. However.116 As these sections were interpreted by the Supreme Court of ~~ Canada in British American Oil Co. it appears to be clear that if A made a transfer of Blackacre to B without obtaining the required consent of A's spouse. . The proposal is based on the proposition that facility of transfer is unduly impaired if the burden of determining whether or not a judicial or a n administrative public official performed his statutory duties properly is imposed on B. Section 4(2) provides that land ceases to be the homestead of a married person. 6. the proposal follows the Frazer philosophy. and B was the registered owner of the mortgage. a t the mercy of a fraudulent married vendor. The court said that the dower interest of a spouse was only divested in favor of one who obtained the entire interest of the married person. is liable to the spouse in a n action for damages. A will be entitled to compensation for the loss of his registered interest. in order to promote facility of transfer.114 involve judicial or administrative procedures. the invalid transfers remain invalid. the proposal extends the protection to any registered interest.134 Torrens' Elusiue Title I n these situations. Section 12 provides that a married person who makes a disposition of land which results in the registration 'of the title' in the name of any other person. and A's spouse would have the rights specified in sections 12 and 14. B's registered ownership is not defeasible. The author wishes that he could assume that the purpose of section 4(2) was to protect a n innocent purchaser from this risk in order to promote facility of transfer.

The caption of this subsection contains. clearly erroneous in any of the possible events stated in paragraph 6. 6.105). In any human system.118 under principles of the general law unchanged by any rule of Torrens law. and presumably gained the benefits of the system. and without a n authorizing transfer from A. or it might have been based on a valid transfer from A to B of the NE A which the Registrar misread as the N '/2. assume that Alberta chose to apply the general law principle that B's registered ownership was defeasible if it were based on a n invalid transfer from A. The reasons supporting this conclusion are repeated here. however. B was ' registered as the owner of the NW A of the section. A's right to have the register revised and to reacquire ownership of the NW A must be extinguished by a rule of Torrens ' law. Later. obtained a valid transfer from B. A had a statutory right to have the register revised and to reacquire ownership of the NW 'A. B's registered ownership was. and (b) registered to a subsequent owner who was a purchaser without fraud under a valid transfer 6.97. In none of the above events would there have been a transfer from A authorizing B's registration a s the ' owner of the NW 'A.25 the author stated that C's registered ownership must not be defeasible in example K. and A's registration was canceled. I n paragraph 4. Defeasibility of Ownership 135 (2) Defeasibility of a prior registered interest to the extent that conflicting legal rights are (a) erroneously registered to an intermediate owner. Specifically. B's registration might have been based on a piece of paper which did not purport to be a transfer.29). for then the issue is whether or not a Torrens system will achieve its primary objective of solving problem 1 a t paragraph 2. . ' either commercial or sentimental. 6. Consequently.120 The problem changes fundamentally. The Torrens system is designed to protect a registered owner from a n erroneous registration which occurred before his registration in order to spare him from both the risk and the expense of investigating the derived title of his predecessors. The NW A might have had a unique value to C. and was registered as the owner of the NW 'A. or because it was intended by neither A nor B (see paragraph 6.119 Neither B nor C would have obtained ownership of the NW A in ' example K under either the general law or the general law a s modified by a recording system. the system must assure him that the error which resulted in B's registration will not subject C's registered ownership to defeasibility in a n example K situation. it might have been based on a transfer in favor of D which the Registrar misread a s B. one must take the bitter with the better. therefore. If C is to be induced to rely on the register. C purchased the NW A from B without fraud. Purely to simplify analysis. resulting ' in B's erroneous registration a s to the NW 'A. A was the registered owner of the NW 'A.118 Example K. Therefore. and B's registered ownership was defeasible. it might have been based on a n invalid transfer from A. when C's registered ownership is considered. B's registered ownership was erroneous either because it was based on a n invalid transfer from A to B (see paragraph 6.Chapter 6 . A was the registered owner of a section of land in Alberta. perhaps still in crude terms. Subsequently. C is also entitled to the benefits.

6. subsection (I). Nothing in this Act shall be so interpreted as to leave subject to . As C is the registered owner of the NW 'A. or of a forged transfer from A. No section of the Alberta Act expressly provides that A's registered ownership is defeasible in example K. Therefore. D ~ p r n e i e r ?B was the registered owner of Blackacre on the basis of a ~ forged transfer. the error must be resolved against the registered owner who was the victim of the error. and as A's registration was canceled.122 Indeed.4~ and De Lichtbuer v. A's former registered ownership was permanently divested. or A's registration was permanently divested. The interest subject to conflicting registrations moved from A through error to B. either C's registration is now defeasible. . from the language of section 167 in conjunction with the primary objective of a Torrens system. and the courts have deduced. In Frazer. A majority of the court held that when C became the registered owner of the M & M.121 Section 167 of the Alberta Act is normally invoked to protect C's registered ownership. except in the case of misdescription as mentioned in section 180. . the section a s literally read supports C. that A's registered ownership was permanently divested. I n the Frazer case:' B was the registered owner of a power of sale over Blackacre on the basis of a forged instrument. I n both Fialkowski v. 6. . 167. the courts have experienced no real difficulty with example K cases. and in favor of the registered owner who purchased without fraud in reliance on the register. or of a valid transfer to D. . clause (e). and A's former registered ownership was held to have been permanently divested to the extent of C's rights under a registered mortgage. However. 6.123 I n order to accomplish the primary objective of a Torrens system. A more informal way to state the Torrens rule is that in the single chain situation.136 Torrens' Elusive Title the necessary rule of Torrens law which makes A's registered ownership vulnerable to permanent divestiture. and then moved without further error to C a s a purchaser without fraud. Fialk0wski. is there any functional reason why A's registered ownership should not be divested if B were registered as the owner of the N '/z (and hence also of the NW lA) because the Registrar misread the legal description in a valid transfer from A to B of a parcel of land which was described a s the NE lA? The sections of the Alberta Act relating to the defeasibility of C's registered ownership if he were registered a s the owner of land by misdescription of the land are . A's registered ownership of the NW l/4 will be divested in a n example K situation if B were registered on the basis of a lottery ticket. However. any purchaser or mortgage bona fide for valuable consideration of land under this Act on the plea that his transferor or mortgagor has been registered as owner through fraud or error . deprivation of land in respect of which he is registered as owner. Example K is sometimes referred to a s the single chain situation. the Privy Council relied on the New Zealand counterpart of section 167 on this aspect of the case. I n the Turta B was registered a s the owner of the M & M because the Registrar misread a transfer from A to B which expressly excepted the M & M. and the court held that C's registered ownership based on a transfer from B executed pursuant to the power of sale was not defeasible (see paragraph 5.73). assume that A was also a n innocent purchaser for value.

6.5 a t item (7). The . and hence a s the registration which will ultimately prevail a s a matter of law. a s a n innocent purchaser who relied on B's registered ownership.Chapter 6. when C became the conflicting registered owner.124 As long a s B was registered a s the owner of the NW ]A. As long a s A and B were the conflicting registered owners of the NW lh.125 Example L.26. and thus presents a contemporaneous conflicting registration situation. while this situation existed. The subject of a n erroneous ownership decree resulting from a n error in a legal description was discussed in paragraphs 5. Therefore.20-27. C acquired a right to have A's erroneous registration canceled after C's registration. 6. At paragraph 6. and if C wanted to minimize this risk before he purchased the NW lh. 6. and consequently the register ceased to be erroneous. B's registration was erroneous.126 When C became the registered owner of the NW % in example L. the register could have been revised by the cancellation of B's voidable and erroneous registration. However. except ' that A's registration a s the owner of the NW A was never canceled. Whereas A had a right to have B's erroneous registration canceled before C's registration. leaving A as the only registered owner. Therefore. it was suggested that the valid registration should be defined by statute as the one which conforms with the general law. functional analysis would be greatly simplified.as necessarily modified by the Torrens system. the register was erroneous. for A and C became the conflicting registered owners of the NW 'A. The caption of this subsection states the rule of Torrens law which exposes A's registered ownership to permanent divestiture. Defeasibility of Ownership 137 quoted in paragraph 6. 6. for A had a right to have the register revised and to regain his lost ownership of the NW A in accordance with principles of the ' general law.127 I n both examples K and L. it means that ' at the moment that C became the registered owner of theNW A A's right to have the register revised was extinguished and replaced by a right to compensation from the assurance fund. in example L the register remained erroneous after C's registration. Example L continues the facts of example K. It should be noted that section 167 contains the misdescription exception. he would have to make a historical search of the legal descriptions in all of the transfers and registrations in B's derived chain of title. If this condition of defeasibility were clearly stated in the Alberta Act. Although B's registered ownership was erroneous under principles of the general law before C's registration. the primary objective of a Torrens system which was decisive in example K continues to be applicable and requires that C's registered ownership be preserved in a conflict with A's registered ownership. Applied to example K. his registered ownership would be defined as the valid registered ownership under the suggested rule. A's registered ownership became erroneous under the required rule of Torrens law at the moment that C became the conflicting registered owner. If C's registered ownership were defeasible under the misdescription exception. A's registered ownership would be defined a s the valid registered ownership under the suggested rule. albeit in a Torrens system in which one's ownership is supposed to be conferred by the state and not derived from the claimed ownership of one's predecessors.

The sections of the Alberta Act relating t o the defeasibility of C's registered ownership if A were deemed to have a prior certificate of title in exampleL are quoted in paragraph 6. The Registrar canceled C's registered ownership of the M & M. and that i t should be revised. A's registered ownership of the M & M was erroneous. h e would have to make a historical search of all of the registrations in B's derived chain of title before he purchased the NW l/i in order to determine whether or not a prior uncanceled certificate of title existed. the Registrar discovered that A's registered ownership of the M & M should never have been divested. After C purchased the M & M from B and became the registered owner. 6. He assumed. I t should be noted that section 167 does not contain the prior certificate of title exception. that the register remained erroneous. therefore. and that B's registered ownership had been erroneous. but not in example K? If C's registered ownership were defeasible under the prior certificate of title exception.130 Example M also presents the essential facts of the Turta case. I n Canadian Gulf.128 Example M.129 The court held that the alterations made by the Registrar were unauthorized because C had acquired his registered ownership in good faith and for value. Consequently. As stated a t paragraph 6.. 6. I n both examples. thereby creating a contemporaneous conflicting registration situation. the register ceased to be erroneous after C became the registered owner of the M & M. with the following changes. for under the required rule of Torrens law under consideration.48 decided by the Court of Appeal of Saskatchewan i in 1954. Both opinions written i n the case carefully emphasized that a s no new rights had been acquired on the basis of A's reregistration.9. The Saskatchewan statute authorized the Registrar to correct errors "without prejudicing rights obtained i n good faith for value". the erroneous entries should be corrected. the court ordered the Registrar to remove the alterations. and reregistered A a s the owner of the M & M by deleting the original cancellation entry on A's certificate of title.122. I s there any functional reason why C's registered ownership should be defeasible in example L. A's registration was canceled. which was summarized a t paragraph 6. Example M continues the facts of example K. Only the decision in the Supreme Court of Canada will be discussed.5 a t item (6). Perhaps the applicability of both the misdescription and the prior certificate of title exceptions was presented by the facts.138 Torrens' Elusive Title only factual difference between the two examples is that in example K. B was erroneously registered a s the owner of the M & M in Blackacre.'19 which was decided in 1954. Neither exception must have been considered a n issue. whereas in example L it was not. achieving the primary goal of the Torrens system requires that C's registered ownership be indefeasible relative to A's registered ownership. After the Registrar's alterations. a majority of the . A's right to have the register revised i n order to regain his ownership was extinguished. for neither misdescription nor prior certificate of title was even mentioned i n the opinions in the case. and relied on the Saskatchewan counterpart of section 185 of the Alberta Act. 6. and if C wanted to minimize this risk. Example M now presents the relevant facts in Re Appeal By Canadian Gulf Ol Co.

and that C remained the legal owner of the M & M. after the Registrar conferred ownership of the M & M on A. . he would have had not only the prior certificate of title. Could not the court have directed the Registrar to revise the register by canceling A's erroneous certificate of title? I n fact.28-30. C had not filed a caveat to protect his interest. no conceptual problem existed with regard to a remedy. would have frustrated the primary objective of the Torrens system. A granted a n oil and gas lease to D. the Registrar must have the power to confer ownership of a recognized legal interest i n land when he is not authorized to do so. and by winning the race C preserved his priority.133 Would the approach taken in Canadian Gulf not have been more appropriate? Under the necessary rule of Torrens law. Therefore. A lost his right to reacquire ownership of the M & M through revision of the register when C became the registered owner. for no transfer from A to B purported to transfer the M & M.30)? . that is precisely what the Registrar did. A's reregistration. If that were not so. for if it were applicable. This. But what if D had caveated first? If A's registered ownership of the M & M were void. and a s was pointed out in paragraphs 4.132 The prior certificate of title exception created far more difficulty. albeit without benefit of registration. C had a right to have the register revised and to reacquire registered ownership of the M & M. a majority of the court held that the misdescription exception only applied to a registration which was erroneous because of a n error in the legal description of the surface boundaries of land. but the only certificate of title. and would have prevailed. of course. in the Turta case. Although C had a prior nonregistered interest relative to D. and therefore of no legal effect. 6. However. The court could simply have directed the Registrar to cancel A's registered ownership of the M & M and to reregister C a s the owner of the M & M. and therefore the Registrar was not authorized to register B a s the owner of the M & M. The majority held that A's reregistration was void. and his prior certificate of title. However. The majority of the court seemed to have been of the opinion that if A had reacquired his registered ownership of the M & M. the Registrar had no authority to divest C's ownership of them and to revest ownership of them in A. C did file a caveat before one was filed by D. were erroneous and voidable.Chapter 6 .131 The misdescription exception was a crucial issue. As the Registrar had not been authorized to divest C's registered ownership under the misdescription exception. how could D have acquired a n interest from A i n reliance on the register (see paragraph 4. 6. At that time. C's registered ownership of the M & M would have been defeasible i n favor of A. However. B would never have acquired registered ownership of the M & M i n the first place. 6. As C's registered ownership of the M & M was not erroneous. Defeasibility of Ownership 139 court held that A's right to have the register revised i n order to reacquire ownership of the M & M which were erroneously registered to B was lost when C became the registered owner of the M & M. according to the author's analysis.

although both C and D purchased in reliance on the register. the prospective purchaser would have to conduct a thorough investigation of the seller's 'derived' registered ownership in order to determine whether or not he would be purchasing on the erroneous chain. There is another solution. If this solution were adopted. the purchaser would have only two options. for C purchased on the erroneous. neither B nor C would have acquired ownership of the NW l/i. D purchased the NW l/i from A without fraud. I n example N. and in favor of C. Under this solution. Example N is sometimes referred to a s the multiple chain situation. obtained a valid transfer. the only chain which would have existed but for the erroneous registration of B. Under the general law. and D would have acquired ownership of the NW l/i through his valid transfer from A. for he chanced to purchase on the authorized chain. or unauthorized chain. To the best of the author's knowledge. 6. therefore. However. he h a s not discovered a case in which the issue was actually presented. he might choose to rely on compensation from the assurance fund if his registered ownership were defeasible because it was based on the erroneous chain. C's registered ownership would be defeasible. with the following additions. This solution. If neither of the registered owners purchased from a . example L was a single chain situation. In fact. all of whom were purchasers without fraud under valid transfers 6. and a s D purchased from A. for A and C held the conflicting registered ownerships of the NW l/i. However. it is believed that the Torrens system cannot achieve its objective of making it possible for one to purchase a registered interest in safety by relying only on the register. Example N presents a conflicting contemporaneous registration situation. multiple chain situations are extremely rare. and became the registered owner of the NW lA. After C became the registered owner of the NW l/i. or multiple chain situation. I s it possible to develop a rule of Torrens law which will make it possible for one to purchase in relative safety. Because the possibility of a multiple chain situation is so slight.136 Because of the potential multiple chain situation.135 One possible solution is to resolve the conflict between C and D through the application of principles of the general law.140 Torrens' Elusive Title (3) Defeasibility when conflicting legal rights have been registered to different persons. the registered owner who purchased from a registered owner who was in possession would prevail. if he were not content to rely on luck and the assurance fund. the registered ownership of one of them must be defeasible. who was the victim of the error. for a s C purchased from B. A would have retained his ownership. Example N continues the facts of example L. as did example L.134 Example N. however. I n a n example N. The error which resulted in B's erroneous registration could be resolved against A. which might come closer to preserving the integrity of the system than that discussed in the preceding paragraph. D's registered ownership would not be defeasible. sacrifices one of the basic objectives of a Torrens system: eliminating the need for derivative title searches. both were purchasers without fraud under valid transfers from a registered owner. who was a n innocent purchaser relying on the register. in spite of the potential multiple chain risk? 6.

872 (K.S. 8.C.R. 3.R. 6.R.L.C. Id.R. the prospective purchaser would have to determine whether or not his seller could deliver possession.B.S. 51. 10.W. the marginal risk of the multiple chain situation would be virtually eliminated. 119731 1 W. 12 W. 491 (P.L.C. items (6) and (7) respectively a t paragraph 6. (1913) 1 4 D.D. [I9411 3 W. (1972) 10 Alta.).A. the registered owner who first took possession would prevail. were discussed a t relevant points throughout section 6.). 7. e.).). [I9131 A. 3S. 1W. 6.).R.R. 106. L.) 609 (Alta.Chapter 6. T. T. K. Notice and Fraud i n the Torrens System. a t 263. 548 (C. 17. L. FOOTNOTES 1.W. Defeasibility of Ownership 141 registered owner who was i n possession. [I9221 3 W.S. 140. 5.265.R.W.c.135 be used a s a secondary rule to resolve the conflict i n a multiple chain situation when the possession rule could not be applied? Summary 6.C. 15. could the registered owner who paid the mineral tax be defined a s the owner in possession in Alberta? Conflicting nonpossessory registered interests would obviously be impossible to resolve under a possession rule.Z. 10.R. at 595 (emphasis added). (1911) 4Alta. reu'd [I9731 6 W. I. I n this situation.W. 18. I n section 6. Could the authorized chain solution discussed i n paragraph 6. [I9771 1W.). T. is contained in a n article by G. 427. 418 (Alta.R. S.W. more orthodox in method. (1885)N. 384(S.). . 87. although independent of a Torrens system. (N. aff'd 119531 4 D. 194 (Alta. A. (2d) 54 (Alta.W. L. I19541 3 D.W. (1952) 5 W. 64 (Sask. the conditions of defeasibility which are required for reasons unique to a Torrens system were discussed.W..R.8 W. (1924) 41 N.R. R.L. 32 Man.).C. Under this rule.Z.R. 6. are all based on principles of the general law which. a t 420.R.) 257.D.).L.S. 471.L. A. 4.C.D.R.R.R. L.W. The author believes that it is appropriate to raise the question of whether they serve or hinder the accomplishment of the objectives of a Torrens system.R. (1910) 3 Sask. 13 West. but he would not be induced to make a search of his seller's derived ownership. Equity.5 W.138 The conditions of defeasibility discussed in section 6. Rev. An excellent analysis of the fraud cases. 13.7(S. 11. (1965) 51 D. 542 (Alta. 9.) 97. 673 (Alta. 584.R. J.D.137 The possession solution discussed in the preceding paragraph might be more difficult to apply if the conflicting registered ownerships were of a subsurface profit a prendre.W. 216(S.W.R. 14.L. 203.d. (N.R.R.d. (1961) 34 W. (1894) 13 N.R.S.C.D. .C. 452.Z. 16.C.B.) 529. (1885) N. 257.R. (N.W. are incorporated into the system.139 The indefeasibility exceptions in the Alberta Act based on prior certificate of title and on misdescription.).R. If a prospective purchaser were assured that his registered ownership would not be defeasible if he met the possession requirements of this rule. (1977)3B.5. Davies. 12. in bank). 2.L. [I9541 S.).

D. 43.).B. (Eq.S. [I9621 S. [I9541 S.D.R. 1970.W.C.R. 28. (N. L. 32 D.W.W. 49.43W. 114. 1.D. 545 (B.R. 48. Id.R. 46. [I9361 1 W. a t 584 (emphasis added).4. 20.). [I9541 S.12 W.R.R..R. The New Zealand Torrens System Centennial Essays 33. 1045.L.A.B.W. Law of Trusts 5 292 (3d ed.D. 37. Hinde. 141.R. C.R. 67.L.W.Z. [I9541 3 D. Q.R.A. 22.W. (1896) 26 S. 280(Alta.R.L. K.) 97.) 280.). 569. aff'd [I9531 4 D.). R. 348(Alta. 34. 87. (1973)42D.46 W.). Watson v.).R. 42. 1. 38.W. 68 D.[1974] 1 W. [I9101 S.A. 44. 80 (Aust. The Dower Act.R. (1952) 5 W. Indefeasibility of Title since Frazer v.3202 (unauthorized delivery).8 W.L.L. 33. 27. [I9641 S.) 174 (Sask.12 W.C.R. (2d) 186.R.L. (1911)4Alta.A.L. [I9241 1 W.R.40 (Hinde ed.W. 1971).S.C.) 11. Hoffert [I9241 3 D.S. 40. c. Torrens' Elusive Title (1954) 12 W.S.R. 248.L. at 5 292.(3d)412.R. A. 39. . 16. 1174. 1967). 3-201. (1952) 5 W.R. 64 (Sask.37 W.R. 569. 193.S. see Credit Foncier FrancoCanadian v.C. C. [I9641 3D.).W.L.C.C. (N. K. Ogilvie [I9241 1 D. (1954) 14 W. 87.S.W. 427.W.D. 216(S. 569. [196q 1 A.W. T.L. 837 (Sask.R. 282.R.R. Morton a n d Cowell v. 47. Walker.) 529.).R. (1902) 2 N. The Singapore Torrens System 86 (1961).L. 23. Bennett (1963) 44 D. 4 Scott.). [I8911 A. (2d) 112. [ I 9 6 1 1A.S. (1870) 1 Vict.R. (Eq.R. 30.I.S.) 609 (Alta. [I9241 N. 1 W.S. Baalman.W. [I9761 5 W.R.L.). (N.C.W.C. A.).R. 170.C.R. [I9231 3 D. H. (3d) 444. 35.W. (Eq.R.) 130. [ I 9 6 1 1 A. (2d) 426. 321 (Sask.R.R. [I9411 3 W. 5 3-208 (agent exceeding authority). (N. aff'd [I9531 4 D.S.). (19'91) 30 C.C.L.W.S.R.42 D.W.142 19.) 37.B.R. 32.C.R. (N.L.W. 36.C.).C.S.R. T. 642. 26.W. 24. (N.L. 815.R.R.[I9231 3 W. 167. 45. (N. (N. 25.W. [I9241 2 W.R.R.R. 29. Re Church 119231S. See the Uniform Simplification of Land Transfers Act (United States) $5 2-202 and Comment. 529 (Alta. 10.R. 405.R.R. (1893) 14 N.) 97. 427.A.W. 21. 41.) 609 (Alta. 31. 8 W.

or B may have contracted to sell Blackacre to E.78. Indeed. The nonregistered interests can be organized into two major categories.3 With the completion of chapter 6. Its operative language reads a s follows: 56. Introduction 7. . (1) Equitable i n t e r e s t s 7. As these interests are merely ownership claims. these categories are either the same as. subject to the . and that E is the claimant of a nonregistered interest. 7. the existence of these interests depends on the willingness of a court to utilize the equitable remedy of specific performance to require either B. Section 56 of the Alberta Act. B may hold Blackacre on a n express trust for E . As stated in paragraphs 2. or a successor owner of Blackacre. or analogous to.59-68. [No] instrument is effectual to pass any estate or interest in . . which provides for the fundamental Torrens system principle that legal interests in land are created by the state through registration. E may claim any one of the classic equitable interests discussed a t paragraphs 2. and Chapter 6 considered the circumstances under which conferred ownership was defeasible. they are characterized a s nonregistered interests in this study. and not surprisingly. l a n d . to carry out B's express or implied promise. and this subject will be further developed in this chapter. 7. .69-70.CHAPTER 7 Protecting Nonregistered Interests Through Caveating a. Chapter 5 contained a n analysis of the extent to which it was both possible and feasible for the estate to confer ownership by registration. .2 In contrast. the two categories of equities discussed in chapter 2. Assume that B is the registered owner of Blackacre. . chapter 7 will be devoted to interests in land which are not supported by the active registered ownership decree of the state a t all. it is now possible to summarize the nonregistered interests. .1 Chapters 5 and 6 were primarily devoted to registered interests.10-13 contained a brief summary of the procedure available under Western Canadian Torrens systems for the protection of these interests by caveats entered in the register. Paragraphs 4.4 The first category of nonregistered interests consists of the classic equitable interests. unless the instrument is executed in accordance with the provisions of this Act and is duly registered thereunder. These interests remain equitable interests in a jurisdiction with a Torrens system and.. was quoted in full a t paragraph 5.

defeasible.8 (c) Interest based on a fraudulent deprivation of ownership (see paragraph 6. in any of these .71-75. and B may have procured his registered ownership through his fraud. As E's nonregistered interest is not based on a conveyance which would be effective at law.11 In situations (b) through (e) listed above. E may have been the registered owner of Blackacre. and E may not have registered the transfer in order to obtain legal ownership of the interest. discussed a t paragraphs 2. they are still alive and well.10 (e) Interest based on a deprivation of ownership through a n invalid transfer to the immediately succeeding registered owner (see paragraphs 6. 7.15-22).103-106). and B may have acquired his registered ownership a s a n innocent purchaser.1 (2) I n t e r e s t based o n revision o f the r e g i s t e r 7. there is a convenience bred of familiarity in referring to E's nonregistered interest a s an equitable interest.5 The second category of registered interests includes interests which are analogous to the mere equities based on the equitable remedies of rectification and cancellation. it is invulnerable. a s opposed to a n equity. 7. E may have a right to have the register revised and to become the registered owner of an interest in Blackacre for reasons wholly independent of the equitable remedy of specific performance. 7. It is also possible that the transfer did not qualify for registration. Although B is the registered owner of Blackacre. This latter problem was examined a t paragraphs 5. 7. Therefore. I n fact.77-79). It is possible that E declined to register the transfer a s a matter of choice.7 (b) Interest based on a transaction intended by the parties (see paragraphs 2.82 and 5. in whole or in part. but a s a donee. and B may have acquired his registered ownership through error innocently. where it was pointed out that the provisions of the Alberta Act limiting the creation of registered interests has the disadvantage of increasing the number of nonregistered interests.E may have been the registered owner of Blackacre. 7. E may have been the registered owner of Blackacre. The courts have frequently characterized interests under unregistered transfers a s equitable interests. It should be noted that if E's nonregistered interest is based on an overriding interest.9 (d) Interest based on a deprivation of ownership through error operating in favor of a donee (see paragraphs 6. most of the situations analyzed in chapter 6 in which B's registered interest is defeasible can be repeated.3 7. but through an invalid transfer.11-12). B may have executed and delivered a transfer of a n interest in Blackacre to E.39). on the grounds that a legal interest can only be obtained through registration.6 (a) Overriding interest (see paragraphs 6. in order to list the nonregistered interests in this category. and need not be protected by a caveat.144 Torrens' Elusive Title recording law principles reflected in the caveating system. the remaining situations in which E has a right to become the registered owner of a n interest in Blackacre through revision of the register are simply correlative to the same situations in which B's registered interest is.87.

Must such a n interest exist.12 Situation (b) poses a further difficulty under the statutory revision theory. he certainly does not have a right to have the registered revised in order to obtain a registered legal interest.13 Section 56 of the Alberta Act was quoted in part a t paragraph 7. typical of Torrens statutues. The transfer in question might pertain to a n interest which contravens no public policy and which would have been a legal interest under the general law. for equitable remedies are discretionary. a s a n equitable interest? Under the general law. But if E does not have a registrable transfer. Caveating 145 situations. if B's legal ownership were based on a conveyance which either was not intended by both B and E. it seems accurate to say that E has a statutory right to have the register revised in order to obtain a register legal interest. Moreover. rather than a discretionary equitable right. and the foregoing questions are merely designed to underscore the problems inherent in this approach.1. is the existence of the interest subject to equitable discretion? The subject of limiting interests qualifying for registration was discussed in section 5. which will be recognized. but both Singapore section 27 and Kenya section 38 contain a subsection (2) which states: (2) Nothing in this section shall be construed as preventing any unregistered instrument from operating a s a contract. I t would seem that if the proven facts establish the validity of E's interest in situations (c) through (e). appears to express a legislative intention that no interest in land will be recognized unless i t is created by registration. There is a problem with this analogy. If E has a n instrument which is not registrable because i t does not substantially conform with the proper form.f. 7. b. and E has a right to become the registered legal owner through revision of the register. E's right to have the Blackacre register revised in order either to gain or to regain registered ownership is analogous to equitable rectification. . and which can be protected through caveating. under the general law it could only be a n equitable interest. and nonregistered interests. Consequently. E's remedy would be a right to have the conveyance rectified or canceled in equity in order to reacquire his lost ownership. There is no suggestion of a distinction between legal interests. the parties have a n absolute right to create recognized legal interests. Under the general law. E has a statutory right to revision of the register. or was procured by fraud.14 Two of the modern Torrens acts deal directly with the ambiguity latent in section 56 of the Alberta Act. with a n exception to be discussed in the following paragraph. which must be created by registration. the author is not aware of any Torrens jurisdiction which denies recognition to nonregistered interest. in these situations B is the registered legal owner. however. 7.. However. but which otherwise purports to create a legal interest which is consistent with the general law.Chapter 7 . if a t all. Should Nonregistered Interests be Recognized? 7. If E has a registrable transfer. Both section 27(1) of the Singapore Act4 and section 38(1) of the Kenya Act5 contain the provision in section 56 of the Alberta Act that a n unregistered instrument will not be effectual to pass any estate or interest. This section.

As E's equitable interest in Blackacre is based on his ability to obtain specific performance of his contract right to purchase Blackacre from B.15 E's nonregistered interest may be any one of the classic equitable interests.146 Torrens' Elusive Title Consider the classic equitable interests referred to a t paragraph 7. There are no apparent reasons which would justify elimination the remedy of specific performance of contract a s between the original contracting parties.17 Once it is decided that enforcing E's nonregistered interest in Blackacre against B is consistent with public policy. (1) Enforcement of nonregistered interests between the immediate parties 7. the subsection ( 2 ) quoted above must mean that the equitable remedy of specific performance of contract remains available for the enforcement of a n unregistered instrument. or if B acquired his registration through a n invalid transfer from E. Rather. If B contracted to sell Blackacre to E. and thus completely abolishing these equitable interests.16 E's nonregistered interest would be a right to have the Blackacre register revised in order to acquire registered ownership if B made a transfer to E. although recognizing that E h a s a n equitable interest in Blackacre insofar a s E and B are concerned h a s significant implications in some areas of real property law (see paragraph 2. provides for the recognition of equitable interests. E could bring a n action a t law to obtain damages for B's breach of contract. Consequently. the subsection (2). the dual goals of protecting E's nonregistered interest and promoting facility of transfer can be reconciled.4. (2) Enforcement of nonregistered interests against a successor registered owner 7. For centuries specific performance h a s performed a useful function in averting difficult contract damage issues. only the goal of promoting facility of transfer stands a s a n obstacle to inforcing it against a purchaser of Blackacre from B. Therefore. in effect.44). In these situations E's nonregistered interest must be enforced against B if it is to exist at all. such a s C. the question is how to develop a system which will make it possible for E to protect his nonregistered interest without impeding facility of transfer. If a convenient system can be implemented to provide C with a source of relevant information a s to all nonregistered interests which could be enforced against him. and if B breached that contract. or if B procured his registration through fraud. . With the exception of the express private trust. The author would be extremely surprised if anyone had ever seriously suggested that section 56 of the Alberta Act meant that a court of law could not grant damages for breach of a contract concerning a n interest in land unless the instrument creating the contract were registered. they are all based on a contract between B and E. or if B were a donee. Moreover. it has no relevance to facility of transfer and the objectives of a Torrens system. the functional question is not whether nonregistered interests should be recognized and enforced. 7.

no further registrations are permitted until the claim protected by the caveat is either registered or denied registration. Any person claiming to be interested in any land for which a certificate of title has been issued . and 58 of the Alberta Act provide a s follows: 136. is expressed to be subject to the claim of the caveator. . may cause to be filled with the Registrar a caveat . . if E's prior nonregistered interest were entered in the register by a caveat.19 In operation. Instruments registered in respect of or affecting the same land have priority the one over the other according to section 20 and not according to the date of execution. These systems have two primary objectives. the system is designed to provide C with information concerning all nonregistered interests which could be enforced against him. . . the effect . .12) 7. it will be the subject of this chapter.18 Even the earliest Torrens acts provided a method for the holder of a nonregistered interest to preserve his interest for a t least a period of time during which he could seek the benefits of registration. a t least so long a s the caveat remained in force. the quoted sections of the Alberta Act provide for accomplishing the first recording system objective. Benefits Secured Through Caveating System 7. . .28). has the same effect a s to priority a s the registration of any instrument under this Act. So long a s any caveat remains in force the Registrar shall not register an instrument purporting to affect the land.21 Taken together. the estate or interest. . unless the instrument is expressed to be subject to the claim of the caveator. owner of. Assume that C wished to purchase Blackacre from B. Under the older system its purpose is to secure temporary protection for a nonregistered interest. 152. (1) Benefits secured by caveating a prior nonregistered interest 7. 152. 142. The second objective is to make it possible for C to acquire a subsequent interest from B free from prior nonregistered interests by relying on the register (see paragraph 3. or any instrument affecting. after the caveat is filed. a caveat gives permanent protection. and they are relatively simple to understand if the two objectives are recognized as distinct. As the Alberta Act utilizes the newer system. unless the certificate of title or instrument . Registration by way of caveat . against the registration of any person as . Legally. the caveating system under the Alberta Act is virtually the same as a typical modern North American recording system. Functionally. The modern caveat or caution can have either of two different effects. 142. . Section 20 of the Alberta Act merely prescribes the procedure for determining the time of registration. depending on the legislation. .20 Sections 136. Under the newer system. after a caveat is filed. 58. .c. The first objective of the system is to provide E with a method of protecting his prior nonregistered interest (see paragraph 3. mortgage or encumbrance in respect of which the caveat is lodged. all further registrations are subjected to the claim protected by the caveat. however. any interest subsequently acquired by C would be subjected to the interest protected by E's caveat to the extent that the interest was valid under the general law. . 7.

87). but he would do so to protect his ownership of the lease against the risk that E might make a subsequent assignment of the lease to G a s a n innocent purchaser. and not merely the owner of the interest a t the time it was caveated.39 and 6.6 It would be expedient for F to file his own caveat. or issued by a court after a judicial determination of the validity of the recorded interest on the merits. before E either caveats or registers. What must C do. in order to take free from E's prior nonregistered interest? Sections 152 and 58 of the Alberta Act appear to create a pure race system (see paragraph 3. in order to gain priority. is not so.22 It should be emphasized that it is the interest which is protected by a caveat under section 142. C must be innocent of fraud (see paragraphs 6. The recorded interest will cease to be relevant when it expires in accordance with its own terms. If E filed a caveat to protect his prior nonregistered interest. however. to the extent of its validity. the feature can lead to unfortunate consequences in terms of facility of transfer.24 The second objective of a recording system is to make it possible for C to acquire a subsequent interest from B free from prior nonregistered interests by relying on the register. or be. the recorded interest may be extinguished or modified by the recording of a subsequent instrument either executed by the proper parties. a n instrument remains recorded until the court house bums down and the records are destroyed. this subject will be discussed separately in section 7. The Alberta Act does contain provisions for the removal of a caveat.23 The caveating system in Alberta contains a n ingredient which is not present in a typical recording system. C would acquire his subsequent interest subject to the prior caveated interest. This. that his registered ownership was not subject to any outstanding interests disclosed by the register. (2) Benefits secured by one who acquires a subsequent interest in reliance on the register 7. It is B's reversion which is bound by the caveated lease. and if C subsequently purchased the reversion from B. Or. and that E later assigned the lease to F. once recorded. E held the prior .77-79 and 6.7 7. Assume that E's prior nonregistered interest was a lease for a term of 30 years. and that C acquired a valid transfer of Blackacre from B. it does not depend on equitable principles from the general law. the Alberta caveating system is a purchaser-race-fraud system.25 As discussed a t paragraph 3. C must either caveat (section 152) or register (section 58). and although the legal consequences of the removal of a caveat are a n integral element in the benfits of the caveating system to the relevant parties. C can not be a donee. a s C is seeking to utilize the caveating system to gain a priority he would not have had under the general law.e. E can be a donee. Consequently. First. Secondly.148 Torrens' Elusive Title of a caveat is prescribed by the Alberta Act.49). the reversion would remain subject to the lease owned by F. C must also be a purchaser for value (see paragraphs 6. 7. 7. But what if E did not file a caveat? Assume that B was the registered owner of Blackacre. that E properly caveated the lease.14). Because E held the prior interest derived from B. there are no provisions for the removal of a recorded instrument. Under the latter.18.

Bannon? E purchased B's contract to acquire a lot from A. Although the principle had existed in Eastern Canada under conventional recording systems for over a century.27 T. C will win the race. as to any remaining proceeds from a foreclosure sale. The previous year. in Stephens v. the court had recognized that E could protect a prior equitable interest by filing a caveat.400 B actually owed to E when C acquired his mortgage. there was no priority issue. E made future advances to B. that is. Bannon. is worthy of consideration here.12 And Stuart J. and it is now clear that under the Alberta Act. In both cases. E held a n equitable mortgage of a lot owned by B to secure B's debt of $2. Assume. C's mortgage only applied to B's beneficial ownership. In the Turta case: translated from example M a t paragraphs 6. to make it possible for a subsequent innocent purchaser of even a comparable equitable interest to gain a n advantage by caveating first. for the purposes of the issue under consideration. for C's mortgage was by its implicit terms subject to E's prior mortgage. the mortgages were conflicting.26 Normally. a s to the first $6. his subsequent interest would not be subordinated to E's prior nonregistered interest. a s a matter of proper construction.M. However. the statute made it possible for E to give the world notice of his prior interest. the value of the lot less the $6. and hence to preserve it. St. if C were also a n innocent purchaser. Consequently.133. E (there C) had a right to have the register revised in order to regain his registered ownership of the M & M which the Registrar had erroneously reregistered to B (there A).1° The foundation case establishing this prinicple is Re Royal Bank and La Banque D'Hochelaga. Later E advanced a n additional $3. because C's mortgage was limited to B's 'equity' in the lot. dissenting. v. that C was a n innocent purchaser in both cases. involved a reversal of equitable doctrine. and C's mortgage was entitled to priority to the extent of the debt it secured because it was purchased without fraud and caveated first. and caveated this interest. E's prior nonregistered interest was not disclosed by a caveat when C acquired his subsequent interest in reliance on the register." decided in 1914.. Simmons J. however.128. Mary's Parish Credit Union Ltd. but E nevertheless preserved his priority by winning the race to the Land Titles Office and caveating first. referred to it a s a "startling innovation". and 6. The c o d held that. The other objective of a recording system.. and E's prior nonregistered interest was not protected by a caveat.400 which might be realized from a sale of the lot pursuant to foreclosure of the mortgages. 7. In Stephens v. Caveating 149 nonregistered interest.400 a t the time C acquired a subsequent equitable mortgage of B's 'equity' in the same lot.Chapter 7 . and C subsequently purchased the same contract from B.130. functionally. 6. This result of the statutory caveat was quite consistent with equitable prinicples. 7.l3 decided by the Supreme Court of Canada in 1961. refused to interpret the statute a s having been intended to produce such a result.000 to B. Ball lumber Co. and E's mortgage secured a debt of $6. .000 and possible future advances to be made by E to B. and C (there D) subsequently acquired a n oil and gas lease from B (there A).

R. The caveated interest is a mere claim. if any.29 The point of overwhelming importance in terms of the functional operation of the caveating system is that there is no requirement that a caveated interest be valid in order to be entitled to whatever protection caveating will provide. was rejected in Rystephaniuk v. 7.15 The counter proposition. The principle was stated with abundant clarity by Tritschler J. The purpose of caveats is to warn the registered owner and. v. the Registrar shall reject the instrument or caveat for . 7. This purpose would be frustrated if a claim to an interest had to be established by the decision of a Court or of the District Registrar before a caveat could be filled. and even though a s a n overriding interest it did not require protection a t all. and (b) either (i) is based either on an instrument executed by any person or on an Act of Alberta.150 Torrens' Elusive Title d Caveating Requirements (1) Interests qualifying for protection 7.y be filed if the claimed interest: (a) is in land registered under the act. but if the author's summary is accurate. it could be simplified to read a s follows: A caveat ma. all persons who might deal on the faith of the certificate of title. or (ii) arose after the land was first registered under the act. what is more important.31 Section 54 of the Alberta Act provides a s follows: 54. v.28 Section 136 of the Alberta Act defines the interests in land which qualify for protection by caveating. or on a specifically enforceable instrument. that the caveator claims an interest which is not disclosed on the certificate of title. ( 2 ) Where any instrument or caveat is presented to the Registrar for registration subject to any condition. A caveat is merely a notice of a claim which may or may not be a valid one. Prosken. I n the early years a commonly held view was that only a n interest which was based either on a registrable instrument. in C. in Imperial Elevator Co. that only a n interest which could not be created in registrable form qualified for protection by a caveat. ( 1 ) The Registrar shall decide whether any instrument or caveat presented to him for registration is subsequently in conformity with the proper form in the Schedule or not and may reject any instrument or caveat that he may decide for any reason to be unfit for registration.30 There has been scant litigation in recent years concerning what interests qualify for protection by caveating.16 In the latter case the court held that a n easement could be protected by a caveat even though it could have been created by a registrable transfer. The section is complex. could be protected by a caveat. This view was rejected by the Supreme Court of Saskatchewan in 1914. The validity of the claim must be determined after and not before the filing of the caveat. District Registrar:l4 Applicant does so claim and it is not disputed that its caveat is in the correct statutory form.P. 01ive. (2) Authority of Registrar to reject caveats 7. It is trite law that caveats are to be used for the protection of alleged a s well as of proved interests and that a caveat is merely a warning which creates no new rights but protects existing rights. and its status on the merits is not elevated by caveating.

when in fact the lease was valid. Signatures.1. (Emphasis added. If the Registrar accepted the caveat. what other reasons would make it unfit? 7. The land affected must be adequately described so that the caveat can be entered i n the proper register. The caveat and its attachments must be suitable for reproduction by equipment available in the Land Titles Office. and t h a t F108s caveat was accepted. Perhaps B sent a letter to the Registrar contending either that the lease was forged. the Registrar may reject a n y caveat that he may decide for a n y reason to be unfit for registration. A prophylactic requirement such a s this.) 7. when in fact the lease was invalid. 7. or that it was executed or delivered by a n agent of B without authority. Assume that E submitted a caveat to the Registrar to protect a lease of Blackacre from B to E for a 30-year term.35 At paragraph 7. Assume that E assigned a caveated but void lease to F. that F was a n innocent purchaser. they require that a caveat be signed by the caveator or by his agent. was quoted as having said that a caveat creates no new rights but protects existing rights. that it contain the name and address of the caveator or of his agent. B would have a n opportunity to make a subsequent transfer of Blackacre to C as a n innocent purchaser. It seems beyond question that the Registrar must have authority to reject a caveat if it does not comply with reasonable administrative requirements. Tritschler J. results in a very considerable expense for the society using the system.32 Section 137 of the Alberta Act and Form 33 are not quoted. and that the Registrar had reason to suspect that the lease was invalid under the general law. 7.Chapter 7. for the state does not purport to confer any ownership rights by entering a caveat in the register. names. The required form enhances administrative efficiency.29. The author believes t h a t the opinions of experienced lawyers should be obtained to determine whether or not this requirement is sufficiently effective in inhibiting the filing of spurious caveats to justify its cost in connection with the thousands of caveats filed. and addresses are all relevant for purposes of notices and proceedings relating to the caveat. Conceding that a caveat may be unfit if it does not meet reasonable administrative requirements. a s E was never registered a s the . (3) The Registrar may reject any document submitted for filing or registration which i s i n his opinion for any reason unsuitable to be microphotographed pursuant to section 22. and thereby to extinguish E's leasehold interest. The lease would have remained void.33 Section 137 also requires that a caveat be supported by a n affidavit stating that the deponent (the claimant or his agent) believes that the claimant h a s a good valid claim in respect of the land. The situation would not have changed. E would have acquired no substantive legal rights. and by accepting the caveat the Registrar would not have exposed the assurance fund to any risk. Caveating 151 registration if the condition is not satisfied at the time the instrument or caveat would otherwise be registered. and that it describe the land in which the interest is claimed.34 According to section 54(1). Was E's caveat rendered unfit? If the Registrar rejected the caveat. when multiplied by the number of caveats filed. if any. but cumulatively. that it state a n address within the province for service of notices.

he would not divest any ownership rights of the registered owner. 7. held that the Registrar had no authority to reject a caveat because he believed that the claim for which it sought protection was invalid. One could speculate for some time in a n effort to identify all of the interests which this class might comprise. If the Registrar has no authority to reject a caveat for reasons related to the validity of the interest sought to be protected. F did not purchase a leasehold interest from a registered owner in reliance on the register. Such a n interest would have arisen before the land was . Does the Registrar have a duty to reject such a caveat? Thousands of caveats are routinely submitted to the Registrar for filing. how much does it cost the users of the system to pay for the Registrar's efforts to carry out that duty? What would be the legal consequence if such a caveat were inadvertantly accepted? If a caveat did not comply with reasonable administrative requirements. If this is the sound view. be unfit. A caveat seeking to protect such a n interest must. that some valid interests in land do not qualify for protection by caveating. and a s the parcel of land was not registered under the Alberta Act.29. However. v. summarized a t paragraph 7. Every caveat has to be entered in the register for a parcel of land.R. but the effort seems hardly justified.39 The only other disqualified interests are those which are based neither on a n instrument executed by any person nor on a n act of Alberta. 7.28. If B were homesteading Crown land which was not registered. and which arose before the land affected was first registered under the Alberta Act. he is not required to commit the valuable time of skilled government employees to the task of reading caveats in order to evaluate the interests claimed on the merits. made before B acquired a Crown patent and become the registered owner.152 Torrens' Elusive Title owner of a leasehold interest in Blackacre. Two possible interests can be easily identified.36 The practical problem is that the Registrar does not know whether or not a claimed interest is valid on the merits.37 It is clear from section 136 of the Alberta Act. that fact would readily be discovered. District Registrar.38 However. therefore. In C. referred to a t paragraph 7. by accepting a caveat based on a n invalid transfer. how does the Registrar determine whether or not a n interest does qualify for protection by caveating unless he has the claimed interest scrutinized? Assume that the caveat seeks to protect a pipeline easement across Crown land which was not registered under the Alberta Act. and would be discovered during the routine administrative processing of the caveat. 7. Here the disqualification is based on the status of the parcel of land sought to be affected by the caveat. and he would not expose the assurance fund to any risk. If the Registrar h a s a duty to reject a caveat seeking to protect a n interest not qualifying for protection. The caveat would adversely affect the ability of the registered owner to enter into a transaction concerning any registered interest subjected to the caveat. and the caveat could be rejected. the Registrar would not confer any ownership rights on the caveator. 7. it would seem that section 54 of the Alberta Act should be redrafted accordingly.P. Tritschler J. E might have acquired a n equitable interest based on a n oral contract to purchase the land from B. that fact would be apparent from the face of the Form 33.

If the Registrar erroneously conferred ownership of a recognized legal interest in land on B through registration. The other interest. As a caveat based on a native land claim is usually filed against thousands of acres. namely: (1) a lien against B's one-half interest for one-half of the cost of repairs made by E to a building on Blackacre. and (3) a right of first purchase if B decided to sell his one-half interest.42 Assume the following facts.120). a s granted by a n agreement of (date and parties) which agreement inter alia provides: (right of first purchase clause of agreement quoted)". it could apply to any caveat filed to protect a n interest which does not qualify for protection for reasons related to the nature of the interest or to the owner of the interest.40 The author does offer a suggestion which would provide and answer to the questions posed a t paragraph 7. if F purchased E's caveated interest without fraud. 7. which is of common knowledge. Subsequent- . for no legal consequence would result if one were accepted. Consequently. and it would have been based neither on a n instrument nor on a legislative act of Alberta. Caveating 153 first registered under the Alberta Act. It would eliminate the Registrar's duty to reject such caveats. 7. a statutory rule providing that a caveat is invalid if the interest does not qualify for protection would simply deprive the interest of the protection afforded by the caveating system. In contrast. The interest would be very rare. facility of transfer of a n interest subject to the caveat is likely to be impaired. however. for unless the caveated interest is adequately described. for by accepting a caveat the Registrar did not purport to validate E's interest. and would leave it vulnerable to subordination in favor of a n interest which was properly registered or caveated. made a contract under which E claimed three equitable interests in B's one-half interest in Blackacre.37.41 Section 137 of the Alberta Act provides that every caveat shall state "the nature of the interest claimed and the grounds upon which the claim is founded. and not a s void. (3) Description of interest sought to be protected by caveat 7. F would acquire no more than E's claim.Chapter 7 . fundamentally distinct. The two situations are. this interest would be apparent. Could the Alberta Act provide that a n accepted caveat purportedly protecting a n interest not qualifying for protection is invalid? This may seem inconsistent with the author's position that under a Torrens system unauthorized ownership decrees must be characterized a s voidable. (2) a lease of B's one-half interest. is often described a s the native land claim. who were the registered owners of Blackacre a s tenants in common in equal shares. F could not rely on the register insofar a s the validity of E's interest was concerned." An adequate description of a n interest sought to be protected by a caveat is crucial. E filed a caveat claiming "a right of first purchase of B's one-half interest in Blackacre should B decide to sell such interest. B's registered ownership must be recognized a s valid until the register is revised in order to support the rule of Torrens law that C can purchase the interest from B without fraud in reliance on B's registered ownership (see paragraph 6. B and E. Although this suggestion is made in the context of section 136 of the Alberta Act.

and then claim only some of them. Consequently. it is seldom a s simple a s one telephone call. Manifestly. and hence were not enforceable against C. however. C purchased B's one-half interest in Blackacre without fraud. for in Calford E claimed a n interest under a lease "on the conditions contained therein". Moreover. they were not protected by the caveat. C purchased the reversion in Blackacre from B. the issue was whether or not the lien and the lease claimed by E were protected by the caveat. 7. E did not seek to enforce this right against C. late of London. as properly construed. However.I8 implicitly raises a more important question related to facility of transfer. a s lessor. the agreement did not grant either of these interests to E. the caveat did not claim these other rights. and insofar a s the facts disclosed. The Ruptash case was easily distinguished.45 The court held that C acquired the reversion subject to all of E's rights contained in the lease. over 22 years after the beginning of the term of the lease. and was registered a s the owner subject to the rights protected by E's caveat. In Calford the original lease was executed in 1974 by Royal Exchange Assurance as executor of the estate of the deceased owner of Blackacre. in the alternative. and either E's lawyer or B's lawyer was the logical target. was not attached to and incorporated into the caveat. that is. a prudent purchaser of the reversion would examine and evaluate the lease. As it seems unlikely that many caveators would recite several interests. including the option to renew the lease. the court held that even if these interests had been valid. E was as assignee of the .43 Although it was conceded that the right of first purchase would be protected by the caveat if it were valid. E held a nonregistered lease protected by a caveat in substantially these terms: "E claims a n interest in Blackacre under a lease in writing (date and parties) for a term and on the conditions contained therein". Zawick. Zeller's (Western) Ltd. and contained a n option giving the lessee a right to renew the lease for a n additional ten years. the Ruptash holding is of relatively limited practical application. The lease. which told a propective purchaser of the reversion (C) almost nothing. The court held that. The reversion in Blackacre had changed hands several times between 1948 and C's purchase from B in 1970. The court said that E's caveat claimed only a right of first purchase (the nature of the interest claimed) granted in a written agreement (the grounds on which the claim was founded). The practical problem is that the nature of the interest claimed was merely described as a lease. E claimed all of the rights in the lease.154 Torrens' Elusive Title ly. and could have been a n instrument containing from one to who knows how many pages. and that although the agreement was referred to a s providing "inter alias' other rights. Therefore. The lease could have been for one year or for fifty years. 7.17 7. The lease was for a 30-year term. and was registered a s the owner subject to the rights protected by E's caveat. C's lawyer had the task of obtaining a copy of the lease from someone. What rights were protected by E's caveat? The issue presented by this example was decided in 1956 by the Supreme Court of Canada in Ruptash v. was not available in the Land Titles Office.44 I t is believed that Calford Properties Ltd. As any lawyer knows. v. and therefore E's claim failed on the merits. In Calford.

the mere existance of a claim protected by a caveat impedes facility of transfer to the detriment of both a n owner of a n interest subject to a caveated claim and a potential purchaser from him. Although a caveated interest will usually be legitimate. to his caveat. For this reason. it is deemed appropriate to give the holder of a n interest subject to the caveat a summary remedy to obtain the removal of the caveat. The caveating system gives this protective benefit to the holder of a caveated interest. t h a t is. 7.49 The mere existence of a claimed nonregistered interest impedes the use and development of land by a n owner.47 Nonregistered interests protected by caveating will invariably conflict with registered legal interests or with nonregistered interests.46 The author sees no reason why a caveator should be absolutely required to attach a copy of the instrument. Removal of Caveats (1) Basic policy issues 7. if any. the owner of the interest in land adversely affected would have to utilize the normal adjudicative procedures to resolve a controversy on the merits. If a caveator wished to summarize the rights provided by the instrument upon which his interest was founded. a remedy which does not give his adversary the procedural means of protecting his interest normally found i n a judicial action. the principle of security of ownership of nonregistered interests in land dictates t h a t adequate safeguards for the claimant be provided. a s frequently will be convenient. Is there any reason why a summary adjudicative procedure should be available if a caveat were filed? 7. and thus actually available for examination a t the Land Titles Office. it may have become obsolete. whether or not he happens to be a caveator. whether or not the claim is protected by a caveat. . 7. so long a s he carries the risk of omissions in the summary. and if legitimate i n origin.48 Because a subsequent purchaser of a n interest in land will be bound by a n inconsistent nonregistered interest protected by a caveat. it is believed that he should be permitted to do so. e. 7. i n order to restore facility of transfer.Chapter 7 . He does suggest that section 137 might be amended to provide t h a t a caveat will only protect rights disclosed by the caveat including its incorporated attachments. Should a judicial system attempt to isolate a n owner of a n interest i n land from conflicting claims? Or should it provide a forum and procedures for the resolution of conflicts on the merits with justice for both parties? If a claimed nonregistered interest were not protected by a caveat. upon which his claim was founded. for a s the great majority of caveated claims are valid on the merits. and thus remove any impediment to the use and development of his land. Caveating 155 original lessee's interest in the lease. it may be spurious. One can only speculate a s to how easy it would have been for either B's lawyer or E's lawyer to have located a copy of the original lease.50 A dilemma is presented when a n attempt is made to promote either facility of transfer or the use and development of land by a summary adjudicative procedure.

53 Assume that B and E made a contract for the sale of Blackacre to E. In Boulter. surely his legal and equitable rights against B would not have been altered. and the subsequent interest was a registered mortgage. . . . . Should it make any difference if E's caveat has been removed a s a result of a notice from B to commence followed by E's failure to do so in time? B would have been able to sell Blackacre to C free of E's claim.lg a 1919 decision of the Supreme Court of Canada. . . and that E's caveat was removed. therefore. Section 144(5) provides that the person sending the notice must have a n interest in the land. If E had filed a caveat. and the subsequent interest was the registered ownership of Blackacre including the M & M. that C sent a notice to E to commence action to substantiate his claim. [is] sent by registered mail .(1) [Elvery caveat .21 it was stated that the benefit which accrues to the holder of a nonregistered interest by filing a caveat is that any subsequently acquired interest is subject to the nonregistered interest to the extent that it is valid. In Bensette the prior nonregistered interest was a royalty interest in the M & M in Blackacre. The effect of removal of the caveat must.. . that E filed a caveat to protect his interest. . But if the caveat protects a valid claim. . . that C subsequently acquired a n interest from B which was consistent with that of B. interest . .51 Section 144(1)of the Alberta1 Act provides as follows: 144. It is clear that the fact that E chose not to file a caveat would not preclude him from obtaining either specific performance of his contract against B in equity.55 As demonstrated by the example in paragraph 7.156 Torrens' Elusive Title (2) Benefits secured by removal of caveats 7. unless before the expiration of the period of 60 days the caveator takes proceedings in court.53. . This example presents the relevant facts of two conflicting caveat removal cases. that E failed to do so in time.Waugh v. l o decided by the Saskatchewan Court of Appeal in 1973. No problem exists if the caveat relates to a n invalid claim. . such a n interested person can obtain the removal of a caveat if the caveator does not commence the required action. claimed.54 Assume that B created a nonregistered interest in Blackacre in favor of E. what is the effect of its removal? 7. . By simply mailing a notice to the caveator. but should that not be the extent of B's benefit from the caveat removal procedure? 7. and Bensette v. to substantiate the . . Union Bank. at least so long a s the caveat remains in force. to the caveator. 7. and that B unjustifiably refused to carry out the contract. or damages from B a t law for breach of contract. Reece. The crucial issue is what effect did the removal of the caveat have on E's right to have the equitable remedy which he had against B enforced against C. 7. t o take proceedings in court on his caveat. shall be deemed to have lapsed after the expiration of 60 days after notice .Waugh the prior nonregistered interest was a n equitable mortgage. Boulter. and had subsequently removed it voluntarily. be to retract that benefit and to leave the nonregistered interest vulnerable to subordination in favor of a subsequently purchased interest. the procedure commenced by C would not have affected E's remedies against B. for the caveator will have sustained no injury. that E did not file a caveat to protect his equitable interest in Blackacre a s a contract purchaser. . .52 At paragraph 7.

58 Section 146 of the Alberta Act provides as follows: 146. E was required to keep his protective caveat in the register during the entire period that C held his interet. . the logical effect of the removal of a caveat is to expunge whatever protection the caveat gave.(1) In the case of a caveat filed . . and he would have the burden of proof. it will be detrimental to any use and development plans of a holder of a nonregistered interest. this section provides the owner of a n interest subject to a caveat with a method for obtaining a summary adjudication of the validity of the caveated claim. and this will require him to prove the validity of his claim.Waugh appears to have concluded that in order to maintain his priority over C. apply to the court or a judge. that was the only effect of the removal of E's caveat. what relief could a n owner obtain under section 146 if the caveator were properly served. by originating notice subject to the Alberta Rules of Court. 7. it is difficult to understand why the continued existence of the caveat should be required. .Chapter 7 .49). However. and because it places the burden of proving the validity of his claim on the caveator. Caveating 157 The least one can say is that the removal of the caveat would enable C to transfer his interest free of E's claim to D a s a subsequent purchaser without fraud. As has been stated. As the functional purpose of the caveat was to give C notice of all nonregistered interests which might have been enforceable against him a t the time that he purchased. 7. the owner would be required to apply to the court for a declaration that his interest was not bound by the caveated claim. .59 However. calling upon the caveator to show cause why his caveat should not be discharged. in order to do so he must show cause why his caveat should not be discharged. The procedure is summary because it is based on originating notice. but chose not to appear? It seems clear .56 However. because a t the time of C's purchase E's prior interest was protected by the caveat.Waugh the Supreme Court of Canada held that the removal of E's caveat was immediately effective to give C priority over E. According to the court in Bensette. The court held that E could enforce his prior interest against C notwithstanding the removal of the caveat.and upon the hearing of the application the court. as to the court. the applicant or owner may . whether or not he intends to sell his interest.57 A summary caveat removal procedure increases facility of transfer for the benefit of both the owner of a n interest subject to a caveat and a potential purchaser from him. may make such order. but also promotes the use and development of land by a n owner whose interest is subject to the caveat. if a summary adjudicative procedure operates too harshly. 7. in Boulter. . . . The author believes that the court acted upon a perceived need for a system providing for a summary adjudication of the merits of E's claim a s it affected C (see paragraph 7. A summary procedure for adjudicating the validity of a nonregistered interest protected by a caveat not only increases facility of transfer. Under ordinary procedure. and that a procedure which merely provided for the removal of a form of protection was extended beyond its logical limits in order to achieve this goal. The caveator will normally want to retain the protection afforded by his caveat. (3) S u m m a r y adjudication o f validity of n o n r e g i s t e r e d interest 7. . In a practical sense. . . The court in Boulter. may seem just.

which would often require proof of a negative set of facts. his caveat would lapse. and irrespective of whether or not he received it. a summary nonjudicial caveat removal procedure was perhaps justified.it seems appropriate to ask whether or not the procedure under section 144 is too summary even for the removal of the protection afforded by a caveat. 7. and his interest would become vulnerable to subordination in favor of a n interest acquired by a subsequent purchaser. the caveator would be bound under the doctrine of res judicata. (4) Adequacy o f s a f e g u a r d s f o r valid c a v e a t e d i n t e r e s t s 7. for whatever it may be worth.63 Much water h a s flown under the bridge since 1861. Would the court have authority to determine the validity of the caveated claim? If the caveator opposed the application. and if the court determined that the claim were invalid. the author believes that serious consideration should be given to amending the section so that it will expressly authorize a court to adjudicate the validity of a caveated claim (see paragraph 7. I t is doubtful that many lawyers who file a caveat on behalf a client feel that the procedure is either ethically questionable or inimical to the proper operation of the Torrens system. As a n application under section 146 is a judicial action. and if the rule were otherwise. 7. If a caveator failed to bring a n action to substantiate his claim after a letter was sent to him by registered mail.59). 7. Nevertheless. The section authorizes the court to make a n order which seems just. the validity of his caveated claim would be placed in issue. Under the Alberta Act subsequent registrations are not blocked by the filing of a caveat.61 Assuming that the summary caveat removal procedure provided by section 144 was never intended to result in a n adjudication of the validity of a caveated claim if the caveator failed to take proceedings in court to substantiate his claimed interest (see paragraph 7. A caveator should have the evidence to prove his claim. the owner of a n interest subject to a caveat would have the burden of proving that the claim was not valid. the author is not convinced that authority for a summary adjudication of the validity of a caveated claim can be derived from section 146. It is generally accepted that few caveated interests are blatantly spurious. we can understand Torrens' zeal to protect the sacred register much a s Horatius defended the bridge. As the caveat was a powerful weapon in the hands of the claimant of a nonregistered interest.51-56).60 The procedure provided by section 146 appears to give a caveator adequate safeguards. However. for although it shifts the burden of proving the validity of his claim to him a s a condition of maintaining his caveat. they are simply subjected to a caveated claim. the summary removal procedure provided by section 144 is strongly suggestive of a statutory prejudgment that the caveated claim is likely to be invalid. he receives the normal notice required by the Alberta Rules of Court.158 Torrens' Elusive Btle that the court would have authority to order that the caveat be discharged. . which operated a s a complete statutory injunction against any subsequent registrations until the caveat was removed.62 The caveat removal concept originated with respect to the original caveat. In the context of the historical development of the Torrens system.

or failed to prove his claim. Waione Timber Co. Caveating 159 7. a s the conflict between E and C relates only to priority. either B or C could request him to remove his caveat and to relinquish his claim. 7. If E could not be located. E's claim is hostile both to B's registered ownership and to C's mortgage. As E would have had a notice conforming to accepted judicial standards. or a right to have the register revised in order to regain ownership of the M & M in Blackacre which had been erroneously registered to B. either B or C could proceed under section 146. if E chose to attempt to substantiate his claim. or if he refused the request. Consequently. Section 149 imposes liability on one who files or continues a caveat without reasonable cause to compensate any person who sustains damage because of the caveated claim. After litigation concerning the validity of E108s contract rights. and the procedure under section 144 could be abolished. and that subsequently C purchased a mortgage of Blackacre from B and was registered a s a mortgagee subject to E's caveated claim. section 147 empowers the court to order the caveator to provide security sufficient to indemnify any person against damages that might be sustained if a disposition of property were delayed by the presence of the caveat. "and to make such other order a s may be just".67 It is believed that the clause just quoted would authorize the procedure in Alberta which culminated in Waimiha Sawmilling Co.. 7. and in the normal course of events. A decision that E's claim was invalid relative to B would necessarily operate in favor of C. The trial judge . B wished to sell the land affected by the caveated claim to C. there are sections of the Alberta Act which give the owner of the registered interest which was adversely affected by the caveated claim rather unusual benefits for a n adversary judicial system. 7. only the summary caveat removal procedure provided by section 146 would be required. a n equitable timber profit a prendre.66 Moreover. B requested the trial judge to order that the caveat be removed for the express purpose permitting a sale to C free of E's possible equitable interest. I n either event. the trial court ruled in favor of B. the author perceives no reason why his caveat should not be discharged.65 If E could be located. v.21 decided by the Privy Council in 1926. if he either failed to oppose the application. Assume that E filed a caveat to protect his claim to a nonregistered interest in Blackacre. it is probable that both B and C would want a n adjudication a s to the validity of E's claim a s it affected each of them. and why his claim should not be terminated on the merits relative to the applicant and to the owner of a n interest necessarily benefited by a resolution of the validity of the claim. based on a contract between B and E.Chapter 7 . justice would have been accomplished. And. E's caveat might protect a claim to either a n equitable mortgage granted by B. and both B and C knew that E was pursuing a n appeal. However. If E substantiated the validity of his claim. a decision that C's registered mortgage was not subject to E's caveated claim would not benefit B. and eventually failed to do so. E's caveated claim was a right to cut and remove timber.64 Would the Alberta originating notice procedure not strike a more just balance between a n owner of a n interest subject to a caveat and a caveator? If so.

R.).R. 11. against the owner of the land.L. v.12 W.68 I n the Waimiha case E alleged that C had fraudulently procured his registered interest because he had purchased with knowledge of the litigation and of E's pending appeal. pursuant to the authority granted by section 147.W. 427. 491 (P. (1956) 4 D.R. (1951) 59 Man.).5 W.C.L. 625.).R.27 D.S. Sub nom Muller v. [I9231 3 D. 497. 405.) 210 (Alta.R. (1954) 11 W.R. Imperial Oil Ltd. Stonehouse v.R.R..) 97. 8. 550 (Aust. [I9191 1 W.W.[1954] 3 D.W.37 W.R.R. (1914) 19D. 13.W. 201 (Alta.C. 714 (Alta.R. Id. (3d) 16.L.W. aff'd [I9551 2 D. Zeller's (Western) Ltd.g.) 289. 817 (Alta. For this reason. [I9231 3 W.Abigail v. Calford Properties Ltd. 248. 528. Singapore Land Titles Ordinance (1956). 19. 62.C.R.R.R.2 D. 19.R.L. 34 D. 103.R.L. and not merely continued a s part of received wisdom.W. (3d) 16. (N. (N.D.18 W.7 W. (2d) 518.R. he believes that it should be seriously scrutinized by experienced lawyers.R. (2d) 118.34 W. the trial judge i n effect exercised his discretion to deny E any remedy of specific performance. Id. 58 S.C. 19 D. 14.R. 101. his action would be to recover damages a t law against B for breach of contract.C.L. the caveat was removed. If E prevailed on the basis of a n appeal. 3.W.W.L.L.A. [I9561 S.W. 20. . 714 (Alta.W. v. 1562.B. 4.[1973] 2 W. 10.R.D. Co.).R.S. Conroy (1954) 12 W. it is feasible for a court to order the discharge of a caveat before the validity of the caveated claim is finally adjudicated. Canadian Pacific Ry. (2d) 551. I. 6.C. (N.C. It should be noted that E's rights were contractual.R. Schwalbe (1914) 19 D.W. 31 D.69 The author h a s leaned rather heavily on the summary caveat removal procedure provided by section 144 of the Alberta Act because he thinks that a credible argument can be made that it is unfair. 347.R.R.C. (2d) 145.D.R. 21. (N..S. even if E ultimately prevailed on the merits a s to his contract rights.W.L.S. H. A.) 12. 18.160 Torrens' Elusive Title so ordered. if any. 17.L.R. Courtney (1963) 110 C.C. e.). 7. a t 244 (Man.). 7.C. 1.B.W.L. v. Kenya Registered Land A d (1963). (1913) 14 D. [I9721 5 W.L. [I9621 S. 385.R. and Imperial Oil Ltd.6 W. The case demonstrates that.R. 333. 241.L. 142. Henderson v.R.3 W.L.) 76 (K.). [I9611 S. Montreal Trust Co. Ltd. [I9261 A. 7. 9. 15.W. 2. Turta v.R. 29 D. Attorney General of B.). T. (N. 642. R.C. Lapin [I9341 A. 1045. (3d) 723. A.) 569 (Alta.R.W.S. [I9721 5 W. 7 W. and C purchased the land and became the registered owner. and that i t may be unnecessary.C. 14 W. 16. 1046. 310. a t 3 0 . e. [I9541 S.W.D.L. it is difficult to comprehend how either B or C could have been fraudulent unless they had bribed the judge. S. 5.C.D.R.W. By ordering the removal of the caveat i n order to permit the sale to C.R. at 827.R. FOOTNOTES 1.. his equitable interest in B's land depended on the willingness of a court of equity to specifically enforce his contract rights.).R. Re Church [I9231 S. a t 521. A. (Finance)Pty. As a judge with equitable powers had directed that the caveat be removed in order to permit the sale to C.R. Q. this order was not appealed. 29D.R. The Privy Council rejected the argument that C had fraudulently procured his registered interest.R.g. A.

3 Stated affirmatively. and the leasehold estates. one's legal right to obtain possession of land depends on whether or not he is the registered owner of a legal interest in land which confers the right to possession. the life estate. Exceptions (a). interstitially. in chapter 7 it was impossible to discuss nonregistered interests without pointing out that their existence is based on particular types of remedies. It states a s follows: 180.(1) No action of ejectment or other action for the recovery of a n y land for which a certificate of title h a s been granted lies or shall be sustained against the owner under this Act in respect thereof.2 The legal remedies available to obtain possession of land by means of a n action under the general law continue to be available to one who has a legal right to possession in jurisdictions with a Torrens system. Types of Remedies (1) Obtaining possession by a registered owner 8. (b) and (c) relate . it was impossible to discuss the situations in which one's registered ownership would be feasible without discussing the right of another to have the register revised in order to acquire registered ownership. for a s one's legal ownership of land was almost invariably based on prior possession.4 Section 180(1) of the Alberta Act appears to attempt to state the foregoing proposition in negative terms. 8. except in any of the following cases. and will attempt to complete our consideration of several topics which have already been introduced. that is. This chapter will focus on remedies as a separate subject. for example. In chapter 6. The legal interests in land conferring a right to possession are the fee simple estates. and not on either his prior possession or the prior possession of a predecessor to whose rights he has succeeded. The phrase was accurate under the common law in England.84-88). that one does not have a right to recover possession of land under a Torrens system based on prior possession. one's legal right to obtain possession of land was of legal necessity a right to recover possession (see paragraph 2.CHAPTER 8 Remedies a. throughout this study. The misleading phrase 'recover possession' is scrupulously avoided. because one's legal right to obtain possession under a Torrens system depends on his registered ownership.1 Remedies have been discussed. 8. b. Introduction 8. And. under a Torrens system. that is to say: Exceptions lettered (a) through (f) follow.

Therefore. and the question is. they appear to give one who was formerly a registered owner a right to bring a legal action to obtain possession of land based on his prior registered ownership. (2) Specific performance 8. the remedy under . Similarly. Although B retained registered legal ownership. but which. and of a lessor to obtain possession of land. Exceptions (d) and (e).5 The equitable remedy of specific performance of promissory obligations under the general law continues to be available in jurisdictions with a Torrens system.51-56). that E's nonregistered interest will be given judicial protection. which might well have included a right to possession. E has no equitable right to a decree of specific performance directing B to give him a registrable transfer. in accordance with the intention of the parties. of a n encumbrancee. however. a s discussed in the proceeding paragraph. contain the fraud and misdescription exceptions under which a registered interest is defeasible. by the instrument he purported to transfer rights in Blackacre to E.18-23). The author is forced to the conclusion that the applicable remedy is specific performance in equity of a trust implied from the transaction between B and E. 7.12).24-26 and 7.4. These rights are all based on the registered ownership of a legal interest in land which confers a right to possession under the proper circumstances.59-70 are recognized (see paragraphs 7. Consequently. exception (f) relates to the legal right of a registered owner under a prior certificate of title to obtain possession of land. it can be implied that B promised to hold his registered legal ownership in trust for E to the extent of the rights contained in the instrument.162 Torrens' Elusive Title to the legal right of a mortgage.13-15. The author believes that exceptions (d) and (e) are absolutely inconsistent with sound Torrens theory. and are entitled to protection under the caveating system a s nonregistered interests (see paragraphs 7.7 As ownership of recognized legal interests in land is conferred by the state through registration under a Torrens system. their existence depends on the judicial remedy of specific performance granted by a court with equitable jurisdiction. I t is clear.17). Thus. and that this trust is subject to specific performance in equity. and that E purchased a n interest from B which would have been a recognized legal interest under the general law. (3) Revision of register in order to acquire registered ownership 8. however. E h a s the same rights a s the beneficiary of a n express trust. 8. for they purport to give one a cause of action to obtain possession of land when he is not the registered owner of a legal interest in land conferring a right to possession. and 7. was contained in a n instrument which was not a registrable transfer (see paragraph 7. Under this analysis. for this was not intended by the parties. Although equitable interests may be extinguished or subordinated through the operation of the caveating system (see paragraphs 7. the classic equitable interests outlined a t paragraphs 2.6 Assume that B was the registered owner of Blackacre. by what remedy. E has no statutory right to have the register revised in order to obtain a registered legal interest.

this remedy is applicable whenever one h a s a right to become the registered owner of a n interest i n land. and must be protected under the caveating system. a nonregistered interest. The right is. the court can intervene with regard to any issue under the Alberta Act. 8. does not mean that his authority should not be defined in order to establish the designed method of operation of the system. As stated a t paragraphs 6. The Registrar derives his authority to create and to terminate legal interests in land by a continous process of revising the register from section 185 of the Alberta Act. The author's concern is that section 185 does not require him to do so.15-20. I t should be emphasized that the fact that the power of the Registrar must exceed his authority (see paragraphs 4. As stated a t paragraphs 7. such a s C.5-11.9 The crucial policy issue regarding the remedy of revision of the register concerns the forum for the remedy. The authority of the courts to direct the Registrar a s to the performance of his duties is contained in sections 181. Was the transfer delivered without authority and therefore invalid? Was B's conduct fraudulent? Was B a purchaser for value? All three issues involve mixed questions of fact and of law.8 The author believes that the right to revision of the register i n order to acquire registered ownership must of necessity be of statutory origin under a system i n which registered ownership is conferred by the state through acts of government officials.28-30). and when should the remedy only be provided judicially. This example concerns a transaction between the immediate parties. no innocent third purchaser. However.Chapter 8. 8. These principles. was involved.182 and 187 through 194. do not delineate the maximum scope of the Registrar's authority. and that B was not a purchaser for value. the example presents a t least three issues.118-124. section 185 authorizes the Registrar to provide the remedy of revision of the register whenever the remedy is authorized under the Alberta Act. whenever its jurisdiction is invoked by either the Registrar or a n interested party. I t is also clear that under sections 181 and 182. Assume that E claimed a right to have the register revised in order to reacquire registered ownership of Blackacre on the grounds that B fraudulently induced a n escrow agent to deliver a transfer from E to B without authority. however. if a n interest were registered to a purchaser for value without fraud. When should the Registrar be authorized to provide the remedy administratively. 8.10 Section 185 authorizes the Registrar to complete the register by correcting a n y erroneous entry without prejudicing rights conferred for value. the register would cease to be erroneous in spite of a prior erroneous entry. however. . Remedies consideration here is a creature of Torrens law. E and B. revision would no longer be authorized by anyone. The sections of the Alberta Act supporting this conclusion were discussed a t paragraphs 6. Should the Registrar be authorized to provide the revision remedy administratively if any question of fact or of law is contested by the parties? I t is probable that the Registrar would invariably refer a case such a s the one posed by this example to the courts. a n d under the necessary rule of Torrens law. Consequently. by the courts? I t is beyond question that the remedy should be administrative in the overwhelming majority of situations.

and on the basis of a principle demarcating administrative and judicial functions which is generally accepted (see the Pylypow case a t paragraph 6. would not only give the Registrar direction. some judges have stated that the Registrar is authorized to correct erroneous registrations which result from accidental clerical errors.13 The need for a system of compensation from a n assurance fund under a Torrens system was discussed a t paragraphs 4. and who by the provisions of this Act is barred from bringing an action for the recovery of the land or encumbrance or interest therein. the author is unable to understand what functional utility is served by drawing such a distinction. mistake or misfeasance of the Registrar or a n official in his office in the execution of his duties.14 If a n owner of a registered interest in land were divested of his interest for any of the reasons summarized a t paragraph 6. (4) Compensation from assurance fund 8.36). a n erroneous registration which was intentionally made by an inexperienced official in the Land Titles Office who either failed to appreciate the significance of a fact. and assuming that one could determine whether a n erroneous registration was accidental or intentional. (a) Comparative benefits of registration and of caveating 8.12 The author is led to suggest that the Registrar should be authorized to revise a register whenever he can do so upon the basis of uncontested facts and law. or by the registration of another person a s owner of the land or encumbrance or by an error. and when it should be judicial. omission or misdescription in a certificate of title. may bring an action against the Registrar of the district in which the land is situated for the recovery of damages.11 Faced with the dilemma presented by a statute such a s section 185 of the Alberta Act. The rule suggested. I t is generally. accepted that a n owner of a registered interest in land who is permanently divested of his interest through the operation of a rule of Torrens law because of the registration of another should be entitled to compensation for his loss. but would also define when the revision remedy should be administrative. Obviously this rule would require the Registrar to exercise his judgment.32-34. Section 165 of the Alberta Act provides a s follows: 165. and the owner had been deprived of his registered interest should not be entitled to compensation from the assurance fund. the defeasibility would result from the application of principles of the general law rather than from principles of Torrens law. If the erroneous registration were accidental. . it is unlikely that revision would involve any contested question of fact or of law.164 Torrens' Elusive Title 8.l With respect. Any person sustaining loss or damage through an omission. the author doubts that any rule could avoid this without seriously impeding the administrative efficiency of the Torrens system. 8. however. but not those which result from intentional judgmental err0rs. although not universally.101. However. and any persons deprived of any land or encumbrance or of a n estate or interest therein through the bringing of it under this Act. might also involve no contested question of fact or of law. or who did not understand the law.

8. and i t would seem that C should be entitled to compensation.102-137).118-133). it would result from a rule of Torrens law.A's registered interest must be permanently divested through the application of a rule of Torrens law. On the basis of these facts. Remedies 165 8. The right to compensation when a registered interest was divested because of a n invalid transfer from the immediately preceding registered owner was discussed a t paragraphs 6. Therefore. Nevertheless. Messer philosophy remains intact (see paragraph 6. 8. There are three problems concerning this lease. The state could and did confer ownership on B in spite of the forged transfer (see paragraph 5. and B was the registered owner of a leasehold interest of the N1/z for a 30-year term. A had a right to have the register revised by the cancellation of B's registered ownership of the lease because of B's fraud.19 Should C protect his leasehold interest by registration. C would not be protected by either registration or by caveating. As the renewal clause in the lease was void for . and consequently. B was the registered owner of the leasehold interest. (1) The transfer of the lease from A to B was forged by B. if his registered interest were defeasible.16 I n the single chain situation. 8.18 In pragmatic terms. As D purchased on the authorized chain.8). if his registered interest were defeasible. or unauthorized chain.103-117. 8. The state could and did confer ownership on B of all of the legal rights in land contained in the lease which are recognized by the general law (see paragraph 5. it would not be through the application of a rule of Torrens law.Chapter 8. and D should be entitled to compensation. C purchased without fraud from B in reliance on the register. for a s long a s the Gibbs v. The state could and did confer B's leasehold interest in the N1/2 in spite of the fact that the transfer only described the NW1/4 (see paragraph 5. If the misdescrption exception applied. and A should be entitled to compensation. As C purchased on the erroneous. he would not have obtained ownership a t all under the general law. However.124. while A's nonregistered right to have the register revised was not protected by a caveat. and C was subsequently registered a s the owner of the interest under a valid transfer from B which C purchased without fraud.105). C purchased the leasehold interest from B without fraud under a valid transfer. and the multiple chain situation (see paragraphs 6. (2) The transfer only described the NW1/4. and it is suggested that example N a t paragraph 6. what does a registered owner pay for and receive under a Torrens system? The single chain situation will be used in this analysis.19). solving the problem inherent in the single chain situation is the primary objective of a Torrens system. or by caveating? Under a Torrens system. A was the registered owner of a section of land. the single chain situation (see paragraphs 6. A's registered interest was divested in favor of B pursuant to a n erroneous registration.17 The multiple chain situation is somewhat more complex.134 be reviewed.15 Consequently. a right to compensation should exist in situations in which the defeasibility resulted from the application of principles of Torrens law (see paragraphs 6. As stated a t paragraph 6.(3) The lease contained a renewal clause which was void for uncertainty. Assume the following facts.63).134-137). remain for consideration.

that subsequently the leasehold interest was erroneously registered to D. the Torrens system made it possible for C to purchase from a registered owner in reliance on the register and to secure substantial benefits without registering his transfer and paying any fee to the assurance fund. quoted a t paragraph 8. C could protect the leasehold interest from A by either registering or by caveating before A caveated.Thus. E obtained ownership of the leasehold interest. it would not be validated by either registration or by caveating (see paragraph 5. 8. The fact that the transfer from A to B had only described the NW% would not endanger D's ownership if the misdescription exception were abolished. and that later E purchased the leasehold interest from D without fraud and caveated his interest. C would have obtained no interest in the N1/2 because the transfer from A to B was forged. that the Registrar accepted the caveat but failed to enter it in the proper register for B's leasehold interest. 8. and neither C nor D paid any fees to the assurance fund. Under the general law. D could safely purchase the interest in reliance on the register. Therefore. and that D filed a caveat to protect his interest which was entered in the proper registrar for B's leasehold interests.~ 8.22 Assume that C submitted a caveat to protect his transfer of the leasehold interest from B. provides that any person sustaining loss through a n omission of the Registrar is entitled to compensation. 8. for C could protect his leasehold interest by filing a caveat. Consequently.24 Assume that C wished to sell his leasehold interest to D.21 Assume that C registered his transfer and became the registered owner of the leasehold interest. C acquired the same right to compensation from the assurance fund by caveating his leasehold interest that he would have obtained by registering it (see paragraph 8.21). under the general law C would have obtained no interest in the NE% because the transfer from A to B only described the NW1/4. The state conferred ownership of the leasehold interest on neither C nor D.166 Torrens' Elusive Title uncertainty under the general law. and because C's caveat was not. if C had not submitted a caveat to protect his nonregistered interest. Obviously.20 Because C purchased B's registered leasehold interest without fraud. Because D's caveat was entered in the register for B's leasehold interest.57). If C's leasehold . 8. D would have to discover that the renewal clause was void for uncertainty by examining the terms of the lease. he would not have been entitled to compensati~n. the author presumes that D obtained priority over C in this example. and C would be entitled to compensation from the assurance fund for his loss.23 Should the owner of a nonregistered interest in land who was deprived of his interest because of a n error in the administration of the caveating system be entitled to compensation from the assurance fund? Section 165. The fact that the transfer of the lease from A to B had been forged would not endanger D's ownership. If C were the registered owner of the leasehold interest in the N1/z.13. C was deprive of the leasehold interest because the Registrar failed to perform a required duty under the caveating system. Even if that transfer had been validly executed. that D purchased the leasehold interest from B without fraud.

Chapter 8. C would not have acquired the leasehold interest. however. and C's caveat would have protected a worthless claim (see paragraph 7. As B was the registered owner of the leasehold interest. Precisely what those risks are would require empirical study. is only charged the assurance fund fee if his caveat protects a mortgage. if he were the registered owner.25 The foregoing paragraph h a s identified the one benefit which one acquires by becoming the registered owner of a n interest in land under the Torrens system: facility of transfer. (a) Upon every transfer of land after the issue of the first certificate of title therefor. i t seems reasonable to suggest that both categories of interests benefiting from the systems. . . he would have the burden of proving his ownership to a potential purchaser. a s opposed to their administrative expenses. and to this extent his facility of transfer would be impaired. The caveating system.35). where the land was not encumbered at the time of registering the grant. I n practical reality. D would purchase a t his peril a s to any defects i n the transfer of the interest from B to C. 8. If the assurance fund is intended to underwrite the potential compensation expenses of the systems. and . an amount equal to (i) one-twentieth of 1 per cent of the value of the land transferred if the value amounts to or is less than $5. should contribute to the assurance fund to the extent of the respective compensation risks which they impose. (b) Fees under the Alberta Act 8. and this fee is specifically imposed by section 140. Remedies 167 interest were protected by a caveat. this impairment is minimal. With the combined benefits derived from the Torrens system and from the caveating system.27 The author believes that i t is safe to postulate t h a t most of the expense incurred by the Government of Alberta in operating the systems provided by the Alberta Act is administrative. 8. he could market the leasehold interest more readily.(1) .28 The assurance fund fee is established by section 161(1)a s follows: 161. C's proof would begin with this fact. 8. in turn. I n addition. If C were the equitable. If the transfer from B to C had been forged. D would only be required to evaluate the nonregistered transfer from B to C. registered and nonregistered. section 161 requires that a separate fee for the assurance fund be charged for the registration of a transfer. Whether or not C should have been the registered owner of the leasehold interest. One who protects a nonregistered interest by caveating.000. and i t is assumed that these fees are designed to underwrite the administrative expense of the systems. If C's claim were caveated. and if no inconsistent claims were caveated. Section 161 of the Alberta Act requires the Registrar to collect the prescribed fee before performing any duty under the Act. permits him to protect his nonregistered interest to the extent of its validity.26 As the preceding discussion h a s demonstrated. the nonregistered interests is probably a s secure under the Alberta Act a s is the registered interest. or nonregistered owner of the leasehold interest. the purchaser of a nonregistered interest derives substantial benefits from the Torrens system because i t permits him to purchase in safety from a registered owner in reliance on the register. however.

(3) The oaths or affirmations may be in Form 39 in the schedule.000. because the fee is based on the increased value of each registered interest since the preceding registration.25. If the value of Blackacre had increased by $100. whichever is the greater.000.000.31 Could the method for determining the assurance fund fee be simplified? One possibility would be to adopt a premium system modeled . Neverthless. The author would venture a guess that. However. I t is believed that a large majority of the registrations in Alberta concern interests which increased in value by between $20. 8. 8. where the value exceeds $5. this $80. and (ii) one-fortieth of 1 per cent on any excess over $5. (b) Upon every subsequent transfer.000. the fee would have been $26. or (ii) a n amount equal to one-eightieth of 1 per cent of the moneys secured by the mortgage or encumbrance. and the fee for each registration must be separately computed. As the value of Blackacre increased by $20. that A sold and transferred Blackacre to B for a fair market price of $70. 8. the government administrative expense involved in checking the required valuation documents and in separately computing each assurance fund fee exceeds the revenue produced.000 since the preceding registration. (i) 25 cents. Assume that A was the registered owner of Blackacre.29 The present system for determining the assurance fund fee has the advantage of being relatively fair. and the cumulative assurance fund fees which B and his predecessor owners paid were based on the actual value of Blackacre.000. (c) upon registering any mortgage or encumbrance on land. As noted above. that a t the time of A's registration Blackacre was valued a t $50. the present system has administrative drawbacks.000 between the time of A's registration and the time of B's request for registration. if there h a s been a n increase in the value of the land since the granting of the last certificate of title. for if B were deprived of his registered ownership under circumstances entitling him to compensation. and shall be necessary in all cases where any new duplicate certificate of title is required to be issued whether or not any fees are payable under this section in respect of the land. the measure of his compensation would be the actual value of Blackacre. the Registrar must satisfy himself a s to the value of the interest a t the time of each succeeding registration. quite apart from the expense to the users of the system of obtaining the oaths or affirmations in Form 39.30 Section 161(2) and (3) provides a s follows: (2) The value of land for the purpose of this Act may be ascertained by the oaths or affirmations of the transferee or transferor of the land or of such other person on the behalf of either a s the Registrar believes to be acquainted with the value of the land and whose oath or affirmation he is willing to accept.000.25.168 Torrens' Elusive Title (ii) one-fortieth of I per cent on the additional value. and that B submitted his transfer for registration.000 variation in the increased value of the interest produces a spread in the assurance fund fee of only $20.000 and $100. B will be required to pay a n assurance fund fee of $6. a n amount equal to (i) one-twentieth of 1 per cent of the increase if the increase is not more than $5.

(c) Obtaining compensation 8. The transferee would be free to declare any valuation he deemed appropriate. and then made improvements which increased the value of the interest to $5 million it can be argued t h a t a requirement that a n additional fee be paid to secure greater protection would provide a more just system than the one presently in operation. and to the right of a n owner to compensation from the assurance fund for the loss of a registered interest.000 declared valuation. One possible disadvantage of this system is that i t would have to provide a n administrative procedure permitting a registered owner to pay a n increased fee in the future to secure additional protection if the registered interest increased in value for any reason. The Registrar would not be required to police valuations. For example. the minimum fee would have to apply to a n increased valuation sufficiently large to exceed.000.000 of declared valuation. If a developer paid a fee based on a $1 million declared valuation.000 a s the valuation increased.33 A t paragraph 4. assume t h a t a minimum fee of $20 applied to a n increased valuation up to $200. mistake or misfeasance of the Registrar or his officials. but to establish the fee a t a fixed amount for each scheduled amount of increased valuation. decreasing in amount per $100.000 residential Blackacre would most likely pay a $30 fee based on a $200. Remedies 169 on casualty insurance. The required fee could be obtained from a fee schedule in a matter of seconds. but the maximum compensation he would be entitled to receive in the event of a loss would be the declared valuation. I n order to achieve the objective of relieving the Registrar of much of the burden of satisfying himself a s to the value of the interest. In an action for the recovery of loss or damage arising only through an omission.000. by a comfortable margin. the inflation problem might be slight. and this would compensate for inflation over a reasonable period of time. As the increased valuation of most of the interests submitted for registration would probably be far below $200. but.000 declared valuation rather t h a n a $20 fee based on a $100. the Registrar shall be the sole defendant. if the action is brought for loss or damage arising only from the . the anticipated increase in valuation of most of the interests submitted for registration. and could impose more formal valuation requirements for the registration of interests which increased in value in excess of $200. Who caused a n erroneous registration is relevant both to the defeasibility of a registered interest. Increased valuations resulting from either inflation or improvements are obvious possibilities.32 Another possibility would be to continue to base the assurance fund fee on the increased value of the registered interest since the preceding registration.20 the author stated that the issue of whether or not a registration is erroneous is quite independent of the issue of who caused a n erroneous registration. The fee could be a fixed amount for each $1. If the fees were minimal.000. and the oath or affirmation would be eliminated. Section 168 of the Alberta Act provides as follows: 168.000. one seeking registration a s the owner of a $90. as a practical matter. the Registrar could assess the minimum fee in the great majority of registrations on the basis of a signed declaration of value in the application for registration.Chapter 8. 8.

170 Torrens' Elusive Title fraud or wrongful act of some person other than the Registrar and his officials. A's conduct was the sole cause of B's erroneous registration. that B was not the cause of the error. or under section 168? 8. or arising jointly through fraud or wrongful act of such other person. that the Registrar registered B a s the owner of the interest i n accordance with A's transfer. and section 168 clearly provides that A h a s a right to compensation i n this situation.38)' was a contributing cause. that A executed a transfer to B either describing more acreage from Blackacre or conferring more extensive rights i n the acreage t h a n the parties mutually intended.34). A's loss did not arise either from a n omission or from the misfeasance of the Registrar.37). and that C subsequently purchased B's registered interest without fraud a n d became the registered owner. a s B's registration was not authorized by a . (Emphasis added. and A was permanently divested of the interest when C became the registered owner a s a n innocent purchaser. they were a s stringent a s could be justified relative to the probable losses which the system would incur from undetected forgeries (see paragraph 4. Does A have a right to compensation either under section 165 (quoted a t paragaph 8. Assume t h a t the protective procedure established by the Registrar to detect forged transfers were based on sound costs-benefits principles: i n terms of their cost to the system.) I t is believed that. but assume that B forged a transfer of Blackacre from A to himself. then the action shall be brought against both the Registrar and the other person. Continue the preceding example. or of the registered owner (paragraph 8. but it is believed that conduct either of the Registrar or of the registered owner would have been a contributing cause. and that the Registrar erroneously registered B a s the owner either of more acreage or of more extensive rights i n the acreage than the parties intended. 8. 8.13). and t h a t the Registrar erroneously registered B a s the owner of Blackacre. but assume that the transfer from A to B correctly reflected the mutual intention of the parties.34 The conduct of a registered owner who was deprived of a n interest could have been the sole cause of the erroneous registration which produced this result.37 Continue the preceding example.35 The conduct of the Registrar could have been the sole cause of the erroneous registration which deprived a registered owner of a n interest. but i n which conduct either of the Registrar (paragraph 8. in terms of causation. and the omission. Nevertheless. The Registrar's conduct was the sole cause of B's erroneous registration. erroneous registrations can be traced to three primary sources. The Registrar was not a t fault. There was no conduct on the part of A which could have been a contributing cause of B's erroneous registration. Assume that A was the registered owner of Blackacre. mistake or misfeasance of the Registrar or other official. The following two examples demonstrate situations in which the conduct of a third party was the primary cause of a n erroneous registration.36 The conduct of a third person could have been the primary cause of the erroneous registration which deprived a registered owner of a n interest. 8. Assume also that the protective procedures were applied properly before B was registered a s the owner of Blackacre. Using the language of section 168.

a s one's right to compensation results from the Torrens system. 8. it would seem that legitimate claims should be paid pursuant to simple administrative procedures.40 One will not have a right to compensation unless he has been deprived of a n interest in land through the application of a rule of Torrens law (see paragraph 8. without a judgment against the Registrar a s nominal defendant. procedurally. and that a claimant should not be forced to bring a judicial action unless his claim is honestly disputed. and that B was erroneously registered a s the owner of Blackacre. therefore. but assume that B fraudulently induced A to execute a transfer of Blackacre to B. However. and from a mistake of the Registrar. authorizes one who has been deprived of a n interest in land to bring a n action against the Registrar for the recovery of damages. Insofar a s the Registrar was concerned. 8.13. and sections 166 through 176 are all framed on the assumption that one must secure a judgment against the Registrar a s nominal defendant in a judicial action a s a prerequisite to obtaining compensation from the assurance fund. how does he obtain compensation? Section 165. 8. if the court finds that some defendant other than the Registrar is . However. for the Registrar merely carried out the transfer executed by A.39 Assuming that one has a right to compensation from the assurance fund. or (3) only from the conduct of a third person. section 169 applies if the conduct of a third person were a joint responsible cause of the loss.Chapter 8. and resulted from a mistake of the Registrar. Remedies 171 transfer executed by A. section 177 contains a procedure permitting the Attorney General to authorize the payment of a well founded claim from the assurance fund administratively.15). I t would seem.37). it is believed that A has a right to compensation in this situation. if the Registrar's conduct were the sole cause of one's loss. (2) jointly from the conduct of a third person and from the conduct of the Registrar (see paragraph 8. would A have a right to compensation under section 168? 8. this example is identical to the example a t paragraph 8. if A's conduct in permitting B to defraud him were considered to be a contributing cause of A's loss. that the Registrar's conduct was a responsible contributing cause of A's loss. However. that is. it seems clear that the claimant should be required to establish his right to compensation in a judicial action. As section 168 refers to a loss which arose jointly from the fraud or wrongful act of a third person.41 Under section 168. In all such actions where there is a defendant other than the Registrar and damages are recovered. I n the example under consideration. quoted a t paragraph 8.34. The Registrar's conduct could hardly have been a responsible contributing cause of B's erroneous registration. If either the inherent validity of a claim or the proper measure of damages were genuinely disputed by the Attorney General. and if the claim could not be settled on terms acceptable to the Attorney General. it would seem that A's conduct in executing the transfer to B was a contributing cause of B's erroneous registration. However.38 Continue the preceding example. 169. he could bring a n action against the Registrar. Section 168 provides that A has a right to compensation if the loss arose: (1) only from the conduct of the Registrar (see paragraph 8.35). it was erroneous.

then within 10 years next after the right accrued to such predecessor. Two problems are often cited: (1) the possessory rights of a n adverse possessor are not disclosed by the register. Under section 44 of the Alberta Limitations Act. This precise problem was presented to the Supreme Court of Alberta. in 1948.90-95. and (2) they can lead to the acquisition of ownership without registration. I t is believed that both of these problems have been solved in Alberta in practice. and judgment may thereupon be entered against the Registrar. as a condition precedent to obtaining a judgment against the Registrar? c. 8. ~ . in Boyczuk v. a n d the subject under the Alberta Limitation Act is . No person shall take proceedings to recover land except (a) within 10 years next after the right to do so first accrued to such person (hereinafter called the "claimant"). As one's right to compensation results from the Torrens system. If C's right to obtain possession of Blackacre were barred. that E was in continuous possession adversely to B for eleven years.t covered in a n article by Professor J. Assume that B was the registered owner of Blackacre. 8. t h a t C became the registered owner. Section 18 bars the legal right of a n owner to obtain possession of land ten years after the cause of action accrued either to the claimant or to a predecessor in title. should be a judgment against the Registrar.172 Torrens' Elusive Title liable for the loss sustained. together with costs.44 The following example concerns the first problem. reads a s follows: 18. which were not protected by a caveat when C purchased Blackacre from B and became the registered owner.42 Section 18 of The Limitation of Actions Act of Alberta: (hereafter the Alberta Limitation Act). he (the adverse possessor) would have obtained possessory ownership. final judgment shall not be entered against the Registrar until a judge of the court in which the action was brought has made an order declaring that judgment is not and cannot presently be satisfied in whole or in part out of the goods or lands of the other defendant found liable. The author can only repeat the point made in the preceding paragraph. or (b) if the right to recover first accrued to a predecessor in title.43 Adverse possession under the general law was discussed a t paragraphs 2. assume further t h a t B sold and transferred Blackacre to C. adversely to the owner with a legal right to obtain possession. if one had been in possession of land for ten years. and that the amount of the judgment in whole or a s to such part thereof a s remains unsatisfied. Appellate Division. then C's registered ownership would have been subordinated to E's possessory rights. why should he be required to obtain a judgment against a third person. Limitation of Actions (1) Obtaining possession by a registered owner 8.S. P e r r ~ . although the legislation is somewhat ambiguous. that E's possessory rights were not protected by a caveat. W i l l i a m ~ I ~ h a s frequently been argued that adverse possession is inconsistent with the philosophy of a Torrens system. and that C promptly brought a n action to obtain possession of Blackacre. and to demonstrate to a court that it cannot be satisfied.

It should be noted that section 73 solves the second problem posed a t paragraph 8.46 The court said that E's possessory rights would have been protected if he had filed a caveat before C purchased. B was the registered owner of Blackacre.47 Whether or not a jurisdiction should permit one in adverse possession of land to acquire a right to divest the registered ownership is a n important socio-economic question. Remedies r 1 73 8.48 Limitation acts in England have never been applicable to such equitable remedies a s specific performance of promissory obligations. Rather. and a s his right to obtain possession was not barred by section 18(a). for it calls to mind ownership under the common law which was based on a superior right to possession derived from a predecessor in title. and that it served the functional objective of protecting C's registered ownership from E's possessory rights which were not disclosed by the register. 8. If a registered owner failed to pay real property taxes. is more complex. B contracted to sell Blackacre to E. The author believes that this holding was theoretically sound. his registered ownership would be subject to divestiture. The current situation in Alberta. I t is the author's opinion. As E was in possession of Blackacre adversely to B for eleven years. Assume the following facts. If E's right to have the register revised in order to obtain registered ownership had been protected by a caveat.95). C would have obtained his registered ownership subject to E's right. 8. however. (2) Specific performance 8. however. a registered owner has no predecessor in title. and rectification and cancellation of deeds. Consequently. and the contract required B to provide E with a transfer of Blackacre with a proper . This latter phrase is archaic.how could E's possessory rights have been protected by a caveat? Under section 73 of the Alberta Act. E had a right to become the registered owner when C in fact become the registered owner. one who has obtained possessory ownership under the Alberta Limitation Act has a right to become the registered owner. C's right to obtain possession of Blackacre was not barred by the Alberta Limitation Act. and was not barred by section 18(a). I n short. But how? As C was the registered owner of Blackacre.43. the flexible equitable doctrine of laches is utilized (see paragraph 2. a s C had no predecessor in title. both C's registered ownership and his right to obtain possession would have been subject to divestiture under section 73. rather. the same consequence could result. that the decision should not be influenced by the fact that a jurisdiction has a Torrens systems. If he suffered one to adversely possess his land for ten years. The court rather neatly repealed section 18(b) by holding that a s registered ownership is conferred by the state. C's cause of action to obtain possession of Blackacre did not accrue until he became the registered owner. if E had filed a caveat to protect his right to become the registered owner of Blackacre.45 I t should be noted that section 18(b) bars a cause of action to obtain possession of land ten years after it first accrued to a claimant or to "a predecessor in title". for one's possessory ownership acquired under the Alberta Limitation Act is a nonregistered interest until registered ownership is obtained pursuant to section 73.C h a ~ t e8.

in fact. and B and E fell to feuding. and was his cause of action barred? The issues posed by this example were presented to the Supreme Court of Alberta.. Appellate Division. but the Registrar erroneously included the M & M in B's registration and canceled A's registration a s to the M & M. and a s a n action for specific performance of a n agreement for the sale of land must surely be an action in respect of such a n agreement. including M & M. A brought a n action seeking a n order directing the Registrar to rectify the register and to restore registered ownership of the M & M to him. B said that he would not honor the contract and offered to refund E's money with 1Wo interest compounded annually. B and E were friendly neighbors.174 Torrens' Elusive Title legal description when E paid the purchase price.49 Section 5 of the Alberta Limitation Act provides a s follows: 5.. E sued for specific performance of the contract seven years after B first failed to provide the transfer. B never got around to having the survey made. A discovered that B was erroneously registered a s the owner of the M & M. and in 1947. . and E never pressed the matter. E paid the purchase price and took possession. 8. E's action was barred by section 5(l)(e). .in Re Pogue and Lane.50 Section 36 of the Alberta Limitation Act bars a n action in respect of a n agreement for the sale of land ten years after the cause of action accrued to the purchaser. E's action was not barred. However. . B was registered a s the owner of Blackacre. and a s E knew of his cause of action for at least six years after B failed to provide the transfer. Then oil was discovered in the area. A executed a transfer of Blackacre to B.51 Assume the following facts. within six years after the cause of action therein arose. Nothing in this section extends to a n action where the time for bringing the action is (2) by statute specially limited. within six years from the discovery of the cause of action. (3) Revision of register in order to acquire registered ownership 8. and a n early snow a few days before E paid the purchase price in October made surveying difficult. As E's action for specific performance sought a n equitable form of relief.(1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned: . (g) any other action not in this Act or any other Act specially provided for.. B contended that A's action was barred by the Alberta Limitation Act. . excepting M & M. and the transfer reflected the mutual intention of the parties. A was the registered owner of Blackacre. As this section specially limits a n action in respect of an agreement for the sale of land. (e) actions grounded on accident. six years passed. What was A's proper remedy under a Torrens system. I n 1946. mistake or other equitable ground of relief not hereinafter specifically dealt with. B failed to provide the transfer because a survey was required. unless the time for bringing the action was by statute specially limited a s provided by section 5(2).6 . The winter passed. in 1951. In 1930. B took possession of Blackacre. 8.

long before A discovered that the Registrar had divested his registered ownership of the M & M and had erroneously registered B as the owner of them. and that section 18 was not applicable. that his cause of action had arisen in 1930. in 1954. The court held that . for a s A's cause of action arose in 1930. he was presumed to have possession of them. he believes that it is clearly relevant. Rectification of a deed in order to correct a mutual mistake of the parties and to restore ownership of a n interest in land to the party entitled thereto is an equitable remedy.55 To this point. As has been stated in countless decisions under the Torrens system.56 B asserted section 18 against A's action. was not A the nonregistered equitable owner of them? Even if one concludes that the authority of the court to order revision of the register is statutory in origin. 8. and that it was barred in 1940 under section 18 of the Alberta Limitation Act. As long a s B was the registered legal owner of the M & M.Chapter 8.52 B contended that A was seeking to recover possession of his M & M.49.49. it will be considered. A had a nonregistered interest: a statutory right to have the register revised in order to reacquire ownership of the M & M (see paragraph 8. but not void. it can be argued that the authority is a statutory addition to the court's equitable jurisdiction. quoted a t paragraph 8. 8. Section 5(l)(g). also quoted a t paragraph 8.8). and thus start the running of the ten year limitation period (provided by section 18) against A's cause of action to obtain possession. Therefore. but its operation would be extremely harsh. As discussed a t paragraph 2.54 Would section 5(l)(e)provide a sensible solution for the limitation problem under consideration? I t would give A six years from the discovery of his cause of action in which to assert it. the author perceives no reason why A could not have added a cause of action seeking possession of the M & M contingent upon his gaining ownership of them through revision of the register. the analysis has been both simple and consistent with Torrens theory. 8.53 Could any other section of the Alberta Limitation Act be applicable to A's cause of action? Although the author knows of no Alberta case which has considered section 5(l)(e). and that under sound Torrens theory. Only after A became the registered owner of the M & M could B take possession of them adversely to A. offers a n alternative solution. Imperial Oil Ltd..7 in 1962. The author believes that this holding was correct. B's registered ownership was defeasible in favor of A. The same issues decided in Re Pogue and Lane were presented to the Supreme Court of Canada in the Turta case. and again in Kaup v.89. it would have been barred in 1936. The court held A was seeking to regain ownership of the M & M through rectification of the register. A was divested of his registered ownership of the M & M in 1930 by a mistake of the Registrar. Remedies 175 8. Although B was erronously registered a s the owner of the M & M. 8. However. As the Kaup decision is more recent. the register is everything. As B was the registered legal owner of the M & M. the crucial point is that A's cause of action to obtain possession of the M & M would not arise until he became the registered legal owner of them. the Registrar had the power to confer ownership on B of any interest in land recognized by the general law.

Joslin. As A remained the legal owner of the M & M since 1930 under court's interpretation of the Alberta Torrens system.(1) No action for damages under this act shall be brought against the Registrar (a) by reason of the deprivation of land unless it is brought within six years from the date when the deprivation took place. Appellate Division. or (b) by reason of any error. B could have taken possession of them adversely to A. under what circumstances should his action for the recovery of compensation be barred by a limitation provision? Section 175(1)of the Alberta Act provides a s follows: 175. unless B proved that he had in fact exercised dominion and control over the M & M adversely to A. The analysis utilized in the Kaup decision was applied by the Supreme Court of Alberta. Therefore. omission or misdescription in a certificate of title. Of course the Kaup decision established the current law.57 As may be seen. The court held that B had not adversely possessed A's M & M. Subsection (c) is vulnerable to the same criticism. unless it is brought within six years of the time when the error. the analysis of the Supreme Court of Canada in the Kaup case differed sharply from that of the Alberta Appellate Division in Re Pogue and Lane. A's action would have been to obtain possession of them. Assume that the owner of a nonregistered interest submitted a . It should be noted that the court's analysis placed the registered legal owner of the M & M in the anomalous position of attempting to prove that he had possessed them adversely to someone else. A would never have lost possession of them. omission or misdescription was made. the Alberta Act will have to be clarified accordingly. and he might not have had any knowledge which would have even prompted a n inquiry on his part.albeit without the benefit of registration. B acquired no interest in the M & M through his erroneous registration. and consequently A's action could not have been to obtain possession of them. and by 1947 this action would have been barred by section 18. in Duncan v. (4) Compensation from assurance fund 8. 8. for one was deprived of his registered interest in land when another person was erroneously registered a s the owner of a conflicting interest. and held that no provision in the Alberta Limitation Act barred this action. The court characterized A's action a s one seeking a declaration of his title to the M & M and a n order directing that invalid entries be expunged from the register.176 Torrens' Elusive Title because B's registered ownership of the M & M was erroneous relative to A. he was presumed to have retained possession of them. or (c) for any other reason. unless it is brought within six years from the date when the cause of action arose. a s A had remained the legal owner of the M & M since 1930. If B had taken adverse possession of the M & M in 1930. in 196!X8 8. and A remained the legal owner of the M & M since 1930.59 It would appear that subsections (a) and (b) state the same rule. However. and if it does not represent the preferable solution. This rule seems to be extremely harsh. for a registered owner might not learn that he was divested of his ownership until years after the deprivation took place.58 Assuming that one is entitled to compensation from the assurance fund.

nor had any reason to suspect existed. is there any reason to believe that the victim of the error knew.S. the author suggested that the Registrar should be authorized to revise a register whenever he can do so upon the basis of uncontested facts and law.R. were sent to all interested parties. 67. or had any reason to know. and he could refer the issue to a court..C. L. his right will invariably have resulted from a n error in the maintenance of the register. either in the registration or in the caveating process.R.. R. Re Appeal b y Canadian Gulf Oil Co. 3. Copying documents is no longer unduly expensive. and that the Registrar entered it i n the wrong register.)97.S. erroneous registrations do occur in the execution of routine transactions.L.61 At paragraph 8.W. [I9651 51 W.R. If the Registrar were relatively certain that a revision would involve a contested issue. Persons either registering or caveating interests are required to maintain current addresses on file with the Registrar.L.W.W. or when a subsequent purchaser of a conflicting interest filed a caveat which gained a priority over the prior interest? I n either event.C h a ~ t e8.W. ( 2 d ) 112.12. 193. The author is prompted to make a suggestion which could be quite effective in prompting the correction of erroneous entries before they resulted in losses justifying compensation. Nevertheless.R. 406.346.249 (B. If a copy of the register affected by any revision. 8. c. when his cause of action arose? Section 5(l)(e)of the Alberta Limitation Act offers a model which might be copied. However. [I9621 S. The Limitation of Actions.C. 209.(N. court referrals involve expense.(N.S. Schweickardt v.A.R. 2. he could file a Registrar's caveat to preserve the existing situation. Did the owner's cause of action to recover damages arise when the original error was made.R. Williams.). FOOTNOTES e. 1970. (1964) 14 W. they would be given a n opportunity not only to detect a n erroneous entry which involved no contested issue. However. how is the Registrar to determine whether or not a revision might involve a contested issue? If the Registrar were revising a register by executing a routine transaction in accordance with a n authorizing transfer. Remedies r 177 protective caveat in proper form. 7. for i t gives one six years from the time in which his cause of action was discovered in which to bring a n action.)130 (Sask.495. 170.W. C. but also to contest a revision which they believed was not authorized.C. 7 0 4 .R. [1948] 2 D.S.L. [I9511 4 D. whether routine or judgmental. J. 4.R.R.37 W. and too many of them would seriously impair the administrative efficiency of a Torrens system. (1968)Alta. Thorne [I9761 4 W.A. 8.32 D. 1. errors are bound to occur. .R. Given the number of transactions which the Registrar must execute.60 The basic problem is that section 175(1)may bar a cause of action which the victim of a n error neither knew existed. Title b y Limitation in a Registered Conveyancing System. [I9481 1 W. 6. When one is entitled to compensation from the assurance fund. Rev. 3 W.g.W. it is unlikely that any contested issue would be involved. Would i t be feasible to require the Registrar to send a copy of the register affected by any entry to all interested parties immediately after the entry was made? 8.S. 5.

.

(e) any decrees. (b) all unpaid taxes. provides a s follows: 64. where there is actual occupation of the land under the same.(1) The land mentioned in any certificate of title granted under this Act is. by implication and without any special mention therein. including irrigation and drainage district rates. that have been registered and maintained in force against the owner. which is the basic section of the Alberta Act with respect to overriding interests. because the listed interests are effective without any special mention on the register. orders or executions.4 The first problem is obvious: if C wished to purchase Blackacre. he would have to search beyond the register in order to determine whether or not there were any overriding interests. facility of transfer would be enhanced if all possible interests in a parcel of land could be discovered by a n investigation of official government records maintained in one location. Because of the existence of overriding interests. and (g) any right of way or other easement granted or acquired under the provisions of any Act or law in force in the Province. Justification for Overriding Interests 9. upon. The language of section 64(1) discloses the reason why the listed interests are conveniently described a s overriding interests.11-12.3 A Torrens idealist would question the suggestion that there could be any justification for overriding interests.14 and 6. b. over or in respect of the land. or Her Majesty.2 Section 64(1). 9. Introduction 9. subject to (a) any subsisting reservations or exceptions including royalties contained in the original grant of the land from the Crown. 9.CHAPTER 9 Overriding Interests a. against or affecting the interest of the owner of the land. for their existence violates the cardinal principle of a Torrens system: that the register is everything. and this creates two potentially serious problems under the system. (0 any right of expropriation that may by statute be vested in any person. (c) any public highway or right of way or other public easement. (d) any subsisting lease or agreement for a lease for a period not exceeding three years. they override the register. Without question. body corporate. and the discussion in those paragraphs can serve a s the beginning of the introduction to this chapter. the register for Blackacre will not necessarily disclose all possible interests in Blackacre.1 The subject of overriding interests was introduced a t paragraphs 4. howsoever created. for it would be more economical for a potential .

For example. Occasionally the language of a statute will make it clear that the legislature intended to create a n overriding interest.7 Why is it that the section 64(1) overriding interests are not carried as a caution on the certificate of title? The answer is simple. Although section 64(1) does not state expressly that the certificate of title is subject only to the listed interests. two very common overriding interests. As section 64(1) implies that it contains a complete list of the overriding interests in Alberta. The Torrens system is predicated on the reasonable assumption that a potential purchaser of a n interest in land knows that he must examine the register in order to determine whether or not his vendor owns the interest. but also of the identity of even the common types of overriding interests. An assumption that a potential purchaser knows that he must search beyond the register for overriding interests is. 9. this section does not appear as a warning on the register (the certificate of title) in Alberta. he could not search for overriding interests unless he knew of their possible existence. the savings to users of the system which would be realized if all possible interests in land were disclosed by the register must be balanced against the costs which would be incurred if certain types of interests in land were required to be entered in the register. and whether or not there are any conflicting interests. The problem under New Zealand law is discussed in a n excellent article by L. a potential purchaser is informed neither of the concept of overriding interests. and rights created under The Dower Act of Alberta1 (see paragraphs 6. are not included in section 64(1). 0'Keefe. 9.6 Although section 64(1) of the Alberta Act lists several common overriding interests.180 Torrens' Elusive Title purchaser to conduct a complete title search. In the latter event.A. The basic problem is that many overriding interests are created by statutes other than the statute creating a jurisdiction's Torrens system.2 in which the authors emphasize the difficulty one encounters in identifying some overriding interests. The author believes that idealism must give way to pragmatism and costs-benefits analysis. rights created under statutes of Canada. including it on the certificate of title would compound the statutory misrepresentation. the fact that a potential purchaser must search for a particular type of overriding interest in a location other than that in which the register is maintained cannot be characterized a s a serious problem if the total cost of such searches to users of the system is less than the cost of having the overriding interest entered in the register. nor of the identity of some of the more common types of overriding interests.B. However. this is the clear implication of the section. 9. however. when in fact it does not. 9. the issue may have . of dubious credibility. section 64(1) does not contain a n exhaustive list. Unfortunately.115-116).8 The author does not know the full extent of the overriding interests in Alberta. To assume that a potential purchaser knows not only of the possibility of overriding interests. and it demonstrates why some overriding interests present a serious threat to the Torrens system.5 The second problem is not so obvious: if C wished to purchase Blackacre. Consequently. stretches credulity beyond the breaking point. but frequently a statute will leave the issue in doubt. Esterman and J.

for they are not subject to the legislative power of . If the existence of a n overriding interest could be justified.9 Based on the experience of Esterman and O'Keefe in New Zealand. a legislature can enact a statute which will affect the interpretation which can be given to both existing and future legislation.10 At paragraph 9. The problem of undetermined overriding interests is so serious that a bold statutory solution for the problem should be considered. Although no legislature can bind the hands of succeeding legislatures. the first problem created by overriding interests. The author suggests that the statute creating a jurisdiction's Torrens system should contain a provision to the effect that no statute of the jurisdiction shall be held to create a n interest in land which overrides the Torrens register unless the statute expressly refers to the statute creating the Torrens system and provides for a n overriding interesL3 If all of the overriding interests permitted in a jurisdiction could be identified. the necessity of searching beyond the register in order to determine whether or not a parcel of land was subject to a n overriding interest.4 the author stated his opinion that the existence of some overriding interests might be justified on the basis of costs-benefits analysis. it is beyond the scope of this study to do more than suggest a n appropriate method for judging the desirability of a n overriding interest. in Alberta one would first be required to make a complete investigation of the statutory law of the province in order to determine which legislation might create a n overriding interest. 9. They are not mentioned in section 64(1) of the Alberta Act. I t can be anticipated.12 The remainder of this chapter will be devoted to a discussion of some of the problems associated with typical overriding interests. As the analysis for each interest in land would require both the collection and evaluation of complex statistical data. 9.11 However. the author believes that it is inexcusable for a jurisdiction with a Torrens system to tolerate the second problem created by overriding interests. or resolved by judicial interpretation. they could and should be carried a s a printed warning on the parcel registers for land under the Torrens system. that is. (1) Interests protected by federal law in a federal system 9. the existence of a n interest which overrides the Torrens register but which was not created by a statute which expressly provides for this result. each lawyer must make his own value judgment a s to whether or not a particular statute creates a n overriding interest. c. Typical Overriding Interests 9. could be accepted. that some ambiguous statutes would leave the question unanswered.Chapter 9. Overriding Interests 181 been resolved by litigation. If it has not.13 Interests protected by federal law in a federal system form a unique category of overriding interests. that is. however. 9. The question of whether or not one of the identified statutes was intended to create a n interest overriding the Alberta Land Titles Act might have been either expressly answered by a statutory provision.

(2) All .14 In the first situation the interest in land is public property of he Crown in right of Canada. including M & M. but by error included the M & M in B's registration and canceled A's registration a s to the M & M. Assume the following facts.17 The other statute was the Railway Act (Canada). including M & M. Subsequently C purchased Blackacre from B without fraud and was registered a s the owner of Blackacre. A was the registered owner of Blackacre. 9. . 9. and no statute of Canada subjected the interest of the Crown in right of Canada to the operation of the Land Titles Act of Alberta.15 In the second situation the statute of Canada benefits any owner of a n interest in land if a transaction comes within the protective ambit of the statute. who was a n agent of the Crown in right of Canada. . This example presents the relevant facts of Re Director of Soldier Settlement.182 Torrens' Elusive Title the Province of Alberta. including M & M. they cannot even be identified positively under provincial law. including M & M. which included the following provision: 198. including M & M. At the time of the transaction there were two relevant statutes in force in the province in which Blackacre was located. .(1) No words of limitation are necessary in any transfer or conveyance of any land in order to transfer all or any title therein.4 The court held that public property of Canada could not be divested pursuant to provincial legislation. shall be deemed to be excepted from the conveyance o f . The Registrar registered B a s the owner of Blackacre. The Registrar registered B as the owner of Blackacre. 9. unless they have been expressly named therein and conveyed thereby. . . excepting M & M. Because their existence does not depend on provincial law. and canceled A's registered ownership of Blackacre. and directed the Registrar to rectify the register by reregistering A a s the owner of the M & M in Blackacre. A executed and delivered a transfer of Blackacre to B. Assume the following facts. Blackacre was located in Alberta. Under the provincial statute. lands [to a railway company]. as the transfer from A to B did not except the M & M. 9. for C's registered ownership of the M & M was divested even though he purchased from B without fraud in reliance on B's registered ownership. I t should be noted that the interest of the Crown in right of Canada in this example was a true overriding interest. and by canceling C's registration a s to the M & M. A. . and consequently B's registration a s the owner of the M & M was correct. but every instrument transferring land operates as an absolute transfer of all such right and title as the transferor has therein at the time of its execution. it operated a s a n absolute transfer of them. unless a contrary intention is expressed in the transfer or conveyance. .16 One was a provincial statute containing a provision which was in all material respects identical to section 8 of The Transfer and Descent of Land Act (Alberta): a s follows: 8. was the registered owner of Blackacre. A executed and delivered a transfer of Blackacre to B. Two situations demonstrating the supremacy of federal law in a federal system will be discussed. mines and minerals . which was a railway company subject to the Railway Act (Canada): and the transfer contained no provision relative to the M & M in Blackacre.

that the federal public policy reflected in the Railway Act (Canada) is to protect a n owner of mines and minerals from the adverse economic consequences of their unintended sale to a railway company. and if a former registered owner (A) is entitled to compensation if he is permanently divested of mines and minerals because of their subsequent purchase by a third party (C) without fraud. 9. However. The issue presented by this example was decided in Re Moir's Estate.' The court held that the federal statute controlled. no transfer of the M & M to B was intended by the parties (see paragraphs 6. B's registered ownership of the M & M was divested because. Because this result would be both unnecessary in terms of the objective of the federal statute and highly detrimental to the proper functioning of the . Rather. and consequently B's registration a s the owner of the M & M was erroneous. if it were held either that A had never lost ownership of the M & M. If A were held to have a right to have the register revised and to regain ownership of the M & M in a contest with C. 9. the issue presented by this example has not been judicially decided. Indeed. or that A's right to reacquire ownership of them was an overriding interest. Moreover.29-31). C purchased Blackacre from B without fraud and was registered a s the owner of Blackacre. Ouerriding Interests 183 Under the federal statute.18 Neither of the two statutes formed part of the Torrens system of the province. a s they were directly contradictory in terms of the facts given. a s the divestiture of C's registered ownership of the M & M would have resulted from the enforcement of a n overriding interest. if C's registered ownership of the M & M were protected. the Blackacre M & M would have been withdrawn from the operation of the jurisdiction's Torrens system until A or his successors chanced to transfer them in accordance with the requirements of the Railway Act (Canada). they were excepted from the transfer. A's right would be a n overriding interest created under federal law. that B's registration a s the owner of the M & M was therefore erroneous.16). assume that before A learned of B's erroneous registration a s to the M & M. for it would have resulted from B's erroneous registration under the Torrens system (see paragraph 8. Insofar as the relationship between A and B was concerned. however. a s the transfer from A to B did not expressly include the M & M. including M & M. only one of them could be operative. However. under the interpretation of the transfer from A to B required by the federal statute.19 Continuing this example. A's right to have the register revised and to regain ownership of the M & M was not a n overriding interest. in accordance with a transfer from B. they were both part of its general law. and that the register should be revised accordingly. 9.Chapter 9 . I t should be noted that although this example demonstrated the supremacy of federal law in a federal system. I t is submitted.20 To the best of the author's knowledge. A would be entitled to compensation for his loss. it did not demonstrate the operation of a n overriding interest created under federal law. it is believed that C would not be entitled to compensation for his loss from the assurance fund. and that this objective can be adequately served if the erroneous registered ownership of a railway company (B) a s a n immediate transferee is defeasible in favor of a transferor (A).

which is usually earlier than the date before which the taxes must be paid. and generally property taxes become a lien against land from the date of assessment. most land in a jurisdiction which is likely to be sold in a commercial transaction will be subject to a tax lien a t the time of the sale.22 Assume that B was the registered owner of Blackacre. If property tax liens were a n overriding interest. he can only ask whether or not the cost of entering all property tax liens on the parcel registers for all land in the taxing jurisdiction. that Blackacre was subject to a property tax lien in favor of the city of E. it would remain a valid lien against Blackacre in spite of the fact that C purchased Blackacre from B in reliance on a parcel register which did not disclose the existence of the tax lien. C would have received no warning that tax liens are a n overriding interest for the section 64(1) overriding interests are not carried a s a caution on the parcel registers in Alberta. 9. The author has already opined that he considers this situation inexcusable (see paragraph 9. I n most jurisdictions virtually all occupied land is subject to local property taxation. or county taxes assessed and administered on a local level of government. it would have been extinguished by C's purchase of Blackacre without fraud because the tax lien was not entered in the register for Blackacre. 9. this administrative procedure might not be unduly expensive. 9. it is believed that the procedure would be very expensive. (2) T a x liens 9. However. If E's tax lien were not a n overriding interest. and that C purchased Blackacre from B without knowledge of the tax lien and became the registered owner. Consequently. If these tax liens were not a n overriding interest. township. and it is believed that most tax liens will secure municipal. If the parcel registers in the jurisdiction were computerized. would exceed the cost of inquiries a t the office of the local tax authority relative to parcels which were actually involved in commercial transactions.21 A lien for unpaid taxes is made a n express overriding interest by section 64(l)(b) of the Alberta Act.24 In the example under consideration it was stated that C had no knowledge of E's property tax lien when he purchased Blackacre. If Blackacre were located in Alberta. the tax lien was to secure the payment of municipal property taxes.11). As the author has no cost information on the point. it would seem unreasonable to attribute such a n intention to the federal Parliament. If the parcel registers were manual. and which is frequently earlier than the date on which the taxes can be paid. and routinely released a t the time the taxes were paid.184 Torrens' Elusive Title jurisdiction's Torrens system. If E's tax lien were a n overriding interest. even if the register for Blackacre had carried a warning that tax liens are a n overriding interest.23 Should tax liens be a n overriding interest? I n the foregoing example. would C have known . they would have to be routinely entered in the parcel register for every parcel of land in the taxing jurisdiction a t the time of assessment. C would have the burden of inquiring a t the proper office of the local governmental entity a s to the tax liability imposed on Blackacre a t the time of his purchase. and of removing the entries when the taxes were paid. that E's tax lien was not entered in the parcel register for Blackacre.

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where to make inquiries a s to whether or not Blackacre was subject to any tax liens? The author is not troubled by property tax liens. As previously stated, it is assumed that a potential purchaser knows that he must examine the register for Blackacre before he can safely purchase a n interest in Blackacre. I t is believed that any potential purchaser who could locate the office of the Registrar, and hence the register for Blackacre carrying a warning that tax liens are a n overriding interest, would know that he must inquire a s to local property tax liens, and would be able to locate the office of the local tax authority. I n short, any system established to facilitate commercial transactions in land must assume a minimal business sophistication on the part of users of the system. 9.25 The foregoing discussion has focused on local property tax liens. I t is believed that their existence a s a n overriding interest can probably be justified. But other tax liens which might exist i n some jurisdictions, such a s a lien for unpaid succession duties or a lien for unpaid workers' compensation assessments, are far more questionable. As the frequency of occurrence of tax liens of a particular type decreases, the cost of having all tax liens of this type entered i n the registers for affected parcels decreases. However, if purchasers were cautious, inquiries a t the office of the taxing authority responsible for tax liens of a particular type would still have to be made with respect to all parcels of land which were involved i n commercial transactions and which might possibly be subject to a tax lien of the particular type, even when the incidence of tax liens of the type was slight. Moreover, because low frequency tax liens are less likely to be known to the public, they are more likely to be overlooked, and consequently they present a greater threat to users of a Torrens system when they are permitted a s overriding interests.

(3) Leasehold interests 9.26 A lease or a n agreement for a lease, for a period not exceeding three years, where there is actual occupation of the land under the lease or the agreement, is made a n express overriding interest by section 64(l)(d)of the Alberta Act. 9.27 Assume that B was the registered owner of Blackacre, that Blackacre was subject to a lease i n favor of E, that E's lease was not entered in the parcel register for Blackacre, that E was in actual occupation of Blackacre under the lease, and that C purchased Blackacre from B without fraud and became the registered owner. Assume further that E's lease provided for either a monthly tenancy or a one-year term certain, and that leasehold interests were not a n overriding interest. E's leasehold interest was extinguished by C's purchase of Blackacre without fraud because the leasehold interest was not entered in the register for Blackacre. 9.28 I n the foregoing example i t was assumed that E held either a monthly tenancy or a one-year term certain, for it is believed that these two categories comprise a substantial majority of contemporary leasehold interests. If every lessee in the position of E were required to enter his leasehold interest in the appropriate parcel register in order to protect the interest in the event of a sale of the reversion i n the land, and if lessees routinely did so, the inconvenience and expense to short term lessees would

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be inordinate relative to the value of the interests protected and the actual risk of loss. In the author's opinion, the overwhelming majority of short term lessees would simply assume the risk. In the example under consideration, it is probable that even if C wished to obtain possession of Blackacre, he would either terminate the monthly tenancy by the normal statutory procedures, or wait for the one-year term certain to expire naturally. If C adopted this course, E would be no worse off for having assumed the risk. 9.29 But what if C's standards of business morality were considerably below normal, and if he chose to evict E a s rapidly as the law permitted. This course would seldom secure any significant economic advantages for C, but it would frequently impose severe inconvenience and economic hardship on E. The possibility of such cases might well be a sufficient justification for permitting leases for one year or less to exist a s overriding interests. 9.30 Moreover, there is another factor to be considered. How likely is it that C would have been unaware of E's leasehold interest when E was in actual occupation of Blackacre: if Blackacre were a single family residence, or a unit in either a ten-unit or a one hundred-unit apartment building? If C were aware that E was a lessee, how likely is it that C would have been unaware of the fact that B's sale of Blackacre other than subject to E's leasehold interest was fraudulent? In the example under consideration it was assumed that C purchased Blackacre from B without fraud, not because it is a t all likely that C would have been innocent of fraud in a case of this type, but because of the difficulty E would probably have in proving C's fraud (see paragraph 6.61). As section 64(l)(d) expressly makes a leasehold interest for a period not exceeding three years a n overriding interest when the lessee is in actual occupation, the difficult fraud issue is avoided and E's leasehold interest would be protected. 9.31 Continue the example under consideration, but assume that E's lease provided for either a threeyear term certain or a five-year term certain. Pursuant to section 64(l)(d), E's lease would be protected a s a n overriding interest if it were for a three-year term a s E was in actual possession under the lease. I t would be extinguished by C's purchase of Blackacre without fraud if it were for a fiveyear term notwithstanding the fact that E was in actual occupation under the lease. I s there any justification for this difference in treatment of the two leasehold interests? 9.32 I t is clear that a leasehold interest is only a n overriding interest if the term of the lease did not exceed three years a t any time. Consequently, E's leasehold interest would not have been a n overriding interest if it had been for a n initial five-year term, even if only two years of the term .~ remained when C purchased B l a c k a ~ r e It is believed, therefore, that the overriding interest benefit is reserved for leasehold interests which have a n insufficient duration a t the time of creation to result in a n economic value which would justify the time and expense of protecting them by entry in the register. 9.33 The leasehold overriding interest enlarges the list of interests which are not disclosed on the register. Therefore, in order to make it possible for a potential purchaser to determine whether or not a parcel of

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land is subject to a leasehold overriding interest, the overriding interest benefit is limited to situations in which there is actual occupation under the lease. The net effect is that the objective simplicity of a system in which all interests which can bind a purchaser must be disclosed by the parcel register is sacrificed for a system under which a purchaser may be bound by the interest of a lessee who is in actual occupation under a lease, and this creates two specific problems. First, although the factual issue of whether or not one is in actual occupation under a lease seldom creates difficulties, it certainly introduces a more flexible standard than the entry of a n interest in the r e g i ~ t e rSecondly, because a purchaser will be bound .~ by the interest of a lessee in actual occupation under a lease for a term not exceeding three years, a cautious purchaser should inspect any parcel of land before completing a purchase in order to determine whether or not it is subject to a leasehold overriding interest. 9.34 The author believes that a credible argument can be made that most leases for a term in excess of one year have sufficient economic value to justify the time and expense of protecting them by entry in the register. If the leasehold overriding interest were intended primarily for the protection of leases of insufficient value to justify entry in the register, one wonders why the benefit of overriding interest status was not reserved for leases not exceeding one year. Although this would not solve the problems mentioned in the preceding paragraph, it would reduce the adverse consequences of the leasehold overriding interest to a purchaser. 9.35 However, section 64(l)(d) extends the benefit of overriding interest status to leases not in excess of three year when the lessee is in actual occupation. This suggests that the leasehold overriding interest was also intended for the protection of a lessee in actual possession under a lease, such a s a lease for three years, which would have been of sufficient value to justify protection by entry in the register. The author believes that section 64(l)(d)reflects the equitable philosophy that rights of persons in possession of land should be protected because a purchaser will almost inevitably be aware not only of those rights, but of the fact that his purchase will be destructive to them (see paragraphs 3.22 and 9.30). Under section 64(l)(d),E's rights would be protected as a n overriding interest if he were in actual occupation under a n agreement for a lease not exceeding three years. If rights of persons in actual occupation are deserving of protection, why should the rights of a person in possession under a n agreement to purchase land, or under a five-year lease, not be protected as a n overriding interest?
(4) Exceptions and reservations in original Crown grant 9.36 Section 64(l)(a) of the Alberta Act provides that any subsisting exceptions or reservations contained i n the original grant of land from the Crown are a n overriding interest. Why is this overriding interest necessary? 9.37 Assume the following facts. Blackacre was located in a jurisdiction whose Torrens statute contained a provision identical to section 64(l)(a).The original instrument issued by the Crown granted Blackacre to A, reserved a royalty interest on any future sale of standing timber, and

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contained no exception of the M & M. A was registered as the owner of Blackacre, and his registration was subjected to neither a reservation nor a n exception in favor of the Crown. Subsequently B purchased Blackacre from A and became the registered owner, and his registration was subjected to neither a reservation nor a n exception in favor of the Crown. C wished to purchase Blackacre from B. 9.38 I t would seem that any interests retained by the Crown in the original grant could have been readily registered on the parcel register for Blackacre. If any interests retained by the Crown were duly registered, C would be informed that these interests remained subsisting interests when he investigated the register for Blackacre. If no interests in favor of the Crown were disclosed by the register, under Torrens theory C should be able to assume that any exceptions or reservations which were contained in the original Crown grant were no longer subsisting. 9.39 However, a s Torrens theory is not applicable insofar a s overriding interests are concerned, C could not make any assumptions regarding interests retained by the Crown in the original grant. Fortunately, C had a little knowledge relative to the overriding interest under consideration. He checked the Crown instrument which granted Blackacre to A, and discovered the reserved royalty interest on the standing timber. Although C thus learned that the Crown had reserved this interest in the grant to A, the Crown grant could not disclose whether or not the interest remained subsisting. Indeed, a s Blackacre appeared to have been recently logged, C suspected that the royalty interest might have been discharged. C was able to locate the appropriate government official responsible for provincial forest management, and learned that the timber royalty interest had been released while A was still the registered owner. C purchased Blackacre from B and became the registered owner, and his registration was subjected to neither a reservation nor a n exception in favor of the Crown. 9.40 Unfortunately, C had only a little knowledge relative to the overriding interest under consideration. C knew that B's registered ownership had not been subject to a M & M exception in favor of the Crown, and his examination of the Crown instrument which granted Blackacre to A had disclosed no exception of the M & M. Consequently, C assumed that his purchase of Blackacre from B included the M & M. However, the original Crown grant of Blackacre to A was made under the authority of a statute which was substantially the same as section 34(1) of The Public Lands Act (Alberta),lowhich provides as follows:
34.(1) All mines and minerals and the right to work the same are, by implication and without the necessity for any express words of exception, excepted from every disposition and notification made under this Act.

Was C the registered owner of the M & M in Blackacre? More specifically, although the M & M in Blackacre were not excepted by the Crown instrument which granted Blackacre to A, were they nevertheless excepted from the Crown grant a s a matter of law under the above statute? This issue was decided by the Supreme Court of Canada, in 1954, in Portage La Prairie v. Canadian Superior Oil of California Ltd.11 9.41 The Court held that the statute comparable to section 34(1) of The

even when it does not appear a s a n exception in the original instrument of Crown grant! 9. Functionally. that the original Crown grant therefore excepted the M & M. the overriding interest for Crown gold and silver is a hidden overriding interest.42 How might a statute creating a jurisdiction's Torrens system solve this dilemma with a s little damage as possible to the Torrens philosophy that the register should be everything? The author believes that the difficulty stems from the fact that the overriding interest for exceptions and reservations contained in the original Crown grant. It is hereby declared that no grant from the Crown. it could be carried a s a warning on the parcel registers for lands under the Torrens system (see paragraph 9. it would be far less . although gold and silver are a n overriding interest in Alberta because they are excepted from the original Crown grant unless they are expressly included. The Portage La Prairie case vividly demonstrates the pernicious operation of the overriding interest for rights retained by the original Crown grant. If a potential purchaser of land were seriously interested in acquiring gold and silver. they are excepted from the original Crown grant because section 19 of The Mines and Minerals Act (Alberta) is included by implication in the original Crown grant in accordance with the holding in Portage La Prairie. However. The author suggests that this problem could be solved by including section 19 of The Mines and Minerals Act (Alberta) a s a separate overriding interest for Crown gold and silver in section 64(1) of the Alberta Act. and that C's registered ownership was subject to this exception in favor of the Crown because it was a n overriding interest. 9.11). As this section provides that no grant from the Crown operated as a conveyance of gold and silver unless they were expressly conveyed. minerals in land or otherwise. like the overriding interest for tax liens. 9. in legal effect. if any. he could check the original Crown grant and would learn whether or not it included gold and silver.Chapter 9 . incorporated in the original Crown grant. has operated or will operate as a conveyance of gold and silver unless gold and silver are expressly named and conveyed in the grant. The problem is that a warning that rights retained in the original Crown grant are a n overriding interest would not give a potential purchaser a clue that the exception for mines and minerals created by section 34(1) of The Public Lands Act (Alberta) is contained in the original Crown grant. whether relating to land. the author accepts the view that it would serve no useful purpose to except gold and silver routinely from every Crown grant.43 Consider section 19 of The Mines and Minerals Act (Alberta). and by carrying it a s a printed warning on all parcel registers.lZ which provides a s follows: 19.44 Although the same solution could be used with respect to the overriding interest for Crown mines and minerals. As this overriding interest can be identified. grants in Alberta ever expressly conveyed gold and silver. I t does not refer to the specific exceptions and reservations which it will most likely include. it would be a wasteful administrative expense to include a n exception for gold and silver in favor of the Crown on every parcel register maintained under the Torrens system. Overriding Interests 189 Public Lands Act (Alberta) was. Similarly. and a s it is doubtful that many. is general in its application.

the clause 'unless the contrary is expressly declared' contained in the statute providing for overriding interests empowered the Registrar to override the Crown's overriding interest by a n entry in the register that it was no longer a subsisting interest. although the M & M were excepted from the original Crown grant to A. subject t o . The original Crown grant of Blackacre to A expressly excepted the M & M. Subsequently B purchased Blackacre from A and became the registered owner. I n the example under consideration. in Prudential Trust Co. including M & M. the Registrar made a n affirmative erroneous entry that B owned them. but by error the Registrar registered B a s the owner of Blackacre. however. by implication and without any special mention therein. unless the contrary is expressly declared. Was C's registered ownership of Blackacre. or any judgment liens. . subject to the overriding interest for exceptions contained in the original Crown grant? This issue was decided by the Supreme Court of Canada. The Registrar. I t seems highly unlikely that the Registrar would ever make a negative erroneous entry that B's registered ownership was not subject to either any tax liens.46 The Court held that the overriding interest for the M & M excepted from the original grant from the Crown was defeated in favor of C because C purchased in reliance on the express declaration in the register for Blackacre that B was the owner of the M & M. including M & M. 9. if section 34(1) were included a s a n overriding interest on a parcel register. that the clause would ever affect any overriding interest except exceptions and reservations contained in the original Crown grant. . I n short.45 One further situation should be considered in connection with the overriding interest for exceptions and reservations contained in the original Crown grant. the clause under consideration would permit the Registrar to make a n erroneous entry negating any overriding interest subject to the operation of the clause. but did so without expressly disposing of them. but which included the clause emphasized below: The land mentioned in any certificate of title granted under this Act is. in 1957. However. including M & M. The author doubts. v. or any subsisting leases. Consequently.13 9. or any easements. he would have to be a knowledgeable purchaser in order to determine whether or not the original Crown grant was under this Act. Later C purchased Blackacre from B without fraud and became the registered owner. Assume the following facts. and it is a fact of common knowledge that dispositions of Crown lands under some other acts not only included the mines and minerals. .190 Torrens' Elusive Title effective. Section 34(1) of The Public Lands Act (Alberta) only applies to dispositions made under that Act. excepting M & M. a potential purchaser would be informed that the original Crown grant excepted the mines and minerals if it was a disposition under The Public Lands Act (Alberta). and A was registered a s the owner of Blackacre. Blackacre was located in a Torrens jurisdiction whose Torrens statute contained a provision virtually identical to section 64(1) of the Alberta Act. . Literally.

and that C had no actual knowledge of E's easement when he purchased Blackacre and became the registered owner. that is.17).50 The author is aware of no policy reasons which justify continuation of the overriding interest for private easements.34). because E's easement was a legal property interest in Blackacre. At common law. but if he does purchase land. but that the vendor's sale to him without a n exception for the public easement was fraudulent. however. and whether or not C was a n innocent purchaser with no knowledge of E's easement is irrelevant. a government entity. that the overriding interest for public easements should be continued. If C had no actual knowledge of E's easement. the author believes that a purchaser of Blackacre would almost inevitably know not only of the existence of the highway. I t is argued. Now assume that Blackacre was located in Alberta. Overriding Interests ( 5 ) Easements 191 9. insofar a s easements are concerned. and private easements and rights of way are made a n overriding interest by section 64(l)(g). and that C purchased Blackacre from B. that E's easement was not protected by recording when C purchased Blackacre. Blackacre remained subject to E's easement after C became the registered owner. Even if the Crown failed to protect its easement in this manner. 9. C acquired Blackacre free of E's easement (see paragraph 3. the Alberta Act retains the common law.51 I t is believed t h a t the genuine problem concerns public easements which would not be apparent to a potential purchaser making a reasonably diligent inspection of land. and the horror example is sometimes cited of a purchase of Blackacre when it was subject to a n easement in favor of the Crown for a n existing surfaced public highway. A potential purchaser must make a diligent inspection of land which he desires to purchase in a n effect to discover any easements. Blackacre remained subject to E's easement after C became the legal owner. Because E's easement was a n overriding interest. that E owned a legal easement for a road across Blackacre. and whether or not C was a n innocent purchaser with neither knowledge nor notice of E's easement is irrelevant (see paragraph 2. and if C had no constructive notice of E's easement. I t can safely be assumed that the Crown would not construct a road across Blackacre without first obtaining a t least a n easement. Assume that E.48 Assume that B owned Blackacre. 9. if E's easement would not have been discovered in the course of a diligent inspection of Blackacre. and that C recorded his deed before E recorded the instrument which granted his easement. Are these ovemding interests necessary? 9.47 Public easements and rights of way are made a n overriding interest by section 64(l)(c) of the Alberta Act.Chapter 9 . and it would seem that having such a n easement entered on the parcel register for Blackacre would not be a n excessive burden. and h a s not even increased facility of transfer to the same extent a s a modern recording system. he will acquire it subject to any valid easements. and could not reasonably have discovered them. owned a n .49 As the preceding examples demonstrate. Assume that Blackacre was located in a jurisdiction with either a notice or a race-notice recording system. 9. even if he did not discover them.

the Registrar maintains a n execution register. and duration. 9. Even if C learned of the possible existence of the easement. and which includes a record of or a reference to the copy of each execution received by the Registrar affecting a judgment debtor indexed in the execution register. create problems in categorization. the charge based on a writ of execution is not entered on the register for any parcel of land until the . B might not inform C of the easement. This solution would. such a s roads. however. which consists of a n alphabetical index of the names of execution debtors a s disclosed by executions received by the Registrar. Although executions indexed in the execution register create a charge against any beneficial interest of a n execution debtor in land in accordance with section 128(2) of the Alberta Act. either because B was dishonest or becauseB was not aware of the easement. The legal effect of a writ of execution which has been entered in the execution register maintained by the Registrar was discussed a t paragraph 6. and government entities would be spared the bother and expense of protection such easements by having them entered in the registers for innumerable parcels of land. and C would not be faced with a simple administrative procedure. conditions of use. C would carry the risk of discovering the existence of the easement and the rights in Blackacre which it included. which could be discovered readily from a n inspection of land.52 It would be possible to retain a n overriding interest for apparent public easements. If the overriding interest for public easements were retained. he would have the further task of verifying its existence. Many public easements could clearly be placed in this category. If the overriding interest for public easements were abolished. and that C desired to purchase Blackacre from B. why i s it proper to characterize a charge based on a writ of execution a s a n overriding interest? 9. for in some cases it would be difficult to determine whether a public easement was on the apparent or the nonapparent side of what is of necessity a vague dividing line. and C could readily obtain complete information a s to the nature of the easement.53 Pursuant to section 64(l)(e) of the Alberta Act. E could protect its known easement by complying with the relatively simple administrative procedure required to have the easement entered in the register for Blackacre. The execution register is thus a n alphabetical list of judgment debtors containing a record of executions received against them. (6) Charges based on writs of execution of judgment debts 9. a charge based on a writ of execution is a n overriding interest if the execution is registered and maintained in force against the owner of land. E would know of the existence of the easement and of the precise rights in Blackacre which it included. which should be reviewed a t this point.54 I n accordance with section 21(3) of the Alberta Act. If a n execution must be registered and maintained in force against the owner of land in order to operate a s a charge against his land.192 - - - --- - Torrens' Elusive Title - easement for a n undeveloped road across Blackacre. such a s exact location.80. He would have to determine that E was the government entity that owned the easement. and would then have to make inquiries a t the proper government office in order to determine the nature of the easement.

such as by the warden of a high security prison.56 As the preceding example demonstrates.000. it would be easier for one to recognize why the charge based on a n execution entered in the execution register is a n overriding interest. and the Registrar must routinely check the execution register before he completes any transaction submitted for registration. 9. Before the Registrar would register C as the owner of Blackacre. the execution register is generally maintained by the Registrar. and would thus subject C's registered ownership to that charge.57 I s the overriding interest for a charge based on a n execution entered in the execution register necessary? The difficulties associated with this overriding interest are primarily administrative. prudent purchasers in all transactions must routinely check the execution register before they enter into a binding contract to acquire a n interest in land to make certain that it is not subject to a charge. that E had a writ of execution entered in the execution register creating a charge against Blackacre to secure a judgment debt of $25. and although the discussion which follows does not purport to offer a complete analysis.Chapter 9. 9. In Torrens jurisdictions. If the execution register in Alberta were maintained in a location apart from the Land Titles Office. the charge will frequently lie dormant until it expires six years after the execution was received by the Registrar because the execution debtor never executed a n instrument affecting land which was subject to the charge or because the execution creditor never took steps to enforce the charge.55 The execution creditor is not required to specify any particular parcel of land of a n execution debtor which he wishes the execution to charge. even though executions in the execution register charge a small percentage of the parcels of land in Alberta. Assume that B was the registered owner of Blackacre. 9. he would routinely check the execution register to ascertain whether or not there were any executions indexed against B. a charge based on a writ of execution is a n overriding interest because it operates as a charge against a parcel of land before it is entered on the parcel register for that land. it is by no means necessary. and that C subsequently purchased Blackacre from B and obtained a transfer. In this example the Registrar would register C as the owner of Blackacre. and hence is physically located contiguous to the Torrens registers. Indeed. executions are issued against a n execution debtor. it will point out two specific problems a s examples. 9. Although this is convenient. Overriding Interests 193 execution debtor executes a n instrument affecting land subject to the charge or until the creditor requests that the writ be entered on the parcel register. frequently the execution creditor will not know whether or not the execution debtor owns any beneficial interest in land which the execution could charge. As already noted. Even if a n execution debtor has a n interest in land which is subjected to a charge. and execution creditors frequently have executions entered in the execution register even though the execution debtor has no beneficial interest in land which could be subject to a charge.58 The execution register system is expensive. Nevertheless. but he would also register the charge created by E's execution on the parcel register for Blackacre. 9.59 The execution register system is subject to considerable confusion .

The question is. It is believed that this change would result in a considerably more economical system. Two problems are obvious: there are many common names.15 d. if the existence of section 183 of the Alberta Act is generally known. rather than a recognized interest in land.60 The overriding interest for a charge based on an execution would be eliminated if the execution register were abolished. The change suggested in this paragraph has been adopted in Nova Scotia under its new Land Titles Act. is the same person a s William Johnson.194 Torrens' Elusive Title because it is based on the names of execution debtors a s disclosed by the executions received by the Registrar.62 The author does not consider the right of expropriation to be a n overriding interest. and facilitating the collection of debts is necessary in a credit oriented society. Indeed. or Her Majesty. How are a potential purchaser and the Registrar to determine whether or not William Johnson. It is doubtful. The inclusion of this provision in the Alberta Act does no harm. 9.63 It is believed that few members of the public are unaware of the power of expropriation held by many government entities and by many public utility corporations.100. is the cost and inconvenience of the execution register system out of proportion in terms of the benefits it produces. exist a t the sufferance of the state. Because the court is authorized to compel the owner to transfer the land to the person who made the improvements in return for such . and of having it checked in connection with every transaction submitted for registration. Admittedly. for it is a n inchoate right in the holder of the power of expropriation to acquire a n interest in land. This section. body corporate. and there are frequently different Anglicised spellings for a non-English name. the execution debtor named in an execution in the execution register? How is the Registrar to determine whether or not John Holigrocki is the same person as John Holigroski?14Section 130 of the Alberta Act contains a n elaborate procedure designed to assist in resolving a controversy a s to whether or not a registered owner and a judgment debtor are the same person. for all possible charges based on executions would be registered against affected parcels of land. potential purchasers would only be concerned with charges if they were registered against a parcel of land involved in a transaction. and if a n execution creditor were required to register his execution against one or more specific parcels of land in which an execution debtor was alleged to have a beneficial interest. whether under a Torrens system or not. is applicable when a person has made lasting improvements on land under the mistaken belief that the land was his own. however. 9. Expropriation 9. however. 9. Similarly. which is quoted a t paragraph 6. the registered owner of Blackacre. would be eliminated. it may be beneficial if it serves to remind all users of the Torrens system that all property interests in land.61 Section 64(l)(f) of the Alberta Act provides that the land mentioned in any certificate of title granted under the Alberta Act is subject to any right of expropriation vested in any person. The operating cost involved in maintaining the execution register. the present system is very economical for creditors.

Railway Act.).N. 8. 9. R. 1978.R. 368 (Man.B. K. c. Estennan and O'Keefe. 591 (Man. Prpic 67 D. S. 234. (1977) 70 D.R. Q. 321. 67 (Alta. R. c. 14. the author would characterize section 183 as providing for a species of private expropriation.282-86 (Hinde ed.S. (3d) 691 (Alta.A.).S. 1971).). Q.W. 10. 16.D. TheNew Zealand Torrens System Centennial Essays 210 (Hinde ed. s. 297. 238.D. See Holigrocki v..W. 8.W.A.L.R. 7.R.L. 1952. 647 (Alta. Oddson 48 D. 83 (Man. c. [I9541 S.Chapter 9. R. 1970. 658.) .C. e.).W. [1957] S. The New Zealand Torrens System Centennial Essays 258. 11.R. D.C. 114.R.R.R.R. 12. 5. C. 732. 1970. See section 2(1) o f the Kenya Registered Land Act (1963).R. R. 442 (Sask. The Dower Act.C.L. 1970. 705. and Whalan.S.). [I9761 4 W. 15.R. Holigrocki (1967) 60 D. c. (3d) 65.L.L.A. (1961) 36 W.9 D.W. (2d) 463.S. Overriding lnterests 195 compensation as the court may direct.).R. (2d) 561.C. Ukrainian Catholic Episcopal Carp.B. 13. Land Titles Act. 1970. 2. (2d) 440. The Public Lands Act. (1960) 25 D. 1971).R. First National Investment Co. [I9541 3 D.16 FOOTNOTES 1. [I9191 3 W.L. Zilka [I9461 3 W. See Mildenberger v. 368. The Torrens System in New Zealand . c.W. Maly v.B. v. The Transfer and Descent of Land Act.S. T.A.R.31 W.Present Problems and Future Possibilities. 41.58 W.g.A. 3. Trotzuk v. 4. c. R. T. 6.L. The Mines and Minerals Act. The Impact of Other Statutes on the Land Transfer System.R.S.

50-53.45-47.41-44. descriptions have different legal consequences than erroneous registrations resulting from other mistakes? See paragraphs 5. Issue 1 Should a registered interest be defeasible to permit the execution of a transaction a s mutually intended by the relevant parties? See paragraphs 6. fraud be limited to situations in which the registered owner knowingly participated in the fraud? See paragraphs 6.54-63.15-38.78-87. a s rights in land under the general law be permitted through registration under the Torrens system? See paragraphs 5. 10. Should the English system of conferring registered ownership by general boundaries be adopted? See paragraphs 5. Issue 4 Should every registered instrument. 10.20-23. Issue 7 Should the creation of contract rights which are not recognized .10-14. be . Should interests in land recognized under the general law be denied the benefits of registration? See paragraphs 5. Issue 3. Issue 5. The suggested issues are organized in accordance with the chapters in which the issues are discussed in this study.1 The author believes that it is appropriate to conclude this study with a summary of important policy issues which should be considered by any law reform body proposing to make recommendations designed to enhance the ability of a Torrens system to achieve its maximum potential. and paragraph references are included.CHAPTER 10 Conclusion a.64-77. Issue 6. except a FSA transfer. Should statutory instruments be enacted to facilitate the creation and transfer of common interests? See paragraphs 5. Summary of Fundamental Policy Issues 10.39-76.2 Chapter 5 issues: . Issue 8. Issue 2 Should the defeasibility of a registered interest obtained through .3 Chapter 6 issues: . Issue 2 Should erroneous registrations resulting from mistakes in legal . defined a s incorporated in the register for the parcel of land affected by the instrument? See paragraphs 5. Should the creation of rights which are not recognized under the general law be permitted through registration under the Torrens system? See paragraphs 5. . Issue 1 Who is the owner of a registered legal interest if the registered 'owner' is not a legal entity? See paragraphs 5.

2.13-17.37. (1) Under what circumstances.2. should a registered interest be defeasible because it was registered to a n immediately succeeding innocent purchaser on the basis of a n invalid transfer? See paragraphs 6. Issue3.41-46.4 Chapter 7 issues: Issue 1. Should a n accepted caveat which seeks to protect a n interest which does not qualify for protection by caveating be invalid? See paragraphs 7. Should a n affidavit be required in support of a caveat? See paragraph 7. See paragraphs 6.77-100. Issue 7. . each of whom was a n innocent purchaser under a valid transfer from a registered owner? This is the multiple chain situation.2425. See paragraphs 6. Should a registered interest obtained by a n innocent purchaser on the basis of a valid transfer from a registered owner be defeasible? This is the single chain situation. Issue6. Issue 4. Issue2.2528. should a registered interest be defeasible because it was based on a n invalid transfer from the immediately preceding registered owner? (2)Under what circumstances. What provision should be made for the situation in which conflicting legal rights have been registered to different persons. and paragraphs 7. Issue6. Should one who acquires a subsequent interest a s a n innocent purchaser in reliance on the register be required to win the race to the register in order to gain priority over a prior interest? See paragraphs 7.198 Torrens' Elusive Title Issue 3. and paragraph 6. Should a registered interest obtained through error by a n owner who was not a purchaser for value be defeasible? See paragraphs 6. Should a condition of defeasibility based on prior certificate of title be retained? See paragraph 6. or (2) seeks to protect a n interest which does not qualify for protection by caveating (see paragraph 7. Should a condition of defeasibility based on misdescription be retained? See issue 2 a t paragraph 10. if any.4-12. Should the Registrar's authority to reject a caveat be limited to situations in which the caveat either (1) fails to meet reasonable administrative requirements (see paragraphs 7.31-36). Who should be defined a s the legal owner in a situation in which there are contemporaneous conflicting registrations? See paragraphs 6.103-117.33.118-133. Issue 9. if any. Issue 5. 10. Issue 5. Should nonregistered interests be recognized? See paragraphs 7. Should the protection afforded by a caveat be limited to those rights which are actually disclosed by the caveat a s entered in the register for the parcel of land affected by the caveat? See issue 4 a t paragraph 10. Issue8. Issue 7.139.134-137. This issue must be framed in two correlative forms. How should the various types of nonregistered interests be characterized in terms of the conventional legal and equitable categories? See paragraphs 7.38-40.139. Issue4.

Chapter 10. 10. Should a caveator be entitled to a notice conforming to accepted judicial standards a s a prerequisite to the removal of his caveat? See paragraphs 7.36-38. Issue 6. Should a registered owner whose conduct was a contributing cause of his deprivation of a registered interest be entitled to compensation from the assurance fund for his loss? See paragraphs 8. how long should the limiting period be and when should it begin? See paragraphs 8. Should a registered owner whose conduct was the sole cause of his deprivation of a registered interest be entitled to compensation from the assurance fund for his loss? See paragraphs 8. Should the administrative fee for filing a caveat be established in the same manner a s the administrative fee for registering a n interest? See paragraphs 8. How should the assurance fund fee be determined? See paragraphs 8.18-23. Issue 8. Issue 10. Issue 4. Issue 10. Should the right of a n owner to compensation from the assurance fund for the loss of a registered interest be limited to situations in which the loss resulted from the application of principles of Torrens law? See paragraphs 8.2-4. Should there be a limitation a s to the period of time available to one to enforce a cause of action to have the register revised in order to acquire registered ownership of a n interest in land. Under what circumstances should the Registrar be authorized to provide the remedy of revision of the register administratively? See paragraphs 8. Issue 9.27.5 Chapter 8 issues: Issue 1.60-69. Issue 5. Issue 3.26-27. and if so. Issue7. Should a n assurance fund fee be charged for the filing of a caveat irrespective of the interest protected? See paragraph 8. What legal consequences should result from the removal of a caveat? See paragraphs 7. Should the owner of a nonregistered interest in land who was deprived of his interest because of an error in the administration of the caveating system be entitled to compensation from the assurance fund for his loss? See paragraphs 8.13-17. Issue 9.51-57. Issue 11. nor the owner of an overriding interest in land conferring a right to possession? See paragraphs 8. Issue 2.33-34.39-41. Conclusion 199 Issue 8. .51-56. Should one be required to obtain a judgment against the Registrar a s a prerequisite to obtaining compensation from the assurance fund? See paragraphs 8.64-65.28-32. Should a caveat removal proceeding based on adequate notice to a caveator constitute a n adjudication a s to the validity of a caveated claim relative to any party and to any interest necessarily affected by the proceeding? See paragraphs 7.7-12. Can one have a legal cause of action to obtain possession of land if he is neither the registered owner of a legal interest in land conferring a right to possession.

8 The existence of the issues presented in this chapter demonstrates that existing Torrens statutes do not create a n adequate legal structure for a Torrens system. Should the Registrar be required to send a copy of the parcel register affected by any entry to all interested parties'immediately after the entry was made? See paragraphs 8. is based on principles of the English common law. In some situations the Torrens system attempts to accomplish more than is possible (see issues 6 and 7 at paragraph 10. 10.6 Chapter 9 issues: Issue 1. Others exist because the statutory solutions for some important problems are of questionable merit. Although grafting the two upper layers on the general law has already produced a revolution in real property law. most of which. it has operated well in most jurisdictions. Should all overriding interests permitted in a jurisdiction be identified by a warning entered on the parcel registers for land under the Torrens system? See paragraphs 9. b. and if so. and at the top is the caveating or recording system for the protection of nonregistered interests in land. . At the bottom is the vast and complex general law.58-59. 10.2). Conclusion 10. how long should the limiting period be and when should it begin? See paragraphs 8. the Torrens system is based on sound functional principles. See paragraphs 9. it could operate much better in any jurisdiction with a n improved statute.5-11. in others the system simply fails to achieve benefits which could be secured (see issue 8 a t paragraph 10. Should there be a limitation a s to the period of time available to one to assert a right to compensation from the assurance fund.9 I n the author's view. Issue 13.12-60. each overriding interest presents the same basic issue. Issue 2. whether of judicial or legislative origin.200 Torrens' Elusive Title Issue 12. The Torrens system of registered legal interests in land is the middle layer superimposed on the general law.2). Some of these issues exist because of important problems which are not solved by existing Torrens statutes. What overriding interests should be permitted? As the necessity for each overriding interest should be evaluated.7 The author thinks of the real property law of a jurisdiction with a Torrens system a s comprised of three layers of law. a completely successful revolution in the English common law of real property requires great skill as well as the enthusiasm of a Robert Torrens! 10.60-61.

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................. Pogue and Lane.Hackworth v ................................................ Bell ................................ .............. ..... 122........ .................................................................... .... 80................................. ......... Williams .. 150 Imperial Oil v ................... 37 30........... Re ........... 34............. Mildenberger v .. 41 Maly v .......... Ukrainian Catholic Episcopal Corp. Edwards .......................... . 48 Maurice Demers Transport Ltd .... 11 Latec Investments Ltd ................. Gardiner ........................................... .................................................................... Whipp ....... 195 Moir's Estate............. v ............................ Parker v ........... 82 79........... 25 Jellett v . Stevenson ......... Alberta Railway and Irrigation Co.............. National Mortgage and Agency Co........ 14 Hextall v ... 149 Henderson v .......................................................................... . Swettenham Rubber Co................. .... Stohwasser ....... Law v ......................................... Courtenay ....................................................................... ... Clements ....... .................... 116....... Municipal District of Opal ............ 144 Imperial Elevator v ........ 88 Hodgson v .......... ...........123........ .............C.................................. ............... ........ Re ............ Housefield ..................... .......... 25 Locher v ..... ... v .................... 91 Nisbet and Pott's Contract....................... ...........................A............................................................ Clissold ........... Wilkie ................. v ........................... Burns & Co........... 94 National Bank of New Zealand v ............................................................... 124 Mumford v . Pinder ... Barrey ..... .................... Pilcher v ............................................ Materials Testing Laboratories Ltd .............. Toronto General Trusts Corp............... Fountain Tire Distributors 118 (Edmonton) Ltd ... ............ 32. (Finance) Pty .............. Imperial Oil Ltd .............. 175....... ................. 81............... ............ Re ................................. Prpic .................. . 29 24. ........................................................................... 194 I............ 176 174...... Re ........................................................... P ..... 24 Piper v ..... ........... 27 Pelletier v ................... 39 36... 183 Morton and Cowell v .. 25 Holigrocki v .......... 124.. .. Mills ...... Hoffert ..... ................................................... 190 ...... 26 McConaghy v ........................ 25 Munro v ...... Ltd ....................... ........................... v ................. Symmons ....... 33 31.................. Jones v .. Marks ....... 114 Lysaght v ................................................ 119 Hardingham v .................................... ....................... Phillips .......................................................... 115 Jared v ...... 123 Prudential Trust Co.......................... ............ 35 Phillips v .................... ......... ................. 15 Ocean Estates Ltd ............ 115 Newton v .......................... Stuart . 149 Independent Lumber Co.......... 39 McGugan v .................................... ............... 23 Nioa v .................................................. .... Howlett ................................................................ Olive ....................................................... .................... 88 Le Neve v ....... v .............. Fisk ...... Newton .. Canadian Superior Oil of California Ltd .......................... Conroy ................................... Turner ........... 28 Maddever..... Nicholls ................. .............................................. 29 Lee v .... Denmark ............... v ....Hote1 Terrigal ......... The Registrar ..... Re ........................................ ................. 195 Marshall v ........................... 30 Land Registry Act 1911....................................189 Price v .. ...... 115 Loke Yew v ........................................ ........... 176 Knight Sugar Co........................................................ 123 22................... 39 Mackreth v .......................................... Holigrocki ................ Baker ......................................................... 84 Lehrer and the Real Property Act. Portage La Prairie v ............ 188...... ...... 80 Hoar v ............ Re ......... .. ....... 21 Henderson v ............. and Demers v ................... 120 Overland v ...........................................................120 Mutual Investments Ltd........... ...................... 33........... Hordern .. 175...... Rawlins ............................................ v..... Warren ....... Northern Countries of England Fire Insurance Co......................... Banks ........... Re ....................... 24 Kaup v .................. Lenehan ............... 13 Perry v ................. 36 Oertel v ............. Montreal Trust Co...................... 47 Lloyd v .... Le Neve .........

. .. St ................. .......... 115 Schweichardt v .......................................... ............ 136.......................................................... 144 Stroughill v ............. 107....................... .........M................................ .. Webb . 27 Ruthenian Greek Catholic Church v ........ Hunt ........ 108............ ................................................... 154 Russel v ...................... 12 Waimiha Sawmilling Co......... 160 Walters v ....14 Tulk v ...................................................... 113 ....... Toronto ....... 149................................... 149 Stonehouse v ......................... 118 117............. 11 Ruptash v ..... Haldane v ................................. Cooper .. Saskatchewan and Battle River Land Development Co..................149 Tourville v .................... Harvey ..... Russell ...................... .. Zilka ............. 139...Kids Investment Co............................. ... Schwalbe .............. 94 Stephens v ......... 149 Ruben v ............. .......................................... ......................... Moxhay ...................................................... and Imperial Oil Ltd ..... ..................................... 88 Smith v ...... v....... 109.................... 150 Salt v ..........Birkhead ..... .......... Sloane ............. 131 Whitworth v .......115 Taylor v ........... ................................................... .......................... Ontario and Minnesota Power Co.... Keith ..... ................................................ 30 Thompson v ............ Mary's Parish Credit Union Ltd ............ 23 Thompson v .......................... Re subnom Muller v .......................... Ball Lumber Co............................................... Smith .. v .................................... Rice v ...... v .................................... 28 Turta v ..................... Co...... 30 Smith v .. .......................................................... Prosken ........................ Russel ...... .......... 35 Spokane and Eastern Trust's Mortgage........................................13 Swanson v ............. Bennett .............................. Zawick ................. 88 Robertson v ...................... Fetsyk .......... 21 Trotzuk v .............. .................. 115 Rystephaniuk v ................... Pylypow .. .. Re ... 32 21............................................... Jones .......... Roe d ............... ............. Re ..... 119 Wortleyv....... 24 Sutherland v ....................... Violette ......... 120 Royal Bank and La Banque D'Hochelaga.............. ... 22 Wicks v ........................ Bannon .............. 166 Smith v ................................................................ .... .............. 17 Saunders v . .. Rice ..... Ridgeway and Smith's Contract....................C......... 10 Scandia Meat Market Ltd ................................ ...................... Waione Timber Co ...... City of Calgary ............. ............... Canadian Pacific R y ...................................................... 36 Violette v ............ Anstey ...................................... Attorney General of B.... Rural Municipality of Spruce Grove ...............Public Trustee for Alberta v .. ....... Gaugain .... 20 Sydie v ........ Anglia Building Society ............... Naish ............ 138........................................................ Hickman .... Simpson ............................ Great Fingall Consolidated ...... 37 Rogers v .......................... .............. 24 Thorndike v ................... 159................ 187 Trustees of Grosvenor St .............. Vandeleur v ............. 164 30.................................... 27 Rounsuell v .............. ................. ................ Ryan & Sons .. 36 Watson v .... ...... Presbyterian Church v ..................................... . Thorne . National Trust Co............ 175 69...... 21 T................................................................... ............ Challis ............................ Ogiluie ............... 32 Zbryski v ............................. ..