Finance Law (Tutorial 7).doc - Lecture 7 Guarantee Torrens System Tutorial 7 Question 3 Petro Pty Ltd acts as the trustee for a family trust It is

Finance Law (Tutorial 7).doc - Lecture 7 Guarantee Torrens...

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Lecture 7 Guarantee & Torrens System Tutorial 7 Question 3 Petro Pty Ltd acts as the trustee for a family trust. It is registered as the proprietor of the land which it mortgages to the bank. Petro is falling behind in its payments and the bank has now discovered the existence of the trust. Whether Petro Pty Ltd as a trustee has an indefeasibility of title over the said land registered on behalf of the beneficiaries? Whether the beneficiaries has any remedies against the enforcement of mortgage created over the said land held under trust? The pivotal concept of Torrens system is indefeasibility of title . This means that a person or any entity who has registered their name on the Torrens Title register will become the owner of the land property to the exclusion of all others. A registered interest holder cannot have his/her interest defeated by an unregistered interest even when the interest holder register interest with notice of the existence of unregistered interest. In this case, by registering as a proprietor of the said land, this is a conclusive evidence of Petro Pty Ltd’s ownership and interests on the land. The indefeasibility of title has been passed on registration and it is protected from property claims because all other property interests are extinguished. However, the indefeasibility of title subjects to exceptions, where here the in personam exception applies. In personam exeption applies when there is creation of new equitable property rights and such rights could relate to events and conduct that arose prior to the registration where in this case the rights is arising from the family trust created. The land actually belongs to the beneficiaries although it had registered by Petro Pty Ltd as owner of the land. Generally, a family trust is a form of ‘inter-vivos’ trust which is created to benefit persons who are related to one another by blood, affinity, or law. In this case, a legal relationship arises when Petro Pty Ltd as the trustee is responsible for safeguarding assets (land) for the beneficiaries. In Foley v Hill (1848) 2 HL Cas 28; 9 ER 1002 (at 35) , a trustee is acted as an agent to deal with any property thus Petro Pty Ltd cannot defeat the best interests of the beneficiaries where it owes a fiduciary duty. Hence, this contractual right held under Petro Pty Ltd as a trustee has prevented it from asserting an indefeasible title on the said land even it is held on trust due to in personam exception.
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Lecture 7 Guarantee & Torrens System Whether the bank can enforce the said mortgage on the land held on family trust upon default of Petro Pty Ltd? Under the provisions of the various real property Acts, a mortgage has effect as a security but does not operate as a transfer of the land . In this case, it is a merely charge on the said land and the title is not transferred to the mortgage lender (the bank). Petro Pty Ltd still remains registered as proprietor and has a legal interest on the said land. The bank registers its mortgage interest on title noting as mortgagee below that of Petro Pty Ltd.
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