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Article Excerpt
[This article considers the proper relationship between Barnes v Addy claims and the indefeasibility of Torrens title. In some recent Australian cases, including Farah Constructions Pry Ltd v Say-Dee Pty Ltd, courts have regarded this question as an important one to be resolved by balancing competing fundamental philosophies. Yet in other recent Australian cases, the question has been all but ignored. This article argues that, although the Torrens system may be underpinned by competing fundamental philosophies, these are no more apparent, nor any more difficult to reconcile, in eases involving Barnes v Addy claims than in cases involving claims of other types. The key to the argument is a correct understanding of the remedies that are available in response to a successful Barnes v Addy claim. This article concentrates on those remedies.]
CONTENTS I Introduction II Indefeasibility III The in Personam Exception IV Barnes v Addy Claims: Remedies A Remedies without Proprietary Consequences 1 Assistant Liability 2 Recipient Liability B Remedies with Proprietary Consequences 1 In Personam Orders 2 Declarations V Conclusion
I INTRODUCTION
Lord Selborne's judgment in Barnes v Addy (1) has been described as a 'display of Victorian self-confidence'. (2) Indeed, the judgment set out foundations for the whole law relating to the liability of an accessory to a breach of fiduciary obligation in only a few pages and without reference to authority. (3) Well over a century later, the observation may be made that the numerous progeny of Barnes v Addy lack the self-confidence of their illustrious ancestor and that the law relating to accessory liability is confused and confusing. This is true with respect to the law on the first and the second 'limbs' of accessory liability under Barnes v Addy: the liability of those who receive property as a consequence of someone else's breach of fiduciary obligation; and the liability of those who assist a breach of fiduciary obligation. (4) Even the High Court of Australia's recent decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd ('Farah Constructions'), (5) while clearing up some doubts about Barnes v Addy, raises a number of questions, the answers to which will have to wait for another day.
The debate has been conducted, and the subsequent confusion has arisen, with respect to the grounds of accessory liability. When it comes to recipient liability, the dispute is between those who think that such liability ought to be fault-based and those who think that it ought to be based on unjust enrichment. (6) When it comes to the liability of assistants, the dispute is between those who think that liability is triggered by knowledge and those who think that it is triggered by dishonesty. (7) Cutting across these divisions are further divisions regarding, for example, what types of knowledge suffice to ground liability (assuming that knowledge is the basis of liability), (8) whether an enquiry into dishonesty is really just an enquiry into knowledge by another name, (9) and whether, at least in cases of assistance, the fiduciary's breach of obligation must itself be dishonest. (10) And informing the debate, at least for some, is a concern to place accessory liability, along with other forms of liability, in a rational account of private law. (11)
While such matters have been thrashed out in the courts and the academy, other interesting topics bearing on accessory liability have received less attention. The remedies that are available in response to a successful Barnes v Addy claim constitute one such topic. (12) Indeed, in Farah Constructions, the High Court dealt with issues relating to remedies for accessory liability in just two paragraphs. (13) Another topic, which is connected with the question of remedies, is the subject of this article--namely, the proper relationship between Barnes v Addy claims and the indefeasibility of Torrens title. This issue arises in cases where a plaintiff brings a Barnes v Addy claim with the aim of compelling the defendant to divest a registered interest in Torrens land. It is sometimes said that such cases reveal a clash between, on the one hand, equity's requirements of conscience and, on the other hand, the principle of indefeasibility which characterises the Torrens system. (14)
A review of recent Australian cases reveals that some courts regard this clash as serious and profound, whereas other courts barely regard it at all. In Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd ('Sixty-Fourth Throne'), (15) Tara Shire Council v Garner ('Tara'), (16) LHK Nominees Pty Ltd v Kenworthy ('LHK Nominees') (17) and Farah Constructions, (18) the question of the proper relationship between Barnes v Addy claims and the indefeasibility of Torrens title was regarded as an important one to be resolved by balancing competing fundamental philosophies. Indeed, in Tara, Atkinson J went so far as to say that '[t]his case brings into sharp relief the great tectonic plates of law and equity as they grind against each other and struggle to settle into a stable position in the substratum of Australia's legal landscape.' (19)
Yet in Koorootang Nominees Pty Ltd v ANZ Banking Group Ltd ('Koorootang') (20) and the decision of the New South Wales Court of Appeal in Say-Dee Pty Ltd v Farah Constructions Pty Ltd ('Say-Dee'), (21) the question of the proper relationship between Barnes v Addy claims and the indefeasibility of Torrens title went almost unmentioned. In Koorootang, the parties did not argue the point (22) and, in Say-Dee, the NSW Court of Appeal dealt with the question in just three paragraphs. (23)
When an issue is regarded as fundamental in some courts but handled with brisk indifference by other courts in analogous cases, it is likely that somewhere the issue has been misunderstood. That is my argument in this article. In what follows, I contend that, although the Torrens system may be underpinned by competing fundamental philosophies, those competing philosophies are no more apparent nor any more difficult to reconcile in cases involving Barnes v Addy claims than in cases involving claims of other types. Therefore, the remarks of Atkinson J in Tara (24) overstate the significance of cases in which Barnes v Addy claims are made with a view to divesting a registered proprietor of an interest in Torrens land.
The key to my argument is a correct understanding of the remedies that are available in response to a successful Barnes v Addy claim. Therefore, an examination of such remedies dominates what follows. In Part II, I discuss the meaning of the indefeasibility of Torrens title. In Part III, I consider the doctrinal basis on which it is said that a Barnes v Addy claim may bring about the defeat of a registered title--namely, the in personam exception to indefeasibility. I note that an in personam claim may present a threat to a registered title where, as Barwick CJ put it in Breskvar v Wall, its 'terminal point' entails orders requiring the registered proprietor to divest the interest acquired by registration. (25) In Part IV, I turn to remedies in response to a successful Barnes v Addy claim. I make two arguments. First, because accessory liability is personal, the terminal point of a Barnes v Addy claim need never take the form of orders requiring the defendant to divest a registered interest in Torrens land. Secondly, a Barnes v Addy claim the terminal point of which does take the form of orders requiring the defendant to divest a registered interest in Torrens land, presents no unusual or special threat to the principle of indefeasibility.
II INDEFEASIBILITY
In Frazer v Walker, the Privy Council considered the meaning of 'indefeasibility of title': 'The expression ... is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys.' (26) In the Torrens system, such an immunity arises upon and because of registration. It is a true immunity in the sense that individuals who are able to assert interests in land under general law principles are disabled from asserting those interests against the holder of an inconsistent title acquired by registration, and they are disabled from doing so from the moment of registration. (27)
The principle of indefeasibility has been fundamental to the Torrens system from the time of that system's conception. In his second reading speech on the Bill that was to be enacted as the first Torrens legislation in Australia, Sir Robert Torrens himself, as a member of the South Australian Parliament, identified as one of the central principles of the system that the Bill was designed to introduce, 'that registered titles, except in cases where registration [is] procured by fraud, should be absolutely indefeasible.' (28) Indeed, today the principle of indefeasibility may be identified in the Torrens legislation of every Australian jurisdiction. (29) Moreover, despite the fact that some courts in the past applied the principle of indefeasibility subject to a qualification (the inspiration for which appears to have been the general law doctrine of notice), (30) other courts applied it rigorously, and it is that rigorous application which currently prevails. (31) Nevertheless, it is arguable that the principle is not applied as rigorously as Torrens might have desired, for it is often said that there are non-statutory exceptions to indefeasibility. (32) One of these is usually referred to as the 'in personam' exception.
III THE IN PERSONAM EXCEPTION
Having identified and described the principle of the indefeasibility of Torrens title, the Privy Council in Frazer v Walker stated that the principle 'in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant.' (33) This oft-repeated passage describes the circumstances in which what is commonly called the in personam exception to indefeasibility may arise. The basis of an in personam claim lies in the conduct of the registered proprietor. For example, think of a beneficiary's claim for the performance of a valid trust of an interest in Torrens land that has been declared by the registered proprietor of that interest; or think of a purchaser's claim for the specific performance of a binding and unconditional contract for the sale and purchase of a registered interest in Torrens land. The basis of both claims is the fact that a registered proprietor has, by their conduct--declaring a trust in the first example; entering into a contract in the second example--created legally enforceable rights in another person. (34)
The justification for permitting an in personam claim to be brought against a registered proprietor, and for disallowing the registered proprietor simply to assert indefeasible title to avoid the claim, was set out neatly by Brennan J in Bahr v Nicolay [No 2]: 'the indefeasibility provisions ... are designed to protect a transferee from defects in the title of the transferor, not to free him from interests with which he has burdened his own title.' (35) However, the title of a registered proprietor is not burdened by interests that are supportable only by invoking vague standards of fairness and justice. Rather, an in personam claim may bring about the defeat of a registered title only where it is brought within an established legal or equitable cause of action. (36) Moreover, courts have exhibited caution when invited by plaintiffs to permit an in personam claim to bring about the defeat of a registered title even in cases where plaintiffs have pleaded established causes of action. (37) The boundaries of the so-called in personam exception are carefully circumscribed and monitored by the courts, and nowhere has this been more evident than in cases such as Sixty-Fourth Throne (38) and LHK Nominees, (39) where Barnes v Addy claims were refused because it was thought that their acceptance would extend those boundaries impermissibly.
To describe an in personam claim as an exception to the indefeasibility of title is misleading. Where a title that would otherwise be indefeasible is, owing to the existence of some fact or facts, not indefeasible, an exception to indefeasibility is in operation. So, for example, an exception to indefeasibility exists with respect to titles that are encumbered by interests recorded on the register itself. The presence of a record of such an interest on the register is sufficient, by itself, to defeat an otherwise indefeasible title. However, it may not be said that an exception to indefeasibility exists with respect to registered titles held by those who must defend an in personam claim, nor even with respect to registered titles held by those who defend such a claim unsuccessfully. The fact that I have unsuccessfully defended an in personam claim against me is not, by itself, sufficient to defeat a registered title that I hold. True, it is sufficient to give rise to a judgment against me, which may entail orders requiring me to perform certain acts, and the performance of those acts might cause the defeat of a registered title that I...
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