Mercantile Mutual Life Insurance Co Ltd v Gosper
The issue before the court was whether Mercantile Mutual Life Insurance had an indefeasible title concerning a forged variation of a mortgage, or whether it was defeated due to the in personam exception to indefeasibility of title under the Torrens system. This case divided the bench and raises questions as to the application of the personal equities exception to indefeasibility under the Real Property Act 1900 (NSW) (‘RPA).[1]
I KIRBY P
President Kirby took a policy-laden approach. He held that, given no equities of third parties had arisen due to bad faith, Mrs Gosper sought to have the register recognise the personal equity between herself and the appellant. She had a ‘personal equity’ - the equity of redemption - which may only have been varied by deed under s91(1) and (2) or via variation ‘duly executed by the parties’ under ss36 RPA.[2] He found that as the variation was forged, it was not a deed and the personal equities existent prior to registration of the forged variation remained ‘wholly unaltered’ by registration.[3] Kirby P justified this on the basis that the loss should not fall on Mrs Gosper as she was ‘utterly innocent’[4] and to hold otherwise would be ‘an astonishing result’.[5] Feminist undertones are evident in his determination that the respondent had treated Mrs Gosper as a ‘mere extension of the husband’s property’ and this was ‘not warranted in law’.[6]
II MAHONEY JA
Mahoney JA also found in favour of Mrs Gosper, holding that the certificate of title was a vital step in securing registration and that the mortgagee had used Mrs Gosper’s certificate of title without her consent in breach of the obligations it owed her.[7] Whilst he acknowledged immediate indefeasibility,[8] this act created a personal equity enforceable against the registered proprietor of the mortgage. Significantly, ‘the mere fact of forgery of the instrument’ did not establish this personal equity; it was only produced by the ‘additional circumstance’ of unauthorised use of the certificate.[9] Mrs Gosper therefore had grounds to set aside registration of the variation.
Mahoney further noted that personal equities could arise against a new registered proprietor ‘independently of his or her own acts’,[10] rather than only from the acts of a new owner.[11] His rationale was that the latter ‘would result in the new owner retaining the registered estate in circumstances in which it should not’ and that it ‘should not be allowed to retain a benefit procured by an act which constitutes a breach of such obligations’.[12]
III MEAGHER JA
In dissent, Meagher JA emphasised that the legal effect of registration of a forged mortgage on land held under the Torrens system is now ‘well-settled’,[13] and that registrations resulting from void instruments are effective according to the terms of registration. He described the majority’s finding as resulting from a ‘sleight of hand’, stressing that the equity of redemption is ‘not a right to discharge the mortgage on tender of the amount contractually due’. Rather it is ‘to have the discharge on tender of whatever amount is due by operation of the relevant statute law’. [14]. Given Mrs Gosper’s title to payment of the increased principal had been irrevocably assured by registration of the variation, the varied mortgage was indefeasible and there was an obligation for her to pay the increased amount. The underlying policy concern was to reinforce public confidence in a secure and certain registration system. Meagher JA also dismissed the argument that Mr Gosper had acted as the mortgagee’s agent as there was no factual basis for this inference.[15]
IV WOULD THIS CASE BE DECIDED THE SAME WAY NOW?
The outcome of this case would be the same albeit with dissimilar reasoning due to both the introduction of new legislation and a disinclination to follow the majority judges’ formulation of the in personam exception to indefeasibility.
Under s185(1A) Land Titles Act 1994 (‘LTA’), a registered mortgagee can not rely on indefeasibility conferred by s184 if they fail to take steps to identify the mortgagor as required by ss 11A and 11B of the LTA.[16] This modification is directly applicable to the case of Gosper given the instrument of mortgage was executed by someone other than the registered proprietor of the mortgaged lot. Mercantile Mutual did not appear to have taken ‘reasonable steps’ to ensure that it was actually Mrs Gosper signing the original mortgage rather than her husband and they would not be entitled to the benefit of indefeasibility.
However, as Gosper was decided before the introduction of this legislation, majority judgements focused on the in personam exception to indefeasibility. Such reasoning has been criticised and would be unlikely to be followed today. Though ‘the limits of the in personam exception have not been clearly defined’,[17] Gosper nonetheless represents its ‘high water mark’.[18] Mahoney J’s notion that personal equities may arise against a registered proprietor ‘independently of his or her own acts’ has been slated.[19] Nor does Gosper sit with the principle that to rely upon the in personam exception, ‘the plaintiff has to demonstrate that they have a recognised legal or equitable cause of action’.[20] Mere unauthorised use by the mortgagee of the certificate of title is insufficient. Some cases even suggest an element of unconscionability,[21] however a concrete view is yet to be determined in Queensland.[22] At the very least, ‘anin personamclaim must be based on more than an innate sense of fairness’,[23] which does not seem to align with the majority’s reasoning.
The reasoning in Gosper also undermines confidence in the Torrens system.[24] As Franzon noted, ‘protection of the registered proprietor is paramount’.[25] Butt similarly argues ‘indefeasibility of title…is a harsh doctrine. That is its whole point. Any other approach diminishes the effectiveness of registration’.[26] Indeed, Windeyer J observed recent moves back from the ‘somewhat extreme decision’ in Gosper to prevent the in personam exception creating unnecessary inroads to indefeasibility.[27] This case exemplifies the delicate balance needed between the ‘certainty, security, and simplicity of the Torrens system’ and the ‘fairness and discretionary nature of equitable jurisdiction on the other’[28]. The majority’s reasoning does not strike this balance and would thus not be followed in the future.
V BIBLIOGRAPHY
A Books
Carmel MacDonald, Les McCrimmon, Anne Wallace and Michael Weir, Real Property Law in Queensland (Thomson Reuters (Professional) Australia Limited, 3rd ed, 2010)
B Cases
Breskvar v Wall (1971) 126 CLR 376 386
Conlan v Registrar of Titles [2001] WASC 201
Garcia v National Australia Bank (1998) 194 CLR 395
Harris v Smith & Ors [2008] NSWSC 545
Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR
Registrar of Titles (WA) v Franzon (1975) 132 CLR 611
Tanzone v Westpac (1999) NSWSC 478
Vassos v State Bank of South Australia [1993] 2 VR 316
White v Tomasel & Anor [2004] QCA 89
C Legislation
Land Titles Act 1994 (Qld) s185(1A)
Real Property Act 1900 (NSW).
D Journal Articles
Butt, Peter, ‘Indefeasibility and sleights of hand. - Whether a forged variation in a mortgage can be set aside’ (1992) 66 Australian Law Journal 596-597
Griggs, Lynden, ‘In Personam, Garcia v NAB and the Torrens System – Are They Reconcilable?’ (2001) 1 Queensland University of Technology Law & Justice Journal 79
Hang Wu, Tang, ‘Beyond the Torrens Mirror: A Framework of the in Personam Exception to Indefeasibility’ (2008) 32 Melbourne University Law Review 682
Sonter, David, ‘Case Note: Mercantile Mutual Life Assurance v Gosper’ (1992) 15(2) UNSW Law Journal 546-550
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LAWS3112Case AnalysisLaw of Property B
[1] David Sonter, ‘Case Note: Mercantile Mutual Life Insurance v Gosper’ (1992) 15(2) UNSW Law Journal 546-550
[2] Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR, 34
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Ibid 36.
[7] Ibid 48
[8] Ibid 41.
[9] Ibid 47.
[10] Ibid 45.
[11] Breskvar v Wall (1971) 126 CLR 376, 386.
[12] Ibid 49.
[13] Breskvar v Wall (1971) 126 CLR 376, 386.
[14] Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR, 52.
[15] Ibid.
[16] Land Titles Act 1994 s184, s11A, s11B.
[17] Carmel MacDonald, Les McCrimmon, Anne Wallace and Michael Weir, Real Property Law in Queensland (Thomson Reuters (Professional) Australia Limited, 3rd ed, 2010).
[18] Lynden Griggs, ‘In Personam, Garcia v NAB and the Torrens System – Are They Reconcilable?’ (2001) 1 Queensland University of Technology Law & Justice Journal 79
[19] Breskavar v Wall; Harris v Smith & ors [2008] NSWSC 545
[20] Tang Hang Wu, ‘Beyond the Torrens Mirror: A Framework of the in Personam Exception to Indefeasibility’ (2008) 32 Melbourne University Law Review 682.
[21] Vassos v State Bank of South Australia [1993] 2 VR 316, 69.
[22] White v Tomasel & Anor [2004] QCA 89; Harris v Smith & ors [2008] NSWSC 545, 11.
[23] Conlan v Registrar of Titles [2001] WASC 201, 87.
[24] Butt, Peter, ‘Indefeasibility and sleights of hand. - Whether a forged variation in a mortgage can be set aside’ (1992) 66 Australian Law Journal 598.
[25] Registrar of Titles (WA) v Franzon 66; Conlan
[26] Sonter, David, ‘Case Note: Mercantile Mutual Life Assurance v Gosper’ (1992) 15(2) UNSW Law Journal 546.
[27] Tanzone v Westpac [1999] NSWSC 478, 1.
[28] Lynden Griggs, ‘In Personam, Garcia v NAB and the Torrens System – Are They Reconcilable?’ (2001) 1 Queensland University of Technology Law & Justice Journal 80.