Case

Which case won?

casea
The case for the purchasers, Mr and Mrs M
  • Even though Ms I is still the registered owner of the property, she doesn’t win this case just by virtue of that. She had an equitable right to have the forged mortgage set aside, which the court has done. We also acquired an equitable right when we became equitable owners of the property upon signing the purchase contract. The court’s role is to decide which of these competing equitable rights takes priority, and the court should prioritise our right.
  • At the time we entered into the purchase contract, we knew nothing about the alleged fraud. The title search attached to the purchase contract at auction mentioned nothing about the existence of any caveat.
  • At settlement, we were under the impression that Ms I’s caveat had been removed by order of the Supreme Court, and that it was therefore safe to proceed with the purchase.
  • It’s due to Ms I’s conduct that we now find ourselves in the position we are in. She deliberately, and for payment of $40,000, agreed to release her caveat, knowing that the release would be used by us at settlement.
  • Ms I had a copy of the purchase contract, which identified us as the purchasers, because she was given it as part of the material in the mortgagees’ Supreme Court proceedings to remove the caveat. Knowing our identity, she then stood by, letting us proceed with the purchase while doing nothing to warn us of her intention to fight to retain the property.
  • Given the above, the court should order that our transfer of ownership be registered, thereby making us the registered owners of the property.
caseb
The case for the registered proprietor, Ms I
  • The property belongs to me and the court must rule accordingly.
  • The purchasers’ transfer of ownership was never registered by the Registrar of Titles, and I am still recorded on the register as the registered owner of the property. Since the law in Queensland provides for a system of title by registration, I am still clearly the owner, irrespective of any equitable interest the purchasers may have.
  • Even if the purchasers’ argument is accepted that this is a competition between equitable interests, what more could I have done to protect my interest? Not only did I lodge a caveat and notify the Registrar of the fraud, but I also notified the police.
  • The purchasers have admitted to the court that they did not undertake any title searches before signing the purchase contract. Had they done so, they would have been aware of the caveat before bidding at the auction.
  • It’s not my fault that the purchasers proceeded with settlement on the incorrect assumption that the caveat had been removed by an order of the court, rather than by me.
  • As for my agreement to release the caveat, I was pressured into doing so by the mortgagees and their lawyers. If I didn’t agree to their offer, I would have faced the mortgagees’ costly legal proceedings to remove the caveat, which I could not afford. In any event, I only gave my agreement to withdraw the caveat on the express basis that I reserved all my rights.
  • Given the above, the court must find in my favour and refuse to order the registration of the purchasers’ transfer of ownership.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case B won. You were right!

How people voted
case a35%
case b65%

Expert commentary on the court's decision

Sue Steel
Sue SteelConveyancing Paralegal
“The title search process enables the purchaser to verify that the seller is legally entitled to sell the property, to identify claims against the property that might impact ownership, and to identify restrictions that might impact the value or use of the property.”
Court rules registered proprietor has indefeasible legal title

In Issa v Owens [2023] QSC 4, the Supreme Court of Queensland found in favour of the registered proprietor, Ms Issa, and directed the Registrar to cancel the transfer of the buyers, Mr and Mrs Morecroft.

The court rejected Mr and Mrs Morecroft’s argument that the dispute was a contest between competing equities.

The contest was instead a contest between Ms Issa’s indefeasible legal title and the Morecrofts’ equitable interest.

Indefeasible legal title means that because Ms Issa’s name was listed on the registry as the registered owner of the property, her claim over the property could not be challenged by a third party, unless one of the statutory exceptions to indefeasibility applied.

In this case, no such exception applied.

The court therefore found that there was no basis to conclude that Ms Issa’s indefeasible legal interest should be postponed to the equitable interest of Mr and Mrs Morecroft.

Registered proprietor also has the better equity

The court noted that much of the argument advanced on behalf of Mr and Mrs Morecroft focused on competing equitable interests, which “… in that respect was misdirected and failed to grapple with the true nature of Ms Issa’s interest”.

The court then stated that even if it considered the matter as one between competing equities, Ms Issa would have the better claim.

Their reasons included that at the time Mr and Mrs Morecroft acquired their equitable interest, Ms Issa’s caveat had already been recorded on the register. The caveat operated as a “notice to all the world” of her interest and would have been apparent to anyone who searched the register.

Mr and Mrs Morecroft did not search the register, and instead relied on the outdated title search attached to the purchase contract, simply assuming that the mortgagees were able to transfer the legal title to the property.

Further, it could not be said that any act, omission or representation by Ms Issa, such as a failure to warn the Morecrofts, induced them to enter into the purchase contract.

Finally, the court did not consider Ms Issa’s conduct of agreeing to withdraw her caveat to be unmeritorious conduct of such a kind that her interest should be postponed to the Morecrofts’ interest.

State of Queensland ordered to pay compensation to property buyers

The Morecrofts also claimed compensation against the State of Queensland under the Queensland Land Titles Act 1994, for compensation for deprivation of an equitable interest because of the “fraud of another person”.

The court ruled in favour of the Morecrofts, ordering the State of Queensland to pay the couple $2.7 million, the current value of the property.

In State of Queensland v Morecroft & Anor [2024] QCA 11, the state appealed this ruling but was unsuccessful.

Buyers of real estate should conduct a thorough title search

Although the Morecrofts won compensation, they had to endure a protracted legal battle and were ultimately required by the court to vacate the property.

A case with similar facts to theirs would be unlikely to happen again in Queensland, because electronic conveyancing (or e-conveyancing) became mandatory in Queensland in February 2023 for certain types of instruments and documents.

E-conveyancing reduces the risk of fraud and is also mandatory in New South Wales, Victoria, South Australia and Western Australia.

However, this does not mean title searches are unnecessary. In fact, they are still absolutely essential.

The title search process enables the buyer to verify that the seller is legally entitled to sell the property, to identify claims against the property that might impact ownership, and to identify restrictions that might impact the value or use of the property.

The title search process can be complex, and it is advisable to seek the guidance of a professional.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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