Property To Gerard And Amounts To Fraud example essay topic

VENDOR & PURCHASER: PART ONE - SEMESTER 1, 2003 ASSIGNMENT ONE QUESTION ONE An agreement was formed between Gerard and Rodney in November 2000. Rodney was to purchase Gerard's house to restore it and lease the property for a term of two years. A special condition of the purchase is that Gerard may repurchase the property for the sale price and the cost of any renovations made by Rodney during the duration of which he is the registered proprietor of the property. A contract for the sale of land was drawn up to reflect this information and the sale was completed. Contrary to the agreement made with Gerard, Rodney enters a further agreement with Keith to purchase the property.

Keith assures Rodney that he will honour the agreement that Rodney made with Gerard. After expiry of the lease Gerard notifies Keith that he wishes to repurchase the property. Keith tells Gerard that he is not bound by the contract between him and Rodney and will not sell. Torrens Title is the system that the vast majority of land in New South Wales is held under.

It is a register of land holdings maintained by the State that guarantees indefeasible title by registration for a registered proprietor, unless the fraudulent conduct of the grantee has rendered the interest defeasible. Indefeasibility is the "foundation of the Torrens system". An indefeasible title cannot be set aside on the ground of a defect in title before the interest was registered. In the Malaysian case of Loke Yew vs. Port Swettenham Rubber Co Ltd, Eusopi, a landlord, sold a small portion of his land to Loke Yew. He was given a transfer, paid his money and forgot to register his transfer. Eusopi sells the rest of the land to Port Swettenham who want to buy all the land, but Eusopi points out his commitment to Loke Yew.

Port Swettenham promises to look after Loke Yew and their agent signed a document stating "As regards Loke Yew's interest I shall have to make my own arrangements". On this basis Eusopi sells to Port Swettenham. Port Sewttenham immediately evict Loke Yew. On appeal, the Privy Council found fraud due to the breaking of a promise and ordered rectification by execution and registration of a transfer in Loke Yew's name. In the Western Australian case of Bahr vs. Nicolay the registered proprietors, the Bahr's, sold their property to Nicolay, who leased it back to them for a period of three years. The contract provided that at the expiration of the lease the Bahr's would enter a contract to repurchase the land for the sum of $45,000.00 payable by a ten per cent deposit and the balance within thirty days.

Subsequently the land was sold under a contract that contained a provision where the purchaser acknowledged the existence of the repurchase clause in the earlier contract. Registration occurred and the new registered proprietors, the Thompsons, then told the Bahr's that they "recognised" the repurchase clause and agreed to the sell the land for the sum of $45,000.00. The Bahr's later paid the deposit, but the Thompson's refused to sell the land. The High Court of Appeal ordered specific performance of the original contract for breach of the contractual obligation by Nicolay. The cases of Loke Yew vs. Port Swettenham Rubber Co Ltd and Bahr vs. Nicolay both show exceptions to indefeasibility through fraud.

Fraud is an exception to indefeasibility of title under section 42 of the Real Property Act 1900, but is not defined within the Act. Fraud must be "actual" fraud, being an intentional, deliberate and wilful act with the purpose of deceiving and cannot be carelessness. Mere notice of an unregistered interest does not amount to fraud. Keith had notice of the unregistered interest in the property. He was informed by Gerard of the special condition in the contract between Gerard and Rodney. Keith further informed Rodney that "he will honour the arrangement" being the agreement for Gerard to repurchase the property at the expiry of the lease for the sale price plus renovation costs.

This verbal agreement was acknowledgment of his intent to comply with the wishes of Rodney. Keith's assurance that he would sell the property to Gerard at the expiry of the lease was not brought to completion. Keith told Gerard that he is not bound by the contract between him and Rodney and refuses to sell the property to Gerard under the contract. This is a wilful and deliberate act, to obtain from selling the property to Gerard and amounts to fraud.

There were three elements present that amount to fraud, these are the notice by Keith of the unregistered interest, acknowledgment of the interest to be preserved and the assurance by Keith that he would honour the agreement was not intended to be kept.