Bourseguin v Stannard Bros Holdings Pty Ltd [1991] QSCFC 57 [1994] 1 Qd R 231

ft h/oS'l ¥ nt IN THE SUPREME COURT OF QUEENSLAND FULL COURT Writ No. 4140 of 1988 BETWEEN : AND: AND: RAYMONDE BOURSEGUIN (Plaintiff) Respondent STANNARD BROS. HOLDINGS PTY . LTD. (First Defendant) NORTHERN BUILDING CONTRACTORS PTY. LTD. and CARCORP PTY. LTD. (Second Defendants) Appellants AND: TAWILLA PTY. LTD. (Third Defendant) Appellant MCPHERSON SPJ RYAN J DOWSETT J Reasons for judgment delivered by McPherson SPJ, Ryan and Dowsett JJ on 20 June 1991. Dowsett J agreeing with the reasons of McPherson SPJ and Ryan J. All concurring as to the order. "APPEAL DISMISSED WITH COSTS. II [1991] QSCFC 57 -- 1 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 4140 of 1988 Before the Full Court Mr Justice McPherson S.P.J. Mr Justice Ryan Mr Justice Dowsett BETWEEN: RAYMONDE BOURSEGUIN (Plaintiff) Respondent - and - STANNARD BROS. HOLDINGS PTY. LTD. (First Defendant) - and - NORTHERN BUILDING CONTRACTORS PTY. LTD. and CARCORP PTY. LTD. (Second Defendants) Appellants - and - TAWILLA PTY. LTD. (Third Defendant) Appellant JUDGMENT - MCPHERSON S.P.J. Delivered the Twentieth day of June 1991 CATCHWORDS Torrens system - Indefeasibility - Agreement for lease for five years - Sale of reversion - Subsequent further sale Simultaneous settlement of both sales - Vendor requiring that lease be registered before transfers - Second purchaser accepting transfers - Lease not registered - Whether fraud or personal equity binding on purchaser - Real Property Acts 1861-1969/ ss.44, 109. Counsel: W. Sofronoff Q.C., with him, Applegarth for the Respondent G. Fryberg Q.C., with him, McGill for the Appellants Solicitors: Seymour Nulty t/a for Quinn & Co., Chevron Island, for the Appellants Robert Lehn & Company for the Respondent Hearing Dates: 21, 22 and 23 March 1991 -- 2 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 4140 of 1988 BETWEEN: RAYMONDE BOURSEGUIN (Plaintiff) Respondent - and - STANNARD BROS. HOLDINGS PTY. LTD. (First Defendant) - and - NORTHERN BUILDING CONTRACTORS PTY. LTD. and CARCORP PTY. LTD. (Second Defendants) Appellants - and - TAWILLA PTY. LTD. (Third Defendant) Appellant JUDGMENT - MCPHERSON S.P.J. Delivered the Twentieth day of June 1991 This appeal concerns a claim to registration of a lease of registered land in competition with successive purchasers from the registered proprietor of the reversion. The first but not the second of those two purchasers having succeeded in being registered, the appeal also raises questions of fraud within the meaning of s.44 of the Real Property Act 1861-1969 and of the priority of competing equities before registration. It is necessary to begin by identifying the parties, their interests in the land, and their respective legal advisers who acted in the transactions leading to this litigation. The plaintiff respondent to the appeal is Mrs Raymonde Bourseguin. -- 3 of 44 -- 2 She was in 1988 the lessee of premises described as shop 1 in a shopping centre known as Somerset House, Chevron Island, in which she conducted a restaurant known as the Sandpiper. Her solicitors were Messrs. Short Punch & Greatorix, who acted for her until late July 1988, when the plaintiff instructed Miss Keating of the firm of Robert Lehn & Company, solicitors, of Surfers Paradise. The first defendant, which is not a party to the appeal, is Stannard Bros. Holdings. It was the registered proprietor of the land on which Somerset House stands, and hence the owner of the fee simple reversion expectant on the plaintiff's lease. Mr Brian Gillan was the first defendant's solicitor in the subject transaction. The second defendants, who are respondents to this appeal, are Northern Building Contractors Pty. Ltd. and Carcorp Pty. Ltd., for whom Mr R. J. Balanda of McDonald Balanda & Chesters, solicitors, acted. Those defendants, to whom I will refer jointly as the second defendant, contracted to purchase Somerset House from the first defendant by written contract (ex. 8) dated 14 June 1988. Finally, the third defendant Tawilla Pty. Ltd., also a respondent to the appeal, was a subsequent purchaser of the land under a contract (ex. 9) dated 24 August 1988. Its solicitor was Mr. J.W. Quinn, who was a director of the third defendant. He had effective authority to make decisions and generally to act on its behalf. The plaintiff was in possession of the leased premises under a registered lease (ex. 1) extending from 1 March 1983 to 1 March 1988. It contained in cl .12 what purported to be an option to renew for a further five years, which was however defective in -- 4 of 44 -- 3 law because it expressly left the rent to be fixed by mutual agreement of the parties : cf. Wilson Parking (Old.) Pty. Ltd, v. Booker Industries Ptv. Ltd. (1982) 149 C.L.R. 600, 604, 607. Despite this, the plaintiff by her solicitors on 10 November 1987 gave notice (ex. 2) of exercise of the option to renew, at the same time requesting that an additional five year option be granted to her. This was acceded to by the first defendant by letter (ex. 3) dated 13 November 1987. By 15 April 1988, which was after the original lease had expired, the first defendant's agents were writing (ex. 28) requiring payment from 1 May of an increased monthly rent of $1,006.16 based on the c.p.i. variation for December 1987 "in accordance with your agreement". It was paid then and thereafter by the plaintiff who, although later served by the third defendant with notice to quit, has remained in possession pending determination of these proceedings. In his reasons for judgment the learned trial judge, who was Shepherdson J. , said initially that, had it been necessary, he would have been prepared to find that the exchange of the letters exs . 2 and 3 gave rise to a binding and enforceable agreement for a five year lease on the terms of the old lease with a further option to renew for five years. In the end his Honour made a specific finding (correctly, in my respectful opinion) that an agreement for lease had by 15 April 1988 been concluded between the parties. The plaintiff and first defendant then proceeded to execute what became ex. 4, which was a formal instrument of lease first prepared (ex. 62) by Short Punch & Greatorix and signed by the plaintiff on 15 June 1988. It was executed by the first defendant as registered proprietor in Sydney on 14 July -- 5 of 44 -- 4 1988 and returned to Mr Gillan probably in the course of the ensuing week. The result was, as his Honour held, that the parties were bound in terms of ex. 4, and the judgment given at trial in favour of the plaintiff was designed to achieve registration of that lease. On 21 July 1988 Mr A.G. Stannard, who was the principal of the first defendant, came to Surfers Paradise from Sydney to attend a "without prejudice" conference with Balanda. The latter was acting for the second defendant purchaser and by that time was aware that the plaintiff's lease had been renewed. On 24 or 25 June 1988 Balanda prepared a memorandum (ex. 16) recording that "to the best of our knowledge this lease has been granted". His instructions were, however, to substitute in the lease a provision for rental variations in accordance with prevailing market rates in place of the existing provision for adjustment in line with movements in the consumer price index. Mr Quinn on behalf of the third defendant became a participant in if not the active promoter of these efforts. In the hope of achieving the substitution, Stannard consulted the tenants - besides the plaintiff, there was anther tenant affected - but without success. Gillan, who saw Stannard on his return from this interview on 26 July, observed him to be "very upset and shaking". The plaintiff is a French lady evidently of forceful personalty, and after his encounter with her Stannard declared his intention of carrying out what he had earlier agreed with her to do. In his evidence at the trial he remained adamant that at no time had he agreed to substitute a provision for review or adjustment of rental in accordance with prevailing market rates. -- 6 of 44 -- 5 His testimony on this point was accepted by his Honour and is not challenged on appeal. Once it is accepted that the parties, who were the plaintiff and the first defendant, were agreed on the terms of the new lease to commence upon the expiration of the registered lease on 1 March 1988, neither of them could effectively vary the terms of that lease without the assent of the other. Neither claimed to have done so. As a person having the benefit of a specifically enforceable agreement for lease, the plaintiff therefore was and is entitled, in accordance with the principle in Walsh v. Lonsdale (1882) 21 Ch.D. 9, to be considered in equity as the lessee of the shop 1 premises. Her equitable leasehold estate in that land is what she seeks to enforce against the second defendant's registered title as transferee of the reversion in Somerset House, and against the third defendant's later equitable interest as subsequent purchaser of that property. Neither of those two defendants now contests the existence of a valid agreement for lease between plaintiff and the first defendant. Subject to the appellants' other submissions, the plaintiff's equitable estate in the land is therefore indisputableOne of the matters in issue between the parties has been the precise moment at which the plaintiff's equitable estate came into existence. That is said to be a relevant consideration because, in determining a contest between competing equities that are equal, the general rule is that the first in time prevails. It was, it will be recalled, the conclusion of the learned trial judge that the plaintiff and the first defendant were bound -- 7 of 44 -- 6 in terms of ex. 4. This was the instrument of lease originally prepared by Short Punch & Greatorix (ex. 62) that was signed by the plaintiff on 15 June 1988 and by the first defendant on 14 July 1988. On 26 July 1988 Miss Keating received instructions to act for the plaintiff in place of her former solicitors. Thereafter the terms of the lease underwent certain variations by Miss Keating that resulted on about 2 August 1988 (ex. 46) in the final version of the lease that is ex. 4. In particular, cl. 12 of ex. 62 which purported to confer the option of a further five year lease at a rental for the first year to be mutually agreed (which would at law have been unenforceable and void) was replaced in cl . 13 of ex. 4 by provision for a current market rental to be fixed if necessary by valuation. In later years the rent was to be determined in accordance with a specified formula involving use of the consumer price index that was the same in the case of both ex. 62 and ex. 4, except that in the latter case cl. 14 expressly provided in effect that, if there was no increase in the consumer price index, the amount payable by way of rent in the preceding year was to be carried over to the following year. By the final sentence of ex. 62, notice of exercise of the option to renew was to reach the lessor at least three months before 1 March 1993; whereas by cl.13(h) of ex. 4, this date was altered to 1 March 1994. Under ex. 62 the option was exercisable at the expiration of the lease only if the lessee had duly performed all conditions, etc.; under ex. 4, it was exercisable if there was then no unremedied breach. It is possible to locate other differences between the two versions in exs. 62 and 4. None of them is, I think, likely to -- 8 of 44 -- 7 be important unless particular circumstances happen to prevail at the time the relevant clause falls to be applied. The defendants nevertheless submit that the effect of these variations was to constitute a new lease between the parties in terms of ex. 4 and so to supersede the lease already entered into in terms of ex. 62. In this context we were referred to the decision of the English Court of Appeal in Jenkin R Lewis Ltd, v. Kerman [1971] Ch. 477, where the authorities beginning with Donellan v. Read (1832) 3 B. & Ad. 899 were reviewed. The Court rejected the proposition apparently to be found in some of those authorities that an agreed variation in rent taking place in the course of the term of the lease necessarily involved a surrender of the existing lease and the creation of a new tenancy. Both the plaintiff and the defendants relied in support of their submissions on various passages in the reasons for judgment of the Court delivered by Russell L.J. in that case. In my view, however, the decision in Jenkin R. Lewis Ltd, v. Kerman and the authorities referred to in it are concerned with a different question; which is, whether, if a lease has already been granted, an agreement by a lessee to pay more can properly be described as producing a true "rent" issuing out of the land demised; or whether that result can be brought about only by resorting to the fiction of a,surrender and regrant at the increased rent. That is not the question to be determined here, where there is at present no more than an agreement for lease which, assuming it to be specifically enforceable, is to be considered as a lease only in equity. Because the agreement contemplates a lease for more than three years, it is required by s.52 of the Real -- 9 of 44 -- 8 Property Act to be registered; and until so registered it is at law not an effective lease : see Hill v. Cox (1882) 1 Q.L.J. 78. No question therefore arises as to whether the variations incorporated in ex. 4 have had the effect of working a surrender at law of the existing lease for five years because no such lease has yet come into existence. At law what the plaintiff now has is a periodic monthly tenancy (cf. Hill v. Cox ) and an agreement that by specific performance is capable of being turned into a legal lease for five years upon registration. Equity looks to the intent and, whether viewed as an equitable lease, or in law as a mere agreement for lease, the matter to be decided here is whether, by the alterations which they authorised, the parties were intending to rescind their existing agreement and substitute a new one; or were simply intending to vary their agreement without entirely abrogating or replacing it. To arrive at the former of these two conclusions it is "essential that there should have been made manifest the intention in any event of a complete extinction of the first and formal contract, and not merely the desire of an alteration, however sweeping, in terms which leave it subsisting". See Morris v. Baron & Co. [1918] A.C. 1, 19, per Lord Haldane. Judged by this standard there can be only one answer to the question in this case. Miss Keating was engaged by the plaintiff to have the lease registered. She wrote to Gillan on 27 July 1988 (ex. 42) setting out her instructions of what had already been agreed; that is, that the option for the further five years from 1 March 1988 had been exercised; that rent for the first year had been fixed at $1,003.16 per month, with rent in the -- 10 of 44 -- 9 second to fifth years to be adjusted in accordance with c.p.i. increases; and that there was to be a further option to extend for five years from 1 March 1993 on the same terms as the original lease, but with the rent in the first year of the option period to be agreed or, failing agreement, to be determined by valuation. Gillan replied on 1 August 1988 (ex. 43) confirming that the terms of the new lease as set out in her ex. 42 were "acceptable to my client". Although his letter speaks of a "new lease", it is plain from a conversation that Miss Keating had with him that the amendments to the lease that Gillan invited her to make were intended to bring it "into line with the original agreement between the parties". His Honour's finding that, after meeting the plaintiff on 21 July 1988, Stannard resolved to carry out his agreement and that he never agreed to substitute market rental reviews in the lease, is demonstrative of his intention, as it also is of hers. Under the procedure to be followed in the Titles Office an instrument of lease to be registered consists of Form 8 under the Real Property Regulations 1986, which sets out particulars of the names of parties, description of the land leased, the terms, and the rent, and contains a reference to agreed covenants and conditions in a Schedule. The latter is in Form 33 under the Regulations, and contains details of the rights and obligations of the parties. It was the provisions only of this Schedule that in early August 1988 the parties by their solicitors were occupied in altering. The instrument in Form 8, containing all the essentials of a valid lease, remained unaltered. In the light of all these circumstances there can in my opinion be no -- 11 of 44 -- 10 doubt that the parties were by ex. 4 intending only to vary and not to abrogate, rescind or extinguish ex. 62, which by 14 July 1988 both of them had executed. The plaintiff's equitable interest in the land can therefore be dated at latest from this event, and at earliest from or shortly after the expiration of the original lease on 1 March 1988 following the exchange of correspondence (exs. 2 and 3) that took place in November 1987 and the letter dated 15 April 1988 (ex. 28) fixing the rent at $1,003.16. It was the latter transactions that were found by his Honour to have resulted in a concluded agreement for lease, which is therefore the starting point of the plaintiff's equitable leasehold interest. As such it is prior in time to both the first contract (ex. 8) dated 14 June 1988, or the second contract (ex. 9) dated 24 August 1988. Irrespective of which of the foregoing events is chosen, the alterations in early August 1988 that produced ex. 4 did not involve a replacement of the earlier agreement, or the equitable interest to which it gave rise, with another and different agreement or interest of later date. Events following the receipt by Miss Keating of instructions from the plaintiff can be summarised as follows. In his conversation with Miss Keating, Gillan undertook that he would attend to immediate registration of the plaintiff's lease in order to protect her client's interest. It was an undertaking that he failed to honour in accordance with its terms. Miss Keating arranged to have the lease stamped, and on 8 September 1988 she sent it to her Brisbane agents to await an appointment to lodge it for registration in conjunction with the certificate of title required for that purpose. Settlement of -- 12 of 44 -- 11 the successive contracts of sale in favour of the second and third defendants was arranged for 12 September 1988 but was deferred to 13 September. It took place on that day in Gillan's office at Surfers Paradise in the presence of Gillan acting for the first defendant, Balanda for the second defendant, Quinn for the third, and a Mr Perrin representing a mortgagee who was lending money to the third defendant. Miss Keating was not present, because despite the undertaking given to her no one told her that settlement of the contracts was taking place. She learned of it from Gillan only on 15 September 1988. In consequence no one attended at settlement to protect the interests of the plaintiff. What happened at settlement on 13 September can best be recounted substantially in terms of his Honour's findings on the subject. He found that both Balanda and Quinn were well aware of the plaintiff's lease and of the fact that it was to be registered. In a letter (ex. 19) dated 7 July 1988 to Gillan, Balanda had described it as a "lease to be registered"; and he enclosed a copy of that letter when he wrote ex. 13 to Quinn on 29 July 1988. By 11 August 1988, which was almost a fortnight before the contract of sale (ex. 9) dated 24 August 1988, Quinn had received (exs. 11, 22) a copy of the lease in its final form ex. 4. In the course of settlement Gillan handed to Quinn a letter (ex. 10) dated 12 September 1988. In it Gillan advised that the certificate of title to the Somerset House land was in the Titles Office pending registration of another lease, and he undertook to deliver it when it was returned to him by the Titles Office. The letter further advised that plaintiff's solicitors -- 13 of 44 -- 12 were awaiting lodgement of the certificate of title relative to shop 1 in order to register the plaintiff's lease "which should precede any other document". The letter contained a final paragraph referring to rates and an undertaking to attend to adjustments of rentals. In addition, and before handing the letter ex. 10 to Quinn, Gillan also, as his Honour found, told him that "before any documents could be lodged in the Titles Office for registration the registrable lease that [the plaintiff's solicitors'] office had and was ready to lodge had to precede any other document". According to Gillan, no one else attending the settlement said anything relevant apart from Quinn, who altered ex. 10 by inserting the words "as at 12/9/88" after "rentals" in the last paragraph. He returned ex. 10 to Gillan, asking him to initial the alteration, which he did. The letter ex. 10 was then re-delivered to Quinn. The purchase money was at the direction express or implied of Quinn paid by the mortgagee direct to Gillan on behalf of the first defendant. Although present, Balanda took no active part in the proceedings, and remained silent throughout. Immediately after the settlement, and out of the hearing of Gillan, Quinn told Perrin to lodge the documents for registration as soon as possible. These documents included the transfers from first to second defendant, and from the latter to the third defendant, together with the relevant certificates of title. The plaintiff's lease ex. 4 was not among them; it was still with the plaintiff's solicitors' Brisbane agents awaiting the appointment to lodge it for registration. -- 14 of 44 -- 13 After discovering what had happened Miss Keating telephoned Quinn on 16 September saying that she was ringing to arrange lodgement in conjunction of her client's lease. He told her that he had to get instructions; he did not think there would be any problem but one of his clients was in New Zealand. This was only partly true. A series of communications followed in which Miss Keating attempted to arrange lodgement of the plaintiff's lease to precede registration of the transfers. During these encounters Quinn resorted to falsehoods and to tactics that were found by his Honour to have the deliberate purpose of "fobbing off" Miss Keating in order to gain time to enable the transfers to be registered first. In the end a caveat was lodged on behalf of the plaintiff, but not until after registration of the transfer to the second defendant, which now appears as registered proprietor of the Somerset House land free of the plaintiff's lease. The caveat did, however, succeed in preventing registration of the following transfer to the third defendant, which has not yet been registered as proprietor. The mortgagee from the latter took no part in the proceedings, although its mortgage presumably remains unregistered. In the circumstances as I have outlined them, his Honour found Mr Quinn to have been guilty of "patent cheating". He also, for reasons to be considered later, found conduct on the part of the second defendant amounting to "fraud", as that term is used in s.44 of the Real Property Act 1861-1989 in specifying the exceptions to "paramountcy" of the title of the registered proprietor; and also as used in s.109 of the Act in excluding the effect on a transferee of actual or constructive notice of -- 15 of 44 -- 14 unregistered claims or interests. In consequence he decided that the second defendant held its interest as registered proprietor in the Somerset House land subject to the plaintiff's lease ex. 4; and he ordered that in respect of that land an estate or interest comprised in that lease vest in the plaintiff on and from 1 March 1988. On appeal, the submissions of the appellant defendants were directed primarily although by no means exclusively to challenging his Honour's finding of fraud against the second defendant. In my view it is convenient to begin by considering the legal positions of both the second and third defendants together, while concentrating for the moment on the latter. In doing so, it is as well to bear in mind first, that a principal purpose and effect of the Torrens system was and is to abrogate the doctrine of notice so as to prevent it from continuing to plague transferees of legal estates or interests in land; and, secondly, to accomplish that aim by ensuring that once legal title to land is acquired by registration, the person so registered holds a title that, apart from specified exceptions, is free from unregistered claims or interests that under the general law would be held to arise from notice and the consequences attaching to it in equity : cf. Bahr v. Nicolav (No . 2) (1988) 164 C.L.R. 604, 652-653, per Brennan J. Speaking generally, s.44 of the Act may be seen as achieving the second of these two purposes, and s.109 the first; but, given that, as Professor Whalan observes, judicial opinion is "overwhelming" that the section operates only when registration is finally completed : The Torrens System in Australia , at 272, it may be -- 16 of 44 -- 15 that in the end s.109 really adds little more than explanation or emphasis to the general declaratory provisions of s.44. Section 109 does, however, expressly mention "actual notice", which, when used as it is in that section by way of contrast to "constructive notice", can only refer to affirmative knowledge of unregistered claims or interests. Accordingly, it is now well settled that "mere" knowledge on the part of a prospective transferee that an outstanding equitable interest exists and will be extinguished by registration of the transferee is not by itself sufficient to constitute "fraud" within the meaning of s.44 or s.109 of the Act : see Stuart v. Kingston (1924) 34 C.L.R. 394; Friedman v. Barrett , ex parte Friedman [1962] Qd.R. 498, 504, 512; Mills v. Stokman (1967) 116 C.L.R. 61, 78; Bahr v. Nicolav (No. 2) (1988) 164 C.L.R. 604, 613, 630, 652-653. How much more than mere knowledge is required to constitute fraud is debatable. A classic case, and one of the comparatively few illustrations of fraud under s.44 or its equivalent, is that of the transferee who, after achieving registration, repudiates a pre-registration undertaking, which he had fraudulently given to the proprietor, to acquire an unregistered interest thus enabling him to procure the transfer to him in unencumbered form : see Loke Yew v. Port Swettenham Rubber Company [1913] A.C. 491, as explained in Bahr v. Nicolav (No. 2) (1988) 164 C.L.R. 604, 614-615, 631 , 654. The decision in the latter case is itself an instance of that kind, the High Court having held that the transferees there assumed the character of trustees by taking the transfer on terms requiring them to recognise the unregistered interest. The decision in Bahr v. Nicolav (No. 2) was recently -- 17 of 44 -- 16 applied by this Court in Powprop Ptv. Ltd, v. Valbirn Ptv. Ltd. [1991] 1 Qd.R. 295 to the case of a registered transferee who, pursuant to its contract for purchase of the reversion, notified its "acceptance" of the terms and conditions contained in certain leases, including an unregistered lease containing an option to renew, to which the transferee was consequently held to have undertaken to bind itself. In my view the present case is distinguishable from both Powprop v. Valbirn and Bahr v. Nicolav (No. 2) . Here the printed form of contract of sale (ex. 8) from first to second defendant contained in cl . 2 the standard provision requiring payment of the balance purchase price on completion date in return for "possession. .. to be vacant except for tenancies stated in Itern M" , together with a registrable transfer free from encumbrances, and so on. Item M referred simply to "All existing tenancies". In addition, there was a typed special condition 30 expressed as follows: "30. This contract is subject to the purchasers and their solicitors perusing all leases over the property within 14 days of the date hereof and their being totally satisfied with the terms of such leases. The vendor agrees to produce copies of such leases to the purchasers or the purchasers solicitors as soon as possible. " His Honour considered that the effect of this clause in the contract ex. 8 was that the second defendant purchased the Somerset House land on terms that it would be bound by all leases perused under cl. 30 as to which the second defendant or its solicitors expressed their satisfaction in terms of that clause. The leases, including what was to become ex. 4 in favour of the plaintiff, were perused by Mr Balanda as solicitor for the second -- 18 of 44 -- 17 defendant, and by letter dated 29 June 1988 (ex. 17) Balanda notified Gillan of his satisfaction with them. On behalf of the second defendant, it was submitted that the satisfaction expressed in the letter ex. 17 was in truth directed to a lease with the plaintiff that was to embody a market rental review provision, and certainly not to ex. 4, which came into existence only much later in August 1988. I do not find this submission at all persuasive; but it ceases to matter if cl. 30 does not have the effect ascribed to it by his Honour. As to that, I am with respect satisfied that cl. 30 did not have the consequence that the second defendant became bound by the leases comprehended by that clause. Like the printed standard cl. 2, its sole functions were in my view to assist in modifying the obligation of the first defendant to provide vacant possession and a title free of encumbrances by identifying specifically the leases that diminished that obligation : see Travinto Nominees Ptv. Ltd, v. Vlattas (1973) 129 C.L.R. 1, 12, per Barwick C.J.; and also in this instance to invest the second defendant, if it was not satisfied with the terms of the leases, with an option to determine the contract. Unlike the provisions considered in Powprop v. Valbirn and Bahr v. Nicolav (No. 2) . there is nothing in cl. 30 or the surrounding circumstances, if they are relevant, to justify a conclusion that the second defendant affirmatively undertook to acknowledge, recognise or accept the plaintiff's agreement for lease or to be bound by its terms. Clause 30 of the contract of sale therefore cannot be used as a foundation for a finding of fraud. To be sustainable, a conclusion to that effect must rest upon the events that took -- 19 of 44 -- 18 place at settlement on 13 September 1988. Having described what happened on that occasion, the learned trial judge went on to find that Quinn had agreed to lodge the plaintiff's lease in conjunction with the two transfers and certificates of title, so as to ensure that the lease would be registered before the transfers. It is true that nothing was said by Quinn that manifested any such agreement. Rather, it is a matter of inference founded on conduct consisting of Quinn's acceptance of the transfers on the condition made known to him by the letter ex. 13 delivered by Gillan to Quinn and the latter's oral statement to him before settlement took place. It must be admitted that in this regard Gillan might well have been more forthright and specific in the expressions he used on settlement; but I nevertheless consider that it sufficiently appeared from what he wrote and said that he was making it an express condition of a settlement by the first defendant of its contract that registration of the plaintiff's lease should take place first, and that the transfer documents were being delivered to Quinn on that premise. That is how Balanda, viewing it as an observer, said he understood it to be. Quinn asserted a contrary belief; but once the condition is shown to have been communicated to him, he was left with a choice between only two alternatives. He could accept the condition sought to be annexed by Gillan on settlement, in which event he would be bound by the condition; or he could reject it, in which event the settlement might not have proceeded and the parties would have been left to their rights under their respective contracts. By "reject it", I mean communicate his rejection of -- 20 of 44 -- 19 it; for what Quinn could not validly do was to make a mental reservation to reject but nevertheless continue acting as if he were proceeding to settle subject to the condition tendered. If, said Blackburn J. in Smith v. Hughes (1871) L.R. 6 Q.B. 597, 607, whatever a man's real intention may be: ".. .he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms". Settlement of a sale of land is, of course, an occasion for performing not for making a contract; but the character of a settlement has about it, as indeed its name implies, much that resembles an accord and satisfaction, so rendering his Lordship's remarks appropriate to the occasion in question here. Silence like that preserved by Quinn at the time when the documents were handed over to him could be construed by a reasonable bystander to mean only that he accepted without protest the condition annexed. To say nothing when doing so created the unavoidable impression that he was assenting to the condition. To attempt now to retain the advantages of his silence while repudiating the condition amounts to a species of fraud acknowledged both in equity and at common law : in addition to Smith v. Hughes , see A. Roberts & Co. Ltd, v. Leicestershire Countv Council [1961] Ch. 555; Johnstone v. Commerce Consolidated Ptv. Ltd. [1976] V.R. 724; Majestic Homes Ptv. Ltd, v. Wise [1978] Qd.R. 225. In Riverlate Properties Ltd, v. Paul [1975] Ch. 133, 140, Russell L.J. said that, in order to attract the principle "a degree of sharp practice" is required. The learned trial judge in this -- 21 of 44 -- 20 case expressly found that Quinn was acting in a "sharp" manner in what he did. In my opinion the conclusion that Quinn was guilty of fraud or, to use his Honour's phrase, "patent cheating" was in the circumstances well justified. It may be added that, fraud apart, the course of conduct at settlement was almost certainly sufficient to constitute Gillan's delivery of the executed transfer documents a delivery in escrow subject to the stated condition : see Norton on Deeds . 2nd ed., at 18-22; 12 Halsburv . 4th ed., paras. 1332-1334, at 525-528; Thompson v. McCullough [1947] K.B. 447, 453-454. The certificate of title itself amounted to a deed under the statute, and, although by s.35 of the Act the instruments of transfer would not become deeds until registration, the authorities referred to in those texts demonstrate the readiness with which the imposition of a condition may be inferred in circumstances like those that prevailed at settlement in this case. However the matter is approached, Quinn and therefore the third defendant are directly within the principle in Loke Yew v. Port Swettenham Rubber Co. and Bahr v. Nicolav (No, 2) . whether his conduct is viewed as fraud within s.44, or as giving rise to some form of personal "equity" continuously enforceable against the third defendant as the person creating it; indeed, fraud must necessarily be regarded as one, even if it is the most compelling, of all personal equities that are recognised as capable of qualifying the title of a proprietor, registered or to be registered, under the principle adopted in Barry v. Heider (1914) 19 C.L.R. 197 and many other decisions including Bahr v. Nicolav (No. 2) itself. -- 22 of 44 -- 21 The third defendant has, of course, never become the registered proprietor, so that it is strictly speaking not necessary to go the length of finding that it, or Quinn on its behalf, was guilty of fraud under s.44. Being as yet unregistered, the third defendant's title continues to rest at most in equity as purchaser pursuant to the contract (ex. 9) dated 24 August 1988 for sale of the reversion. The third defendant was, however, perfectly well aware at the time of execution of ex. 9 of the existence of the plaintiff's prior equitable interest; and its fraudulent behaviour in attempting to overreach that interest by seeking to register the transfer to it in defiance of the condition annexed and accepted at settlement is scarcely conduct of a kind that would endear it to a court of equity. It would obviously be quite against conscience to allow the third defendant now to escape with the Somerset House land free of the plaintiff's lease, or to order that the contract ex. 9 be specifically performed in derogation of the plaintiff's rights. As between plaintiff and third defendant, the balance of merits is thus firmly tilted in favour of the former; and, even were the merits equal, the equitable interest of the plaintiff, being first in time, would on ordinary principles expect to prevail over those of the two later purchasers : see Rice v. Rice (1853) 2 Drew 73; 61 E.R. 646; Latec Investments Ltd, v. Hotel Terrigal Ptv. Ltd. (1965) 113 C.L.R. 265, 276; Bahr v. Nicolav (No. 2) (1988) 164 C.L.R. 604, 616. -- 23 of 44 -- 22 The third defendant's response to this is to invoke cl. 39 of its contract with the second defendant. It is in the following terms: "39. Provided settlement takes place the vendors agree to assign to the purchaser all of their right title and interest under or in connection with the Contract of Sale between the vendors herein and Stannard Bros. Holdings Pty. Ltd. dated the 14th June, 1988 including all rights and entitlements to take action against Stannard Bros. Holdings Pty. Ltd. or any Lessee of any of the shops or suites in the building." Whether any assignment contemplated by the agreement in this clause has in form and in fact taken place is not revealed; without it, the third defendant might need the aid of equity to make it good. The point at issue is, however, that under cl. 39 the third defendant claims to be entitled to the second defendant's equitable interest under its contract ex. 8 dated 14 June 1988 for the purchase of Somerset House. By virtue of registration of the transfer to it, the second defendant is, it was submitted, free from notice of the plaintiff's interest and any equities arising from it; and that being so, it is said to be able to give a good title to a purchaser from it, even if like the third defendant that purchaser is itself affected by notice : see Re Stapleford Colliery Co. . Barrow's Case (1897) 14 Ch.D. 432, 445; Wilkes v. Spooner [1911] 2 K.B. 473, 483; Snell ' s Equity . 29th ed., at 56-57. In Scott on Trusts . 3rd ed., para. 316, at 2494, the principle is succinctly stated as that if the trust property has once reached the hands of a bona fide purchaser without notice, "the equity of the beneficiary is effectively cut off" . Both Scott and Snell emphasise that the rationale of the rule is that, apart from it, the property would -- 24 of 44 -- 23 in effect become unsaleable in the hands of a bona fide purchaser for value without notice. There are, however, three distinct reasons for supposing that the principle stated by Snell and Scott has no application to the circumstances of this case. The first is that the third defendant is not simply a person with mere notice or even knowledge of a prior equity; it is, on the finding made by his Honour, one that engaged in deliberate "cheating" amounting to fraud. Thus, in stating the principle, Scott (para. 316, at 2494) draws on the analogy of the holder of a negotiable instrument, who derives his title through a holder in due course "and who is not himself a party to any fraud... affecting the instrument". While it therefore may be that others with notice or even knowledge can safely acquire the Somerset House land from the second defendant, the third defendant in consequence of its fraud may very well be the only person in the world that is incapable of acquiring title to it free of the plaintiff's leasehold interest. Secondly, the third defendant has not yet qualified as a "purchaser" of the legal estate, and will not do so until it achieves registration as proprietor, which it is the whole object of these proceedings to prevent. Finally, the application of the principle assumes that as intermediate purchaser the second defendant holds a title by registration that is itself unassailable under s.44 and so capable of transfer to the third defendant without regard for the latter's obligation undertaken on settlement to respect the plaintiff's lease. As I have already said, the learned trial judge found that the second defendant was guilty of fraud under s.44 in acquiring -- 25 of 44 -- 24 its title in defiance of an obligation that his Honour considered it to have undertaken under cl. 30 of its contract (ex. 8) with the plaintiff to purchase the Somerset House land. I have earlier given reasons for my opinion that that ground of decision cannot be sustained. His Honour went on to find that Balanda remained silent at settlement "because he believed the basis upon which the letter [ex. 10] was delivered was accepted and that Mr Gillan made clear to Mr Quinn that the lease for shop 1 should precede [registration of] any other document". That finding in a sense tends, as the appellants emphasised, to negative fraud on the part of Balanda and his client. But the fraud, if any, on the part of the second defendant was held to consist not in Balanda's conduct at the settlement, but in the second defendant's action in presently asserting as registered proprietor a title to Somerset House that is absolute and unqualified by the plaintiff's leasehold interest, and in doing so in breach of the arrangement at settlement that the lease should be registered first : cf. Bahr v, Nicolav (No. 2) , at 615-616, 654. The way in which Balanda approached the settlement was, not unexpectedly, that if Quinn was satisfied to settle on the instruments tendered by Gillan, his client the defendant had sufficiently discharged its own contractual obligations. I say "not unexpectedly" in part because of the nature of the settlement itself, which involved the second defendant in the largely passive role of permitting all the transfer documents to be passed across to the third defendant; and in part also because of a remarkable series of provisions contained in the typed -- 26 of 44 -- 25 special conditions of sale in the second contract ex. 9. Among these are (to mention only some) cl. 31, providing that the third defendant purchaser agreed to make no claim in respect of the terms of the leases of properties in the buildings, and agreed to indemnify the second defendant purchaser in respect of any claim by the first defendant as registered proprietor or any of the tenants in the building; cl. 34, by which the purchaser indemnified the vendor in respect of any action taken by the first defendant or any lessee concerning any matter or thing arising out of or in connection with any of the leases or shops; cl. 35, by which the third defendant acknowledged that the second defendant was not the registered proprietor of Somerset House, and agreed to accept a prior stamped transfer and a following transfer in satisfaction of the standard obligation in printed cl . 2 of the contract to transfer the land; and cl. 36, by which the third defendant agreed to make on settlement no objection to the fact that leases for the shops were not registered. These clauses represent a considerable enlargement of those to be found in an earlier draft contract (ex. 21 ) for sale by the first defendant direct to the third defendant for the same purchase price ($2,251,750) as in ex. 9. Although executed by the third defendant, that contract evidently was not proceeded with. The special conditions, and in particular cll.35 and 36, were regarded by Shepherdson J. as confirmatory of Quinn's overall plan to cheat the plaintiff out of her lease. Taking control of both transfers and the other documents at settlement enabled him to ensure that the plaintiff's lease was not registered ahead of those transfers. His Honour's findings do -- 27 of 44 -- 26 not, however, sustain a conclusion that Balanda acting for the second defendant was a conscious participant in this plan. On the contrary, the trial judge accepted Balanda's evidence that at settlement he expected the condition requiring prior registration of the plaintiff's lease to be fulfilled. Balanda 1s attitude on that occasion was, his Honour found, to "delegate" to Quinn the responsibility of ensuring that the second defendant saw to it that the transfer to it was registered subject to the plaintiff's lease. However this, and the learned judge's further conclusion that it would be fraud for the second defendant now to contend that its registered title was held free of that lease, depends ultimately on acceptance of cl. 30 of the contract ex. 8 as the source of an obligation by the second defendant to respect that lease after registration. For the reasons given earlier I am not prepared to assent to that proposition. In these circumstances, it is by no means easy to discover a basis for a finding of fraud on the part of the second defendant. For the plaintiff it was submitted on appeal that, having at settlement stood by and acquiesced in the course adopted by Gillan and Quinn, Balanda or through him the second defendant was as much bound by the condition accepted by Quinn as was the third defendant itself for whom the latter acted; alternatively, it was submitted the second defendant was on the register only as intermediate transferee and, having been paid in full, it had in consequence no equity or interest in the Somerset House land; or, finally, that the plaintiff had a personal equity against the second defendant entitling her to -- 28 of 44 -- 27 have her lease registered in priority to the transfers of the fee simple reversion. Unless the second defendant can be regarded as having by its acquiescence in the events at settlement become bound by the condition concerning the sequence of registration, I am unable to identify any basis on which a personal equity can have been raised in favour of the plaintiff binding the second defendant to have the lease registered ahead of its own transfer. On the other hand, it is plain that, as between the second defendant as vendor and the third defendant as purchaser, the former now stands in the relation of trustee for the latter as cestui que trust of the Somerset House land. That is a consequence that ordinarily follows from a specifically enforceable contract for the sale of land : see Lvsaght v. Edwards (1876) 2 Ch.D. 499, 506. Even if the constructive trust that so arises is not perhaps as unqualified as may be suggested by Jessel M.R. in that case, the circumstances here afford a plain instance of a vendor who in every sense has now become a trustee for the purchaser. The second defendant has been paid in full; it has passed over the instruments of transfer and title; it has performed all its obligation; and it has the benefit of the express indemnities in the special conditions of sale ex. 9. The second defendant is, in short, nothing but a bare trustee for the third defendant of the registered title to the Somerset House land which it now holds in its name, and as such can be ordered to deal with that property as the third defendant directs : see Stephenson v. Barclays Bank Trust Co. Ltd. [1975] 1 W.L.R. 882. -- 29 of 44 -- 28 There is thus no basis on which the second defendant can properly resist a proper direction from the third defendant to transfer the land or an interest in it to that defendant or to anyone else, or to facilitate registration of the plaintiff's lease before registering the transfer to the third defendant. If it were to resist, the third defendant as beneficiary would be entitled to an order compelling the second defendant to perform its trust by carrying out the direction; or else to an order removing the second defendant from the office of trustee and consequentially also from the register of title. For the Court to exercise jurisdiction to order the second defendant to act in this way presupposes, however, a direction to the second defendant and an application to Court by the third defendant as beneficiary and sole party interested; otherwise there would be no foundation for judicial intervention to enforce a trust under which the duties of the trustee were owed exclusively to the third defendant. There is, in other words, no existing "equity" enforceable against the second defendant, except at the instance of the third defendant, to compel it to take such a course. The position of the third defendant is, however, altogether different. It has the sole beneficial interest in the Somerset House land of which the legal title is held in trust for it by the second defendant. That beneficial interest is, however, not unqualified or complete. Having against it a finding of fraud and a personal equity in favour of the plaintiff, the beneficial interest in that land is in the hands of the third defendant subject to the plaintiff's equitable interest as lessee. To the extent of that interest the third defendant holds the land on -- 30 of 44 -- 29 trust for the plaintiff. It would continue to do so even if title to that land were transferred to it so that it became the registered proprietor. That is a consequence in law of the fact that the third defendant's fraud in this case involves an exception to or subtraction from the "paramountcy" or indefeasibility of title otherwise conferred by s.44. Alternatively, viewed as a "personal equity" created, if before registration, by the third defendant itself, it will not be extinguished but will continue to attach to the third defendant even after registration in its name of title to the land : see Bahr v. Nicolav (No. 2) (1988) 164 C.L.R. 604, 613. The third defendant can therefore be compelled to perform its trust and to satisfy the equity that it assumed when at settlement Quinn on its behalf accepted the transfer documents on the condition that the plaintiff's lease would be registered in priority to the two transfers . The circumstance that title to the land remains in the name of the second defendant, which is itself not subject to any such trust or equity in favour of the plaintiff, is in the ) circumstances therefore immaterial. Indeed, the fact that the second defendant has become the registered proprietor tends only to obscure the legally decisive fact that the third defendant is independently bound by the equity to which its own conduct gave rise. The case is not one involving property that, like the company shares considered by the High Court in Ascot Investments Ptv. Ltd, v. Harper (1981 ) 148 C.L.R. 337, is subject to special incidents or discretionary powers over which the Court can have no control. The land is in the name of the second defendant -- 31 of 44 -- 30 subject to a bare trust in favour of the third defendant. The Court can therefore act upon the conscience of the third defendant to compel it to direct the second defendant as trustee to act in a manner that will give effect to the trust or equity binding the third defendant. It can thus by taking two steps achieve indirectly what it could strictly not achieve directly by taking only the single step of directing the second defendant to hold the land in trust for the plaintiff to the extent of her leasehold interest in the land. All of this follows from the circumstance that it was the third defendant itself that created the equity in favour of the plaintiff. It must be added that because of the view formed by the learned trial judge of the conduct of the second defendant as having been guilty of fraud, the two steps have here been compressed into one. An order was made directly vesting the leasehold interest of the plaintiff in the Somerset House land held by the second defendant as registered proprietor. Consistently with what I have said here, the proper course would be to order the third defendant to give effect to the trust of the plaintiff's equitable leasehold interest by executing or consenting to the lease, or preferably by consenting to its registration ahead of the transfer to it, and if necessary further ordering that lease and transfer be lodged for registration in that sequence. But the vesting order embodied in the judgment gives effect to the result required, and in the circumstances I see no useful purpose to be served in disturbing it simply in order to substitute what I conceive to be technically the correct process. The second defendant enjoys -- 32 of 44 -- a full indemnity - from the / '.third ' defendant ,%iwhich has ft been .• zhvrS^-c conducting its defence on behalf of the latter . -:It 'is .therefore fully protected as to costs. .r. . I would accordingly dismiss the appeal with costs. 31 -- 33 of 44 -- IN THE SUPREME COURT OF QUEENSLAND ' t ~ ~ s-r^^n'f 5^ .* FULL COURT ' - .. ,. . No. 4140 of 1988 Before the Full Court Mr. Justice McPherson S.P.J. Mr. Justice Ryan Mr. Justice Dowsett BETWEEN: RAYMONDE BOURSEGUIN (Plaintiff) Respondent - and - STANNARD BROS. HOLDINGS PTY . LTD. (First Defendant) - and - NORTHERN BUILDING CONTRACTORS PTY. LTD, and CARCORP PTY. LTD. (Second Defendants) Appellants - and - TAWILLA PTY. LTD. (Third Defendant) Appellant JUDGMENT - RYAN J. Delivered the Twentieth day of June, 1991 Counsel: G. Fryberg Q.C. with McGill for the Appellant Mr. W. Sofronoff Q.C. with Applegarth for the Respondent Solicitors: Seymour Nulty T/A for Quinn & Company for Appellant Robert Lehn & Company for Respondent Hearing Dates: 19-21 March 1991. -- 34 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 4140 of 1988 BETWEEN : RAYMONDE BOURSEGUIN (Plaintiff) Respondent - and - STANNARD BROS. HOLDINGS PTY. LTD. (First Defendant) - and - NORTHERN BUILDING CONTRACTORS PTY. LTD, and CARCORP PTY. LTD. (Second Defendants) Appellants - and - TAWILLA PTY. LTD. (Third Defendant) Appellant JUDGMENT - RYAN J. Delivered the Twentieth day of Twentieth, 1991. I agree that for the reasons stated in the judgment of McPherson S.P.J. the appeal should be dismissed with costs. The only matter to which I wish to refer is the conclusion by the learned trial Judge that the second defendants were guilty of fraud for the purposes of s. 44 and 109 of the Real Property Act 1861. He based this conclusion on three findings. The first was that the second defendants purchased Somerset House from the first defendants on terms that they would be bound by all leases in respect of which they or their solicitors had satisfied themselves pursuant to clause 30 of the contract of sale, and the plaintiff's lease was one of these. The second was that at the settlement Mr. Balanda knew and expected that the transfer, when effected, would be subject to the plaintiff's registered lease. -- 35 of 44 -- 2 The third was that the attitude taken before him at the trial by the second defendants showed that they had repudiated the agreement with the first defendant and were endeavouring to make use of the position they had obtained as registered proprietors to deprive the plaintiff of her rights under the agreement. His Honour referred to a statement by Prendergast C.J. in Mernie v. McKay (1897) 16 N.Z.L.R. 124. In that case, the plaintiffs had gone into possession of and erected buildings on land under an agreement with the registered proprietor for a lease of it for 10 years, the lessor and his successors to take the buildings at a valuation at the end of the lease, and the plaintiff to have the option of purchasing in case of the lessor selling. The defendant was a successor in title of the registered proprietor, and he purchased with knowledge of the plaintiff's agreement, of his possession, and of his expenditure. The plaintiff's agreement was never registered. Prendergast C.J. concluded that there was much more than knowledge in the defendant of the existence of an unregistered interest - there was knowledge of possession under the agreement and of the outlay of money under it. He said: "If the defendant acquired the title intending to carry out the agreement with the plaintiff, there was no fraud there; the fraud is in now repudiating the agreement, and in endeavouring to make use of the position he has obtained to deprive the plaintiff of his rights under the agreement. If the defendant acquired his registered title with a view to depriving the plaintiff of those rights, then the fraud was in acquiring the registered title. Whichever view is accepted, he must be held to hold the land subject to the plaintiff's rights under the agreement and must perform the contract entered into by the plaintiff's vendor. " -- 36 of 44 -- 3 The fraud by the second defendants in this case, according to his Honour's reasoning, consisted in repudiating an agreement that they would be bound by the plaintiff's lease and relying upon their registration to deprive the plaintiff of his rights under the agreement. In Bahr v. Nicolav (No. 2) (1988) 164 CLR 604, it was said by Brennan J. at p. 654-655, that a registered proprietor who has undertaken that his transfer should be subject to an unregistered interest and who repudiates the unregistered interest when his transfer is registered is, in equity's eye, acting fraudulently and he may be compelled to honour the unregistered interest. The fraud which attracted the intervention of equity consisted in the unconscionable attempt by the registered proprietor to deny the unregistered interest to which he had undertaken to subject his registered title. He then added: "Although a purchaser who secures registration of a transfer of the fee simple merely with notice of a third party' s right to purchase acquires on registration of his transfer a title freed of any obligation to the third party which equity would otherwise impose, a purchaser who has undertaken - whether by contract or by collateral undertaking to hold his title subject to a third party's right to purchase remains bound by his undertaking after registration of his transfer. If he should repudiate the third party's right to purchase, equity imposes a constructive trust so that the registered proprietor holds his title on trust for the third party to the extent of the third party's interest." Wilson and Toohey JJ considered that the fraud to which sections corresponding to ss. 44 and 109 of the Real Property Act of 1861 (Qld.) refers is fraud committed in the act of acquiring a registered title. They referred in support of this view to passages in judgments in Loke Yew v. Port Swettenham Rubber Co. Ltd. [1913] A.C. at 503-4; Stuart v. Kingston (1923) 32 C.L.R. -- 37 of 44 -- 4 at 329; and Breskvar v. Wall (1971 ) 126 C.L.R. at 384. They pointed however to decisions that the principle of indefeasibility in no way denied 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. They referred to a passage in the judgment of Barwick C.J. in Breskvar v. Wall (1971) 126 C.L.R. at 384-385: "Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title." In their view, the indefeasibility provisions do not protect a registered proprietor from the consequences of his own actions where those actions give rise to a personal equity in another. Such an equity may arise from conduct of the registered proprietor after registration : Barry v. Heider (1914) 19 CLR 197; or before registration: Logan v. Shoalhaven Shire Council - (1979) 1 NSWLR 537 at 563. Mason CJ and Dawson J considered that the passages to which Wilson and Toohey JJ had referred as establishing that fraud is confined to fraud in the obtaining of a transfer or in securing registration did not warrant that conclusion. They said (at p. 615): "in the context of [s.44] there is no difference between the false undertaking which induced the execution of the transfer in Loke Yew v. Port Swettenham Rubber Co. Ltd. [1913] A.C. 491, and an undertaking honestly given which induces the execution of a transfer and is subsequently repudiated for the purpose of defeating the prior interest. The repudiation is fraudulent because it has as its object -- 38 of 44 -- 5 the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer. For the same reason the subsequent repudiation by a transferee of property of a limited beneficial interest in that property is fraudulent, when the transferee took the property on terms that the limited beneficial interest would be retained by the transferor. It is immaterial that the transferee 'may have been innocent of any fraudulent intent in taking the conveyance in absolute form' : Bannister v. Bannister [1948] 2 All E.R. 133 at p. 136." If the fraud to which ss. 44 and 109 refer is confined to fraud committed in the act of acquiring a registered title, it is clear that in this case it could not be concluded that the second defendants had acted fraudulently. His fraud, if it exists, would be in repudiating an undertaking after he had secured registration without fraud on his part. As such fraud committed after registration would give the plaintiff the right based upon a personal equity to an order enforceable against the second defendants binding them to give effect to the plaintiff's interest, I consider it sufficient to determine whether the conduct of the second defendants was such that an order should be made which would have the effect that the registered proprietors take subject to the plaintiff's interest. I turn now to an examination of the evidence so far as it relates to the issue I have described. On 14 June 1988, a contract of sale was made by Stannard Bros. Holdings Pty. Ltd. ("Stannard") as vendor to Northern Building Contractors Pty. Ltd. and Carcorp Pty. Ltd. as purchasers for a sum of $2,051,750. The date for completion was 12 September 1988. It was subject to special conditions, of which one was clause 30: -- 39 of 44 -- 6 "This contract is subject to the purchasers and their solicitors perusing all leases over the property within 14 days of the date hereof and their being totally satisfied with the terms of such leases. The vendor agrees to produce copies of such leases to the purchasers or the purchasers' solicitors as soon as possible." On 29 June 1988, a letter was sent by Mr. Balanda, solicitor for the purchasers, to Mr. Gillan, solicitor for the vendor. In this he confirmed that "our clients have satisfied themselves in relation to clauses 30 and 31 . The contract is therefore unconditional so far as these clauses are concerned". Evidence was given by Mr. Balanda that he had visited the office of Mr. Gillan on 15 June 1988 in respect to the contract of 14 June 1988, and that Mr. Gillan disclosed to him all the particulars that he had in relation to the leases of Somerset House. He was also given some schedules setting out the particulars of the leases. Mr. Gillan gave Mr. Balanda a handwritten document in relation to the plaintiff's lease, showing its commencement date as 1 March 1988, its expiry date 1 March 1991, a monthly rental of $1,003.10 and a lease term of 5+5. His Honour found Mr. Gillan told Mr. Balanda on 15 June 1988 in relation to shop 1, which had been leased to the plaintiff that it had been agreed that the extension had been taken up some months earlier, that the tenant of shop 1 would be given a further lease of 5 years on the same terms CPI, and that the tenant was presently in the second five years under the registered lease as an option but that she was to be given a further 5 years in addition. He found also that Mr. Gillan told Mr. Balanda that all rentals were linked to the CPI. -- 40 of 44 -- 7 His Honour expressed his view of the operation of clause 30 in these words:- "Clause 30 achieved more than giving the second defendants notice of details of the leases. It was in my view quite clear to Mr Balanda and therefore to his clients that the purpose of clause 30 was to ensure that the transfer of title from the first defendant to the second defendants was to be subject to the leases of which Mr. Balanda had satisfied himself and one of these leases was the plaintiff's lease ... it is my view that the second defendants purchased Somerset House from the first defendant on terms that they would be bound by all leases in respect of which they or their solicitor had satisfied themselves pursuant to clause 30 and the plaintiff's lease was one of these ." I am unable, with respect, to accept this interpretation of clause 30. I can find nothing in it to lead to the inference that the second defendants agreed to be bound by the plaintiff's lease. Its purpose was to enable the purchasers to exercise an option to determine the contract if they were not totally satisfied with the terms of the leases; but it could not be construed as an undertaking to be bound by the terms of these leases . Accordingly, the basis upon which his Honour found fraud by the second defendants, namely repudiation by the second defendants of an agreement to be bound by the plaintiff's lease, fails. The second defendants had not undertaken to subject their registered title to the plaintiff's unregistered interest. They had not undertaken to hold their title subject to the plaintiff's interest. The second defendants could not be said to be dishonest in anything which happened at the settlement or in obtaining registration of its title to the land. Nor could it be said that they acted after its registration to deprive the plaintiff of any rights which she had against them. -- 41 of 44 -- 8 There was accordingly no basis for concluding that the second defendants' title was made subject to the plaintiff's unregistered interest either by reason of the exception of fraud in ss. 44 and 109 of the Real Property Act , or by reason of a personal eguity which she could enforce against the second defendants and which would entitle her to have them declared to be constructive trustees for her to the extent of her interest. In this case, however, the second defendants were in the position where they were a mere intermediary in an intended transfer of title from the first defendant to them and then immediately to the third defendant. In those circumstances, it would be appropriate for an order to be made directing the third defendant, which for reasons given by McPherson SPJ was fraudulent, to require the second defendants as bare trustee to transfer the land to it to be registered after registration of the lease to the plaintiff. As that is the practical effect of his Honour's order, I would let it stand as it is. -- 42 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 4140 of 1988 Before the Full Court Mr. Justice McPherson S.P.J. Mr. Justice Ryan Mr. Justice Dowsett BETWEEN : RAYMONDE BOURSEGUIN (Plaintiff) Respondent - and - STANNARD BROS. HOLDINGS PTY. LTD. (First Defendant) - and - NORTHERN BUILDING CONTRACTORS PTY. LTD, and CARCORP PTY. LTD. (Second Defendants) Appellants - and - TAW ILL A PTY. LTD. (Third Defendant) Appellant JUDGMENT - DOWSETT J. Delivered the Twentieth day of June, 1991 Counsel: G. Fryberg Q.C. with McGill for the Appellant Mr. W. Sofronoff Q.C. with Applegarth for the Respondent Solicitors: Seymour Nulty T/A for Quinn & Company for Appellant Robert Lehn & Company for Respondent Hearing Dates: 19 - 21 March 1991. -- 43 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 4140 of 1988 BETWEEN : RAYMONDE BOURSEGUIN (Plaintiff) Respondent - and - STANNARD BROS. HOLDINGS PTY. LTD, (First Defendant) - and - NORTHERN BUILDING CONTRACTORS PTY. LTD, and CARCORP PTY.- LTD. (Second Defendants) Appellants - and - TAWILLA PTY. LTD. (Third Defendant) Appellant JUDGMENT - DOWSETT J. Delivered the Twentieth day of June, 1991 I have had the advantage of reading the reasons prepared by McPherson S.P.J. and Ryan J. and am in agreement with those reasons . Once it is recognized that the true issue in this case is the relative priorities of the interests held by the plaintiff and the third defendant, the outcome identified by their Honours becomes inevitable. I would only add that the conduct of the conveyance by the various solicitors for the first, second and third defendants left much to be desired, to say the least. It may be appropriate for the Law Society to consider this matter further. -- 44 of 44 --