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Abigail v Lapin [1934]

By Rika

Facts of the Case

  • Lapins are the registered proprietors of the land
  • They executed a transfer of land to Mrs. Heavener.
  • The transfer of the land was intended to be a security for a loan.
  • Therefore it was redeemable on repayment of the loan.
  • Mrs H treated it as though she was the registered titleholder.
  • She mortgaged the land to Abigail.
  • They had not lodged a caveat and A was not aware of L's interest in the land.
  • Lapin's lodged a caveat before the mortgaged could be registered.
  • Abigail attempts to lodge the mortgage for registration and seeks a removal of the caveat.

There is a competition between two unregistered interests.

  • L's equitable right to redeem the right of a mortgagor under a mortgage

and

  • Mr. Abigails right with an equitable mortgage.

THANK YOU.

Appeal to Privy Council

Decisions

Supreme Court of NSW

Issue

  • Real Property Act 1900 (NSW) is a system for registraion of titles, not of deeds; the statutory form of transfer gives a title in equity until registration, but when registered it has the effect of a deed and effective to pass the legal title.
  • Upon registration of transfer, the eststae belongs to the transferee.
  • However, under this act equitable claims and interests in land are recognised. (This was held in Barry v Heider 1914).
  • In the present case judge found an oral agreement, but all that appeared was the absolute transfer for full consideration paid and received.
  • No document of qualification and no caveat was lodged.

Crucial issue: Whether the equitable interest of Lapin's was to be postponed to that of Abigail?

  • The court agreed with the findings of fact of the Trial Judge.

  • Court Held: Case was covered by the decision of the HC of Australia in Butler v Fairclough (1917)

  • "Abigail's equity, though subsequent in time, was the better equity"

*Respondent appealed to the High Court

High Court of Australia

Griffith CJ (Summing up the position)

Majority (Knox CJ, Isaacs and Dixon JJ): NO

Dissenting (Gavan Duffy and Starke JJ): YES

  • In the case of two equitable claimants the first in time, all other things being equal, is entitled priority.
  • But all other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had the effect of inducing a claimant later in time to act to his prejudice.
  • Lapin armed Mrs. H to believe that she has the means of dealing with the estate as if she were the absolute legal and equitable owner.

Knox CJ: Registration of H as proprietor was consistent with the existence of equitable interest. She was in a fiduciary relation to L and was entitled under the arrangement to become registered and hold the property until debt was paid off. The possessor of the prior equity is not to be postponed to the possessor of subsequent equity unless the act/omission proved against him has contributed to a belief that prior equity was not existence.

Dixon J: Although, L did not caveat, it does not appear that any search for caveats was made on A's part or that he acted in the belief there was no caveat.

Further

Gavan Duffy and Starke JJ Dissenting Concluded:

The effect of failure of caveat:

  • Based on the facts, A did not search the register, so he couldn't say that he had relied on clear title giving the mortgage.
  • If L had caveated it would have disarmed Mrs H and her conduct.
  • She was acting within the apparent indicia of authority as agent for L but exceeded its actual limits. (This creates a form of estoppel).
  • The court are not suggesting that lodging a caveat is compulsory.
  • The court will look at all the circumstances in order to decide whether the holder of the equitable ineteres should be postponed.

Lapins are bound by the natural consequences of their acts in arming Mrs Heavener to go as an absolute owner of the lands and thus execute transfers/mortgages of the lands to other persons.

They ought to be postponed to the equitable rights of Abigail as allowed by the Supreme Court.

Conclusion

  • The form of actual transfer was adopted, L was bound by the natural consequences of their acts and Abigail's interest should prevail.
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