297 Protection Of Purchaser In Good Faith And For Value

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

See Di Castri, Registration of Title to Land, vol. 1, §6:30, vol. 2, §17:19, §17:23, and §17:25, and vol. 3, §22:8 and §22:14.

CASE LAW

“Purchaser” Acquiring Interest after Fraud

The plaintiff was the registered owner of a property in Surrey. One of the defendants, D, representing himself as the plaintiff, conveyed the plaintiff’s property to his confederate, the second defendant, G. G then mortgaged the property twice to the defendant mortgagees. The mortgagees were unaware of G’s fraud when they agreed to advance the mortgage proceeds. The chambers judge granted the plaintiff’s application for a declaration that the plaintiff was the sole registered owner of the property and directed the registrar to cancel title in the name of G and issue a new title in the plaintiff’s name. In following the Supreme Court’s decision in Kwan v. Kinsey; Morisseau v. Kinsey, 1979 CanLII 654 (BC SC), the chambers judge dismissed that part of the plaintiff’s action seeking to cancel the two mortgages. As title showed the defendant G as the registered owner when the mortgage proceeds were advanced, the chambers judge held that, by operation of s. 23(2) of the Act, G’s title was conclusive evidence both at law and in equity of G’s entitlement to the property and accordingly the mortgagees were entitled to rely on the register as it stood when they accepted the mortgages (Gill v. Bucholtz, 2008 BCSC 758). The Court of Appeal disagreed with and overturned the chambers decision on the question of the mortgages. It noted that not all Torrens systems operate under the same or essentially similar legislation and that, in interpreting an Act, it is necessary to read the words of the Act in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of the legislator. Amendments to the Land Title Act since 1979 persuaded the Court of Appeal that the decision of the Supreme Court in Kwan simply could not stand. Further, the Court of Appeal found that the conclusion of the chambers judge that the Act gives any registered owner—even a fraudster—an “indefeasible right to deal with the property” rests on a misapprehension of s. 23(2)(i) and fails to give effect to the Act as it reads. Noting that the chambers judge himself recognized that a regis­tered charge does not obtain the same quality of indefeasibility as the registered fee simple, the Court of Appeal held that the chambers judge failed to apply that principle. On its plain meaning, the exception in s. 23(2)(i) of the Act to the indefeasibility of title applies and the phrase “void instrument” in s. 25.1(1) includes a mortgage taken from a person who obtained title by fraud or forgery, as occurred in this case. The Act preserves the nemo dat rule with respect to charges (that one cannot validly or effectually give that which one does not have)—even where the holder has relied on the register and dealt bona fide with a non-fictitious registered owner. The mortgagees in this case did not acquire any estate or interest in the property on registration of their instruments because, having been granted by a person who had no in­terest to give, those instruments were void, both at common law and under s. 25.1(1) of the Act. Accordingly, the Court of Appeal found that the chambers judge erred in law in his interpretation of the scope and nature of indefeasibility in the context of the scheme of the Act, and in “applying a principle in favour of indefeasibility”. The Court of Appeal noted that, in a perfect Torrens system, any person lending money bona fide on the security of a mortgage granted by the registered owner might have a valid charge. However, while there were sound policy arguments on both sides of the question, the Legislature of British Columbia appeared to have adopted the policy that the cost of frauds perpetrated against mortgagees and other chargeholders should be borne not by the public (as the funders of the Assurance Fund) but by lenders and other chargeholders themselves. Whether this policy choice was a good one or not was not for the Court of Appeal to decide (Gill v. Bucholtz, 2009 BCCA 137). See also the decision of the Court of Appeal in Re Oehlerking Estate, 2009 BCCA 138, overturning 2008 BCSC 1648. (Leave to appeal was refused (sub nom. GET Acceptance Corp. v. Land Title and Survey Authority of British Columbia) 2009 CanLII 57518 (SCC)).