A majority of the High Court has allowed in part an appeal from the decision of the New South Wales Court of Appeal in Cassegrain, relating to the fraud exception to the indefeasibility of title. In a related judgment, the NSWCA found that Claude Cassegrain, a director of the respondent company, had breached his fiduciary duties to the company by using its loan account to buy a dairy farm for himself. That farm was then transferred to his wife Felicity, and held by them both as registered joint tenants. There was no allegation that Felicity knew of Claude’s fraud in using the loan account to purchase the farm. The NSWCA held that Felicity’s title to the farm was defeasible due to Claude’s fraud, either via Claude acting as her agent, or due to their joint tenancy. The High Court declined to grant special leave in Claude’s appeal, but did hear Felicity’s appeal.
The Court (French CJ, Hayne, Bell and Gageler JJ, Keane J dissenting) partly allowed the appeal, holding that Felicity Cassegrain held a half interest in the property on trust for the respondent company, and ordered that she transfer her half of the property to the company. The majority rejected the argument that Felicity’s title was defeasible due to Claude’s fraud on the basis that in committing the fraud he had not acted as her agent. The lower courts had treated the question of agency as one of fact (at ), but the majority of the Court of Appeal had wrongly imputed knowledge of the fraud as part of the agency relationship. The majority stated at : ‘what was seen as a factual inquiry about whether Claude brought about the transfer to Claude and Felicity as joint tenants with her knowledge (but without her knowing of the fraud) was treated as concluding the legal issue presented by s 42(1). But why that step should be taken was not explained. Rather, the word “agent” was used as a statement of conclusion’ (see also at –). Nor was Felicity’s title as joint tenant deemed through s 100(1) defeasible on the basis of her registration as joint tenant: again, absent Claude’s fraud being brought home to her, her registration remained valid (–). However, the interest in the land that Felicity gained from or through Claude could be recovered by the respondent company because Claude had become the registered proprietor through fraud (–). Thus Felicity retained half of her interest, but held the other half (gained from or through Claude) on trust for the respondent. Keane J would have dismissed the appeal, and treated the registration of Felicity and Claude as joint proprietors (and without any separate title being acquired by Felicity) as effecting the deprivation (see at –).
|High Court Judgment|| HCA 2||4 February 2015|
|Result||Appeal allowed in part|
|High Court Documents||Cassegrain|
|Full Court Hearing|| HCATrans 249||13 November 2014|
|Special Leave Hearing|| HCATrans 138||20 June 2014|
|Appeal from NSWCA|| NSWCA 453||18 December 2013|
|Trial Judgment, NSWSC
|| NSWSC 1156||29 September 2011|