Bahr v Nicolay (No 2) (1988) 164 CLR 604

Mason CJ, Wilson J, Brennan J, Dawson J, Toohey J

Real Property Law – Indefeasibility – ‘in personam’ claims against the proprietor

Facts: Bahr was a registered proprietor of fee simple in land and entered into a contract to sell his land to Nicolay (clause 6). The contract included a three-year lease, giving Bahr an option to buy back later. After Nicolay became the registered proprietor of the land, Nicolay sold the land to Thompson. The contract between Nicolay and Thompson contained a clause that expressed that “the purchaser acknowledges that an agreement exists between Bahr and Nicolay as stamped and signed 5 March 1980”.

After a week passed by, Thompson became the registered proprietor of the land and wrote a couple of letters to Bahr. Thompson implicitly recognised that he was bound by the rights in the land, which Bahr had under the contract with Nicolay. However, upon the expiration of the lease, Bahr attempted to buy back the property and Thompson refused to comply.

Questions before the Court: Could the concept of ‘fraud’ constitute an exception to the indefeasibility principle? Were the rights given to Bahr by Nicolay binding on Thompson?

Holding: The Court found that given regard to the intention of the parties expressed in clause 4 of the latter agreement, the subsequent repudiation of clause 6 of the 1980 agreement constituted to fraud. All the justices agreed on the concept of fraud, however, the preferred view being that of Wilson and Toohey JJ, conveyed that Thompson to change their mind after signing the contract was not fraud. To establish a successful in-personam claim, conduct needed to arise before Thompson became a registered proprietor.

The case therefore fell within the statutory exception with a result that Bahr’s prior equitable interest prevails over Thompson’s title and Thompson should have taken notice of Bahr’s interest. As a result, Bahr’s right to repurchase the land pursuant to the contract with Nicolay grants Bahr an equitable interest in the land.

Further, the Court examined and looked at trusts – however, no express, constructive or unconscionability constructive trust could be made out. The Court expressed that a constructive trust is described as an act to protect a prior interest from destruction on the registration of a latter interest (i.e. first priority prevails). Consequently, no in-personam could be made out.