What Is the Fraud Exception to Indefeasibility?

Of the nine exceptions to indefeasibility in section 33(1) of the Land Registration Act, fraud is the first, the most powerful, and the most often pleaded without success.

The provision

The other eight exceptions leave the registration standing while preserving a particular interest against it. Fraud is different: it goes to the registration itself, and can result in the title being set aside.

Fraud means actual dishonesty

What is required is actual, moral dishonesty: a deliberate act designed to obtain registration to which the person knows they are not entitled, or to defeat an interest they know exists.

Whose fraud counts

The fraud must be that of the registered proprietor, or of their agent acting within the scope of that agency. Fraud committed by a third party, of which the registered proprietor was innocent, does not deprive the proprietor of indefeasibility.

Why notice is not fraud

The Act removes the argument twice over:

• Section 45(1) — notwithstanding any rule of law or equity to the contrary, a transferee is not, except in case of fraud, affected by actual or constructive notice of a registrable claim, right, title or interest other than those notified or protected by entry in the Register.
• Section 24(1)(b) — competing instruments take priority by date of production notwithstanding any express, implied or constructive notice.

So a buyer who is told about an unregistered interest and registers anyway does not thereby commit fraud. The corollary is unforgiving for the holder of the unregistered interest: lodge a caveat or register. Telling the buyer is worth nothing.

Where the line is crossed is active dishonesty — participating in a scheme designed to defeat the interest, or registering in the knowledge that the instrument is forged or the authority false.

Pleading and proving fraud

1. Plead it specifically. Fraud must be alleged with particulars — who did what, when, and with what knowledge. A general allegation of impropriety will be struck out.
2. Identify whose fraud. Tie it to the registered proprietor or an agent acting within the scope of the agency.
3. Prove it to the requisite standard. Fraud is a serious allegation and requires cogent evidence, not inference from irregularity.
4. Deal with Mudge. If your complaint is really about how the lease was granted rather than about dishonesty in obtaining registration, the claim is likely to fail.
5. Protect the position meanwhile. Lodge a caveat to prevent further dealings — and remember it lapses after three months unless you commence proceedings and give the Registrar written notice.

See Paga No 36 Ltd v Eleadona [2018] PGSC 17; SC1671, Timothy v Timothy [2022] PGSC 82; SC2282 and Papindo Trading Co Ltd v Tolopa [2023] PGNC 97; N10211.

Section 28 — tenants in actual occupation

Section 33(1)(g) preserves the effect of section 28, which is worth knowing in its own right.

So actual occupation protects the tenancy itself — which is why physical inspection of the land is an essential part of any title search. But an option to purchase or to renew is not protected by occupation alone. A tenant holding such an option must register or caveat it.

If fraud is established

The Court has the tools to put things right: the registration may be set aside, the Registrar may correct the Register under section 161, and Part XV Division 3 provides for damages, ultimately payable out of the Assurance Fund.

Where the fraudulent party has already transferred to an innocent purchaser who has become registered, the land is generally gone and the claim converts into one for compensation.