I. THE ASSURANCE FUND
4.1 Until 1982 the Transfer of Land Act 1958 (Vic) incorporated a separate Assurance Fund. The Fund was abolished by the Public Account (Trust Funds) Act 1982. Since that time the assurance scheme has been supported by the Consolidated Revenue Fund. Although contributions in most cases are no longer collected (specific payments continue to be levied for certain types of transactions), a proportion of general fees is normally set aside from consolidated revenue as an insurance contribution by the Registry.
II. COMPENSATION PROVISIONS
A. Bases of claim
4.2 Sections 109, 110 and 111 of the Transfer of Land Act establish the circumstances under which a person may seek compensation. Claimants must establish that they are not excluded by s109(2) and that the facts fall within one of the bases of claim contained in s110(1), many of which overlap.
4.3 Section 109(2) specifies three circumstances in which compensation will not be payable. The Fund is not liable if the loss, damage or deprivation was the result of a breach of trust by a registered proprietor.1 Similarly, if the loss was caused by the same land being included in two or more Crown grants, or if a misdescription of title has resulted in two parcels of land being included in the same certificate of title, the Fund is exempt from liability.2
4.4 Section 110 allows claimants to obtain compensation from the Registrar if they have sustained any loss or damage through:
(a) the bringing of any land under the Act;
(b) a solicitor’s failure to disclose in a solicitor’s certificate a defect in title or the existence of an estate or interest in land;
(c) any amendment of the Register Book;
(d) any error, omission or misdescription in the Register Book, or the registration of any other person as proprietor;
(e) any payment or consideration given to another person on the faith of any entry in the Register Book;
(f) the loss or destruction of any document lodged at the Office of Titles for inspection or safe custody, or any error in any official search;
(g) any omission, mistake or misfeasance of the Registrar or any officer in the execution of his duties; or
(h) the exercise by the Registrar of any of the powers conferred on him in any case where the person sustaining loss or damage has not been a party or privy to the application or dealing in connection with which such power was exercised.
4.5 Before commencing an action under s110, application for compensation may be made directly to the Registrar.3 The Registrar may admit the claim and authorise payment. If the application is refused, the applicant is at liberty to commence an action.4
B. Defendant
4.6 When court action is necessary, s110 permits action to be taken directly against the Registrar as nominal defendant without proceedings first being taken against the party responsible for the loss. The Registrar may join any other person as co-defendant in the proceedings.
4.7 Whalan regards the Victorian approach as superior to the approach taken in New South Wales and other jurisdictions where action is brought against the “wrongdoer” in the first instance.5 The concept of bringing the primary action against the Registrar as nominal defendant accords more with the principle of insurance. It also avoids the complications in New South Wales and other systems under which very great care must be taken to ensure that the correct defendant is chosen.
4.8 On the other hand the apparent advantages of the Victorian approach may be somewhat illusory since no compensation is payable under the Act if the claimant (or the claimant’s solicitor or agent) causes or substantially contributes to the loss by fraud, neglect or wilful default.6 The effect of this provision is that a person sustaining loss or damage in any of these circumstances is required to take a common law action against the wrongdoer.
4.9 Claims against solicitors who have been negligent may be satisfied from the compulsory indemnity insurance held by them, but claims for fraud are not covered by the compulsory schemes. Only if the solicitor sued is insolvent may a claim be satisfied from the Solicitors’ Guarantee Fund. In any event difficulties and delays will always occur if the person sustaining loss is obliged to make out a case of negligence or fraud against his or her solicitor.
4.10 In the case of a negligent or fraudulent agent who is not a solicitor (or an estate agent) there is no access to an independent fund such as the Solicitors’ Guarantee Fund and there may therefore be no recovery. A more satisfactory solution may be to pen-nit a person who, without fault of his own has sustained loss, to recover from the Assurance Fund, but to subrogate the Fund to any of the rights the claimant has against a third party.
C. Fraud
4.11 Section 110 does not specifically include fraud as a category of recovery, although some of the grounds for bringing a claim (particularly the registration of another person as proprietor) would allow a defrauded claimant to recover compensation. In addition, s110 now expressly excludes from compensation those cases in which claimants or their solicitors or agents have substantially contributed to the loss by fraud. To obtain compensation, a claimant must prove that the loss was not caused by such fraud. A specific remedy is provided for fraud in s126(1)(a) of the New South Wales legislation. Given the broad interpretation of the New South Wales provision in Parker v Registrar General,7 the Victorian legislation affords less protection than the New South Wales compensation provision.
D. Measure of damages awarded under section 110
4.12 Section 110(4) contains restrictions, not found in other Australian jurisdictions, which are difficult to justify. The subsection places limits on the payment of indemnity and stipulates that any indemnity paid in respect of the loss of an estate or interest shall not exceed:
(a) where the Register Book is not amended, the value of the estate or interest at the time when the error ... which caused the loss was made; or
(b) where the Register Book is amended, the value of the estate or interest immediately before the time of amendment.
4.13 Similar limitations are contained in the Land Registration Act 1925 (UK) s83(6). The appropriateness of the provision was examined by the Law Commission of England and Wales in a report published in 1987.8 It recommended the repeal of the subsection and provided an illustration of the injustice which may result from the operation of the provision:
Suppose that X, through no fault of his (or of the Registry), is wrongly registered as the proprietor of a piece of land belonging to Y. At the time r registration the land was worth 500 pounds. The error is not discovered for five years, by which time the land is worth 1500 pounds. If rectification of the register is refused, then under [a provision equivalent to Transfer of Land Act 1958 s110(4)(a)] the indemnity payable to the true owner, Y, is restricted to the value of the land at the time of registration, 500 pounds: whereas if rectification has been ordered he would have received back the land, then worth 1500 pounds, and the dispossessed registered proprietor X could be paid indemnity up to the figure of 1500 pounds for the loss of his registered estate.9
4.14 Although the point has not been taken in any reported case, these restrictions in Victoria could cause hardship if the value of the estate in land increases significantly after the error is made but before it is discovered and an action is brought,10 particularly in times of rapid inflation. Moreover, by placing limitations on indemnity, the principles of insurance are being wrongly excluded.
4.15 Neither method of assessing damages is satisfactory, particularly in view of today’s climate of ever-increasing property values. This matter will need to be addressed in any legislative amendments. One option is to follow the recommendation of the English Law Commission to repeal the equivalent provision in the Land Registration Act 1925.
E. Limitation on time for bringing actions
4.16 Similarly to New South Wales, Victoria has no specific requirement that an action for compensation be brought within a particular time. However, s5(l)(d) of the Limitation Act 1958 (Vic) may be applicable. This section states that an action “to recover any sum recoverable by virtue of enactment, other than a penalty or forfeiture” must be brought within six years from the date on which the cause of action first accrues.
4.17 If applicable, the general limitation sections in both Victoria and New South Wales may produce extreme hardship, since it is quite possible for a person to be unaware for a considerable period that he or she has been deprived of an estate in land.11
4.18 The decision in Breskvar v White12 is an example of the harshness of the operation of the limitation provisions. The claimants in that case were held to be barred by a limitation provision from claiming against the Assurance Fund since the claim was made more than six years from the date on which the cause of action against the fraudulent party accrued.13 This was despite the fact that it did not become apparent to the claimants that their action for damages against the fraudulent parties under the Queensland equivalent of s126 could not be satisfied until after the six year period had expired.
4.19 As Sackville and Neave suggest, if the limitation provision is to be retained, the limitation period should commence only when the claimant becomes (or should become) aware of the loss of his interest or when he becomes entitled to proceed directly against the Assurance Fund.14
Ill. ADMINISTRATION OF THE TRANSFER OF LAND ACT 1958
A. Administrative perfection or risk management?
4.20 In 1985, Mr K C Taeuber of P A Management Consultants reviewed the operations of the Victorian Assurance Fund. He regarded it as paradoxical that while most of the work in the Titles Office was directed towards maintaining the integrity of the Register Book and minimising claims against the Assurance Fund, recent statistics showed that the overwhelming proportion of successful claims resulted from errors in the processing system itself, and not from deficiencies in registered titles. The Office subjects documents to intense scrutiny at a high cost both to the Office itself and to users of the system. It was doubtful, he argued, that these costs resulting from a system designed to protect the Fund were greatly outweighed by the costs of meeting claims caused by deficiencies in the Register.15 The Office processes documents on the basis that they are incorrect. In fact, some 16% of documents are stopped for error or requisition and some 35% of surveys are subject to correction or requisition. Mr Taeuber made the general observation that in striving for “administrative perfection” the Office was allocating resources to one aspiration when the resources could have been allocated to a more realistic, achievable objective, such as containing losses resulting from lost documents.
4.21 While the Registrar of Titles disagreed with many of Mr Taeubers conclusions, he agreed that the Land Titles Off ice could look into risk management of the insurance scheme. The Office reports that it has progressively moved towards risk management and away from administrative perfection.16 The Office has abandoned a great many checking processes that were appropriate in more leisurely times when there was less pressure of business. Requisitions on withdrawal of lapsed caveats and checks on signatures and registration of companies have been eliminated.
4.22 The Office could abandon more checking procedures. Unlike New South Wales, it checks that a document is properly executed under a power. A dealing is stopped if a signature contains an extra given name, but if a signature fails to contain a middle name that is on the document, the dealing is not stopped. The irony is that signatures are not generally checked or verified.
B. Future areas for practice of risk management policy
1. Investigation of possessory titles
4.23 Part IV Division 5 of the Transfer of Land Act 1958 (Vic) sets out a detailed procedure for applying for registration of an interest acquired by adverse possession. Central to this procedure is the power of the Registrar to make a vesting order “if satisfied that the applicant has acquired a title by possession to the land”. The evidentiary requirements to be satisfied are stringent and in many cases it is conceivable that, although the merits of the individual case would justify registration of a possessory title, the application may be unsuccessful because insufficient evidence can be produced to support it.
2. Caveats
4.24 Examiners check each caveat to ensure that it reveals a sufficient interest in land to satisfy the Transfer of Land Act. On one view this should be the responsibility not of the Land Titles Office but rather of the solicitor preparing the document, subject to the right of the registered owner to object to the caveat. This would bring the treatment of covenants and caveats into line with each other. The Titles Office no longer stringently checks the particulars of a covenant. If a similar approach were to be taken with caveats, it would fall to the solicitor to check that the claim was sufficient and accurately described.
3. Powers of attorney
4.25 Section 94(2) of the Transfer of Land Act appears to place responsibility on the Registrar to check whether the acts of attorneys fall within the scope of their relevant powers, while ignoring whether the power was in force when the relevant acts were done. The usefulness of the Registrar’s check is in doubt if the existence of the power is not confirmed.
4.26 Questions of the existence and validity of powers of attorney should not concern the Registrar. Responsibility to investigate these questions should lie with the solicitor relying on the power of attorney. This would mean that pdor to settlement, a buyer’s solicitor would check the original power of attorney or some other verification.
FOOTNOTES
1. Transfer of Land Act 1958 (Vic) s109(2)(a).
2. Transfer of Land Act 1958 (Vic) s109(2)(b), (c).
3. Transfer of Land Act 1958 (Vic) s111.
4. D J Whalan The Torrens System in Australia (Law Book Co, Sydney, 1982) 357.
5. Id at 352.
6. Transfer of Land Act 1958 (Vic) s110(3)(a).
7. [1977] 1 NSWLR 22.
8. Law Commission Third Report on Land Registration. (Law Corn No 158,1987) 50-51.
9. Id, quoting Law Commission Land Registration (Third Paper) (Working Paper No 45, 1972) 66.
10. M A Neave, C J Rossiter and M A Stone Sackville & Neave Property Law Cases and Materials (4th ed, Butterworths, Sydney, 1988) 402.
11. Id at 401.
12. [1978] Qd R 187.
13. Real Property Act 1861 (Qld) s127.
14. Neave, Rossiter and Stone, note 10, 401.
15. K C Taeuber Victorian Titles Office Review - Guarantee of Title - The State as Exclusive Guarantor (Unpublished document, PA Management Consultants, July, 1985) 3, 5.
16. Registrar’s comments on K C Taeuber Victorian Titles Office Review - Guarantee of Title - The State as Exclusive Guarantor.(Unpublished document, 1985).
