INTRODUCTION

4.1 This chapter discusses submissions received on the following options for reform presented in the Commission’s Discussion Paper and Issues Paper:¹

• abolition of the State guarantee of Torrens title;
• continuation of the State’s role as insurer of Torrens titles, but with the insurance provided by private insurance companies;
• acceptance by registered proprietors of responsibility for insurance of Torrens titles (either in addition to or in substitution for the present State guarantee); and
• retention of State guarantee, but with improvements to the current compensation provisions in the Real Property Act 1900 (“RPA”).

The discussion of the Commission’s recommended option for reform, that State guarantee of title be retained with improvements to the legislation, refers to submissions received on the specific proposals for changing the compensation scheme put forward in the Discussion Paper and Issues Paper. This chapter primarily focuses on the main issues arising from the submissions. They are made the subject of recommendations in Chapter 5.

ABOLITION OF STATE GUARANTEE OF TITLE

No longer any need for compensation

4.2 In the Discussion Paper and Issues Paper,² the Commission put forward several arguments in support of abolishing State compensation for losses sustained during the title registration process. One contention was that, while a compensation scheme was necessary for the introduction of the Torrens system over one hundred years ago, it is now anachronistic and should be abolished.³

Compensation provisions as a consumer protection measure

4.3 One response to this argument was that the compensation scheme has been, for the public, a very cheap form of consumer protection.⁴ It has provided compensation not only for Departmental errors, but also in circumstances when the claimant would not have been able to recover loss from anyone else. Thus, it would be quite strange, in this era of consumerism, to remove a very long standing consumer protection measure unless:

• it can be replaced with a superior consumer protection measure; and
• it is the right time to introduce such a change.

Neither of these qualifications would appear to have been satisfied by the options presented in the Issues Paper.⁵

Technological and other changes

4.4 Another response⁶ to the abolition proposal was to suggest that major technological and other changes have an impact on the operation of the Torrens system and provide further justification for retention of the State guarantee of title. These changes include:

• automated titles;
• recent conversion of almost the entire Crown land title system to Torrens title (which contains a potential for errors, such as omitted unregistered second mortgages); and
• the continuing efforts of the Land Titles Office to eliminate Old System title through the issuing of qualified and limited titles without investigating existing titles and the existence of outstanding interests.

Land registration systems without State guarantee

4.5 Another argument for abolition presented in the Issues Paper⁷ suggested that several foreign jurisdictions operate registration systems satisfactorily without compensation. Despite differences between Australia and these jurisdictions in their legal, social and economic conditions, it was contended that the overseas experience supported abolition of compensation here. The Registrar-General⁸ stated that insufficient details were presented in Issues Paper 6 to enable a proper assessment of the overseas registration systems.

4.6 It is difficult to make any accurate assessment of whether the absence of State guarantee of title in those overseas registration systems supports the abolition of the State guarantee of title here, as New South Wales lacks directly comparable authentication procedures. The suggestion that the existence of registration systems which operate satisfactorily without compensation is an argument for abolition of the compensation scheme in this State was not supported in submissions to the Commission. Furthermore there appears to be general acceptance and support for the need for a compensation scheme.

Tort remedies are inadequate

4.7 In response to the Commission’s argument in the Issues Paper⁹ that tort principles might adequately compensate persons suffering loss as a result of the operation of the Torrens system, it was suggested¹⁰ that a compensation scheme for errors made by the Registrar is preferable to bringing a common law action for negligence with all its costs and delays. However, as noted above,¹¹ the current system can also involve considerable delays and a scheme involving direct application for compensation to the Registrar-General would only be better than a common law action if losses were compensated fully and quickly.¹²

No compensation for unregistered titles

4.8 The fact that the State does not pay compensation if a title is unregistered, no matter how diligent an innocent purchaser may have been, was raised in both the Discussion Paper and Issues Paper as an argument for abolition of the State guarantee of title.¹³ In response, Stein¹⁴ suggested that the State did not guarantee the operation of the Old System and there is, therefore, no reason why it should offer compensation for loss flowing from its operation. The State does, however, guarantee the operation of the Torrens title system.

Purchaser of Torrens title land more vulnerable than purchaser of Old System land

4.9 Section 41(1) of the RPA provides:

Dealings not effectual until recorded in Register

41(1) No dealing until registered in the manner provided by this Act, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money, but upon the registration of any dealing in the manner provided by this Act, the estate or interest specified in such dealing shall pass, or as the case may be the land shall become liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in such dealing, or by this Act declared to be implied in instruments of a like nature.

Thus the purchaser may lose priority of his or her interest to a prior equitable interest in the period between settlement and actual registration or lodgment of documents in a registrable form. It follows that the purchaser of Torrens title land is more vulnerable than the purchaser of Old System land. The purchase price has been paid, but legal title has not been acquired in a Torrens transaction. However, it may be that the effect of the absence of State compensation for an unregistered (but “registrable”) dealing is reduced by RPA s 43A which gives purchasers of Torrens title land some protection against prior equitable interests.

Protection as to notice of person contracting or dealing in respect of land under this Act before registration.

43A (1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate.

This seems intended to give a purchaser of Torrens land, the protection given to a bona fide purchaser of a legal estate under the general law. If a purchaser of Torrens land is a bona fide purchaser for value without notice of prior equitable interests, he or she is not subject to those interests.¹⁵

Absence of guarantee in personal property registration systems

4.10 The fact that the State does not pay compensation for losses arising from the operation of other types of registration was raised as an argument for abolition¹⁶ but is of little merit as the nature of ownership of real property is quite different from personal property. Personalty in the ordinary situation has nothing to do with the Crown. “Realty” however, reposes solely in the ownership of the Crown and proprietors hold estates of the Crown.¹⁷

STATE GUARANTEE PROVIDED BY PRIVATE INSURER

4.11 Issues Paper 6 suggested that the State could continue its role as insurer of Torrens titles but use the private insurance industry to deal with claims. Premiums payable to the insurance companies would be met by the Government. It was suggested in the paper that this option would have the advantage of setting up an independent agency between the claimant and the Land Titles Office. It was also suggested that another advantage of this option would be to encourage the Registrar-General to devote fewer resources to achieving perfection in administering the RPA.¹⁸

4.12 The submissions which addressed this option generally rejected the concept of allowing the private insurance industry to process claims. It was suggested in some submissions that the involvement of private insurers would result in the community generally losing confidence in the Torrens system, and a loss of faith in the accuracy of the Register and in the ability of the Land Titles Office to perform its statutory obligations. Further, the interposition of an independent body to deal with claims would be relatively more costly than allowing the Land Titles Office to deal with claims because of that Office’s familiarity with the nature of the claims and understanding of the issues in dispute. It was also suggested that care should be taken not to allow risk management policies to relax to the point where increased litigation results. Other submissions suggested that, while the option was essentially a commercial decision for the Land Titles Office to make, there would be inadequate accountability to the Parliament by a private insurer.

TITLE INSURANCE ARRANGED BY REGISTERED PROPRIETOR

4.13 Another option suggested in the Issues Paper was that registered proprietors could take out insurance to cover losses which relate to their titles. There was also some discussion in the paper of title insurance developments in the United States, such as the development of insurance policies which indemnify both title and non-title related losses and the wide range of transaction-related services provided by title insurance companies. It was also observed that in the few jurisdictions in the United States where the Torrens system operates, finance companies generally required private title insurance even where State guarantees are provided. The option put forward in the Issues Paper was that private insurance, either compulsory or optional, could replace the State guarantee. A variant of this was that the State could continue its indemnity for losses resulting from, for example, errors within the Land Titles Office while registered proprietors themselves could insure against losses resulting from fraud, surveyors’ errors and the like.¹⁹

4.14 This option was rejected by all submissions which considered it primarily on the basis that private insurance would be too costly for the registered proprietor. Lang²⁰ stated that in the United States, title insurance is integral to the conveyancing system to cover not only losses which result under a Torrens system, but also to indemnify losses which result from serious deficiencies in the title systems in the North American jurisdictions and solicitors’ negligence. The different and broader purpose of title insurance in those jurisdictions is the reason for the payment of a substantial single premium.²¹ The Commission does not support the introduction of a system of private title insurance.

ELIMINATION OF EXISTING LEGISLATIVE DEFICIENCIES²²

Torrens system losses

4.15 The Torrens system exposes land owners to two types of loss:

• losses flowing from the mistakes of Government officers in the Land Titles Office in not entering interests and estates on the Register correctly; and
• losses flowing from the deprivation of land through the operation of the indefeasibility provisions of the Torrens statute.

4.16 If it is accepted that the Government should provide compensation for losses arising from the operation of the Torrens system, should the following ideals be pursued:

• that the Register be likened to a “mirror” in that it should reflect accurately and completely all matters relevant to the title to a parcel of land, and that the State should compensate anyone suffering loss as a result of their reliance on the Register; and
• that the State should compensate those persons who find themselves wrongfully deprived of a registered interest (for example, by the fraud of a third party)?²³

Discussion Paper 19 and Issues Paper 6 put forward a number of proposals in respect of these issues and others on which submissions were received which related to the possible future administration of the compensation scheme. These are considered below.

Reliance on the Register²⁴

4.17 In the Issues Paper²⁵ the Commission asked whether compensation should be paid to a person who sustains loss by reliance on the Register when it is inaccurate, that is, loss:

• caused by statutory interests created independently of the Register; and
• caused by errors of officers of the Land Titles Office (for example, where an easement is omitted from a title).

All submissions supported the idea of State compensation for losses caused by errors of officers in the Land Titles Office, and of the establishment by legislation of an administrative scheme to replace ex gratia payments and court proceedings.²⁶

Statutory interests not recorded on the Register

4.18 A number of “interests” which are not recorded on the Register and which may strictly be neither equitable nor legal interests can exist in respect of a parcel of land. Various and varied inquiries are made of statutory authorities by prudent purchasers, as standard conveyancing procedure,²⁷ to ensure that the land is not affected by such interests. These “interests” may be statutory obligations, charges, duties and limitations on enjoyment; or they may be no more than proposals. Searches are advised to be made in respect of various pieces of legislation including the Mine Subsidence Compensation Act 1961, the Local Government Act 1993, the Water Board (Corporatisation) Act 1994 and the Land Tax Management Act 1956. Applicants wishing to determine government interests affecting their land need to apply to numerous authorities individually.

The Central Register of Restrictions

4.19 However, with the development of the Central Register of Restrictions (“CRR”), this practice has changed. The CRR is a project developed by the Land Titles Office on behalf of the State Land Information Council.²⁸ The purpose of the CRR is to provide a single point of enquiry for persons seeking information on government interests in land. This has eliminated the need to apply to numerous authorities individually, providing greater convenience and cost savings both to applicants and to the authorities themselves. The CRR operates together with the Property Information Inquiry Service which is based in the Land Titles Office. This service provides a central point for lodging property enquiry forms. A single form and a single payment may be lodged with the Land Titles Office, which distributes the enquiries on a 24 hour basis to the relevant authorities on behalf of the applicant. This service has been operating for some time and will be enhanced by the progressive implementation of the CRR. As authorities record their interests on the CRR, “clear certificates” can be issued immediately upon application without the need to send the enquiry to the authorities concerned. The Property Information Inquiry Service is presently managing enquiries on behalf of the following authorities:

• AGL Gas Company (NSW) Ltd
• Rural Lands Protection Board
• Department of Energy
• School Education Department
• Department of Mineral Resources
• Soil Conservation Service
• East Australian Pipeline Ltd
• State Forests
• Environment Protection Authority
• State Rail Authority
• Hunter Water Corporation Ltd
• Sydney Electricity
• Local Councils
• Sydney Water
• Mine Subsidence Board
• The Heritage Council of New South Wales
• Office of State Revenue (Land Tax)
• TransGrid (Electricity Transmission Authority)
• Roads and Traffic Authority
• Water Resources

At present not all of these authorities are accessible directly on the CRR. Access to the CRR may be obtained through remote computer terminals, which allow on-line customers to make CRR inquiries for no cost other than the normal authority inquiry fees.²⁹ The Land Titles Office has entered into agreements with individual authorities which provide for the respective liabilities of the Land Titles Office and the authority for incorrect information, prompt and accurate recording of interests on the CRR and the delegation of authority to the Land Titles Office for the issue of “clear certificates”. Any liability of the Land Titles Office in such circumstances would be separate from the liability of the Registrar-General under a statutory compensation scheme of the kind under consideration in this Report.

4.20 Two submissions to the Commission have suggested that it would be ideal to record statutory interests on the Register for completeness.³⁰ Stein also suggested that “cluttering” of the Register which was raised in the Issues Paper as an argument against noting these “interests” in the Register is absurd in light of the successful operation of registers which cross reference such interests in Germany and Austria and which have existed since the thirteenth century. Johnstone³¹ suggests that the present method of inquiring into statutory interests is patently inefficient and that a proper investigation be conducted into whether it would be more efficient in some cases for the government body concerned to note its interest on the certificate of title.

4.21 The Commission³² is of the view that these interests should not, in general, be required to be recorded on the Register, because many of them are neither legal nor equitable interests in land, and they would clutter and confuse the Register; and that accordingly State guarantee should not be provided in respect of these “interests” generally.

Resumptions

4.22 However, in relation to resumptions by statutory authorities, the Commission is of the view that the authorities should be required to give notice of such resumptions, the Registrar-General should be required to record them, and losses suffered as a result of persons relying on the Register should be compensable. There seems no acceptable reason why a person relying on the Register should be at risk of loss in these circumstances, where it would involve no significant burden on the resuming authority to require it to send a copy of its Gazette notice to the Registrar-General, and no significant burden to require the Registrar-General to record the resumption on the Register.³³

4.23 Trieste Investments Pty Ltd v Watson³⁴ is an example of a case where compensation was denied for an unregistered statutory interest. It was held in that case that RPA s 127 could not be relied on to compensate a registered proprietor where there was an unregistered resumption under the Public Roads Act. This was decided on the stated ground that, before 1930, a resumption could not be registered so that the Registrar-General had no power to register one; although, as observed by Woodman and Nettle,³⁵ no reference was made to the provisions of s 14 of the Real Property (Amendment) Act 1921 whereby the Registrar-General could record a statutory vesting on receipt of a formal application to do so.

4.24 Section 31A of the RPA now empowers the Registrar-General to record a resumption where he or she has notice of it, but does not require the Registrar-General to do so. The Commission is of the view that no compensation should be payable by the Registrar-General on the basis of failure to exercise a discretion to record a matter, because it cannot be assumed that such a matter will be recorded. However, as stated in paragraph 4.22, the Commission is of the view that any authority capable of resuming Torrens title land should now be required to notify the Registrar-General of resumptions, and that the placement of those resumptions on the Register should be required where notification has been received. Then, compensation should be available from the Registrar-General where resumptions are not recorded: if this happens because the resuming authority failed to notify the resumption, the Registrar-General should be indemnified by the resuming authority.

Wrongful deprivation³⁶

4.25 The Issues Paper suggested that the State may have a duty to compensate individuals wrongfully deprived of land where fraud or negligence of a third party is the primary source of any losses suffered. The bona fide purchaser for value obtains an immediately indefeasible title when registered pursuant to a forged transfer or if a registrable forged transfer has been lodged, while the same purchaser under Old System would gain nothing. Thus, the effect of forgery under the Torrens system is prejudicial to the title holder.

4.26 Submissions received on this issue generally agreed that there should be statutory compensation available where fraud or negligence of a third party has caused the loss.³⁷ The Law Society has suggested³⁸ that aside from fraud, errors in the Register resulting from negligence should “sound in damages calculated in accordance with the existing principles of the common law including liability for contributory negligence”. No specific comment was given by the Law Society on the treatment of fraud.

Documents signed under the influence of fraud

4.27 One of the exceptions to recovery under a “fraud” basis for wrongful deprivation of land suggested in the Discussion Paper and Issues Paper³⁹ was where a registered proprietor voluntarily signs documents of title under the influence of fraud. Here, it was suggested that the case for compensation may not be so strong, as the victim could be assumed to have control over what occurred. The Registrar-General in his submission agreed with this proposition. However, as Justice Mahoney pointed out in Parker v Registrar-General,⁴⁰ there seems to be no justification for limiting a right of recovery against a fraudulent party according to whether the fraud involves the voluntary signing of a transfer induced by fraud, the signing of it by mistake or the forgery of a document where the fraud is directed to achieving the deprivation of land. Furthermore, limiting compensation to cases of forgery would not fulfil the insurance principle in that it would not compensate losses resulting from fraud, other than those resulting from forgery (for example, where innocent registered proprietors are fraudulently induced to execute transfers). The proposal would also not compensate losses which involve negligence or error of third parties where error of the Registrar-General or forgery has not occurred (for example, where a solicitor negligently completes instruments which transfer title but there is no disconformity between the instrument and the registration on which it is based, so that there is no mistake by the Land Titles Office).⁴¹

Negligence of a claimant’s solicitor or agent⁴²

4.28 The Issues Paper suggested that the aim of the Victorian exception to compensation in the case of negligence or fraud by the claimant’s solicitor or agent is to provide an incentive to the claimant to exercise care in relation to the choice of agents. It was also suggested that there is no good reason for making the State responsible for loss caused entirely by the fraud or negligence of a claimant’s solicitor or agent. Accordingly, the Commission proposed the following in paragraph 48 of the Discussion Paper:

There should be an exception from the right to compensation in the case of loss totally attributable to the fraud or negligence of a solicitor or agent of the claimant. Apportionment of damages should occur in those cases where a solicitor or agent has been partially responsible.

4.29 Some submissions supported the idea of leaving plaintiffs to bring actions against their solicitors and agents. Others supported the idea of the Registrar-General being subrogated to the rights of plaintiffs against their agents and solicitors. The first option has a number of difficulties which the second does not. Guarantee funds within professions may not cover frauds within, for example, solicitor’s offices by law clerks and other non-qualified employees.⁴³ In addition, the Registrar-General would be in a better position than the average plaintiff to bear the loss.

4.30 To illustrate, in Robinson’s case⁴⁴ the plaintiffs, the Robinsons, obtained judgment together with costs of the proceedings against Chatterton, a law clerk who fraudulently transferred the Robinsons’ land to himself and granted a mortgage over the Robinsons’ land. The amount of judgment was not recovered and the Robinsons brought bankruptcy proceedings in the Federal Court in which they obtained a sequestration order against Chatterton’s estate. They were not able to recover from the estate, and claimed damages under RPA s 126(5) (which allows compensation if, amongst other things, the person liable for damages is insolvent) against the Registrar-General, and also costs of the proceedings against Chatterton in the Supreme Court and of obtaining the sequestration order in the Federal Court. However, the Court held that RPA s 126(5) proceedings did not embrace the right to recover the costs of obtaining judgment for damages against Chatterton in the Supreme Court or of obtaining the sequestration order. The Robinsons therefore suffered a loss at least equal to the costs of those two proceedings.

4.31 There are a number of issues in the area of professional indemnity which should be considered. First, an inequitable situation has resulted from plaintiffs claiming directly against professional fidelity funds. The Funds after paying out a claim may then claim against the Registrar-General, thereby creating unnecessary litigation, and increasing associated costs. For example, in Gill’s case,⁴⁵ Gill’s solicitor, Hawkins, with whom she had left her certificate of title, forged her signature to a mortgage over Gill’s property. A company lent Hawkins money on the faith of the mortgage which was registered in favour of the company. After Hawkins’ fraud was discovered, Gill claimed against the Fidelity Fund operated by the Law Society which paid out the company and resulted in the removal of the mortgage from Gill’s title. The Law Society in the name of Gill, to whose rights it was subrogated under the Legal Practitioners Act 1898, sought to claim damages against the Registrar-General under RPA s 127. One of the questions which was referred by Master McLaughlin to the Equity Division of the Supreme Court of New South Wales to be determined prior to the trial was whether the Law Society was entitled to recover damages under RPA s 127 against the Registrar-General as nominal defendant pursuant to its subrogation rights under s 61 of the Legal Practitioners Act 1898. Justice Young held that the Law Society could maintain its action against the Assurance Fund. Section 89 of the Legal Profession Act 1987 enables the Law Society to be subrogated to all rights and remedies of a successful claimant against the Fidelity Fund against any person other than a solicitor who is a partner of a claimant who acted honestly and reasonably. It is unfair that the Law Society can require contribution from practitioners for the Fidelity Fund which is used to compensate claimants for the dishonest acts of their solicitors, and yet obtain reimbursement of those funds by claiming an indemnity from the innocent Land Titles Office which is not responsible for the acts of the dishonest solicitors. It is clearly inequitable that the Registrar-General should be called on to indemnify losses resulting from the fraudulent and dishonest acts of solicitors where funds are available for the very purpose of compensating those losses. If on the other hand Gill had claimed directly against the Registrar-General, it would be quite fair for the Land Titles Office to recover against the Fidelity Fund. The situation has since been remedied by the passing of legislation which precludes professional indemnity insurers from seeking reimbursement from the Registrar-General where losses have resulted from the acts of professionals which have been insured against.

4.32 Secondly, professionals are only required to take the minimum cover necessary under their indemnity schemes, and in any property market with appreciating values, this cover may well be inadequate.⁴⁶

4.33 Thirdly, the Registrar-General is better able to bear the delays and cost of claiming against a fidelity fund than would an individual litigant with small means.

4.34 Fourthly, the final arguments against requiring plaintiffs to pursue remedies against solicitors and agents or their fidelity or professional indemnity funds can be summarised as follows.⁴⁷ Solicitors are properly held out by the Law Society and by individual practitioners themselves to be professionals who are competent and trustworthy. The Registrar-General of the Northern Territory observed that it is unfair to assume that citizens have any ability to make accurate assessments of their agents’ honesty and skills. A person living in remote areas serviced by a single sole practitioner has little practical choice in obtaining the services of another solicitor. In any event losses may arise, not so much from the choice of solicitors in a transaction, but by entrusting evidence of title for safekeeping with solicitors. The Commission would add to this that financial and other pressures may lead plaintiffs to choose agents they would not choose under different circumstances. For example, in Robinson’s⁴⁸ case, the plaintiffs may have used the same solicitor as the vendors to save costs. In an era of consumer protection it is unfair to force the victims to bear the consequences of the unauthorised acts of their agents.

Contributory negligence of a claimant⁴⁹

4.35 The Issues Paper suggested that claimants may contribute to their losses in a number of ways such as by signing a transfer without first obtaining payment or by negligently dealing with a duplicate certificate of title. In such situations there is no good reason for requiring the Registrar-General to compensate people contributing to their own losses. It was also suggested that in cases where the claimant was entirely, and not just partly, responsible for the loss, it would be anomalous to give compensation, while denying it to the claimant whose agent had caused the loss. Accordingly the Discussion Paper proposed that:

There should be an exception from the right to compensation in the case of loss totally attributable to the negligence of the claimant. Apportionment of damages should occur where both the claimant and the Registrar or Registrar-General have been partially responsible.⁵⁰

4.36 Lang has said of this proposal that:

... the decisions dealing with contributory negligence and the apportionment of responsibility between two parties each separately (or in combination) responsible for loss, in the professional liability area, are in my view quite arbitrary and difficult to justify on consistent principles. ... My preference would be that if the loss is attributable partly to an extraneous source (other than the claimant) and the Registrar-General, the fund should pay the entire claim and be subrogated to the claimant’s right against the extraneous party.⁵¹

4.37 Stein suggested that although the proposal in the Discussion Paper is sound in theory,

exigencies of the moment and circumstances of degrees of innocence invariably have the result, in some cases, of visiting unreasonable consequences upon people who are often incapable of understanding or appreciating the full nature of contributory negligence.⁵²

The remaining submissions generally supported the contributory negligence argument.

Exhaustion of other remedies

4.38 The expense and delay of litigation may be prohibitive for a potential plaintiff. In paragraph 50 of the Discussion Paper the Commission proposed that:

There should be no requirement that other remedies be exhausted before compensation is payable. The Registrar or Registrar-General should be able to join other persons as co-defendants or bring a separate action by way of subrogation.

4.39 Persons making submissions on this point generally agreed that there should be no requirement that other remedies be exhausted before claiming against the Registrar-General. The Registrar-General stated that there should be several qualifications to this which are discussed below. In addition, he suggested that the present exception in RPA s 133(c) be retained. The merits of retaining RPA s 133(b), as well as s 133(c), as exceptions to compensation are discussed first.

Exceptions to recovery

Sections 133(b) and 133(c)

4.40 Section 133(b) of the RPA prevents claims against the Fund for loss caused by the inclusion of the same land in two or more grants from the Crown. The Commission sees no sufficient reason for this exception, and recommends that it not be retained in any new statutory scheme.⁵³

4.41 RPA s 133(c) excludes recovery from the Fund where loss has resulted from land being included in the same folio of the Register or certificate of title with other land through misdescription of boundaries or parcels unless the person responsible for loss is dead, insolvent, or bankrupt or has absconded. It is anomalous that the State should provide an indemnity where a third party has caused loss to a plaintiff as a result of a misdescription of parcels or boundaries and where the wrongdoer is not able to be sued, but not provide any recourse where the Land Titles Office has caused the error. It is contrary to the insurance principle underlying the Fund that persons who suffer loss through reliance on the Register are denied full compensation, whether such loss arises from land being included in the same folio of the Register or certificate of title with other land through a misdescription of parcels or boundaries by the Registrar-General or a third party.

Unauthorised use of company seals

4.42 Another qualification to the general agreement of the Registrar-General with the proposition that other remedies need not be exhausted before compensation is payable is where companies sustain loss through the misuse of their seals.⁵⁴ The Registrar-General suggested that a specific exception from recovery for such companies be made in the same terms as s 178(c) of the Land Transfer Act 1952 (NZ) which states that:

The Crown shall not under any circumstances be liable for compensation for any loss, damage, or deprivation occasioned by any of the following things, notwithstanding that effect may have been given to the same by entry on the registrar: ...

(c) By the improper use of the seal of any corporation or company; or ...

4.43 The Commission is of the view that the introduction of a provision similar to the New Zealand exception may unjustly favour those who deal with companies at the expense of innocent creditors and shareholders who are victims of unscrupulous persons acting or purporting to act on behalf of companies.⁵⁵ For example, in the Northside⁵⁶ case, Robert Sturgess, a director of Northside Development Pty Ltd (“Northside”) without authorisation granted a mortgage over the company’s land to secure advances by the lender to companies controlled by Sturgess. The companies were not related to Northside. The mortgagee was unaware of the irregularities in the execution of the mortgage which was registered. Northside defaulted under the mortgage and the lender sold the land to a bona fide purchaser who became registered under the RPA. The mortgage was held to be invalid as the court held that the mortgagee should have been put on inquiry by the circumstances of the loan. This enabled Northside to recover damages from the Registrar-General under RPA s 127, which gives a plaintiff the right to recover damages where loss has resulted from the registration of any other person as proprietor of the land.

4.44 If a company were to be denied compensation by a provision similar to the New Zealand provision, the company, and ultimately its shareholders and creditors, would have to bear the loss, unless they could bring actions to recover loss against the company’s directors or other persons managing the company. If innocent shareholders and creditors could not recover against the Registrar-General for losses resulting from the unauthorised acts of their directors or other officers in management, such an exception assumes that their remedies under the Corporations Law or at common law against these persons are adequate. If these actions are not available, such innocent parties will have to bear the loss. In addition, innocent purchasers of land from a company may be disadvantaged by such a provision, for example, where the purchaser’s land is encumbered by a fraudulent mortgage executed by the company of which the purchaser is unaware. If the companies seal exception applied, the purchaser would not be able to claim from the Registrar-General compensation for losses resulting from the mortgage. Also, there appears to be no valid reason for discriminating between persons suffering loss on the basis of their legal identity. Corporations (and shareholders and creditors having interests in those companies), like individuals, can ill afford actions for recovery of damages.

Other exceptions to recovery

4.45 The other exceptions to recovery suggested by the Registrar-General are: ⁵⁷

• where claimants have already compromised with, or settled claims against, other persons responsible for their loss; and
• where the Registrar-General is joined as a co-defendant in actions against third parties (for example where an error of the Land Titles Office occurs as a result of the negligence of a solicitor).

These suggested exceptions are considered in the Commission’s Recommendations discussed in Chapter 5.

Administrative procedures

4.46 In the Discussion Paper and Issues Paper⁵⁸ the Commission expressed the view that litigation against the Registrar-General is time-consuming and a waste of resources. The Victorian approach, in contrast, involving a direct application to the Registrar, has the advantage that the majority of claims are dealt with quickly. Accordingly, the Discussion Paper proposed that:

Compensation should be payable on application to the Registrar or Registrar-General. A decision should be required within a prescribed period.

4.47 Submissions supported the right of plaintiffs to claim directly against the Registrar-General, who would have subrogation rights against any other persons responsible for the loss. The Registrar-General⁵⁹ (amongst others) proposed that the legislation stipulate time limits within which compensation claims should be finalised.

Assessment of compensation

4.48 The Commission proposed in the Discussion Paper and Issues Paper⁶⁰ that a claimant be entitled to recover actual loss suffered, and that the Court develop a test to determine such loss. The date for valuation should take into account both rising and falling property markets, so that claimants are not penalised when property values fall after the date of actual loss. Paragraph 52 of the Discussion Paper proposed that:

Compensation should be for actual loss and it should be the value of the land at the date of the loss or at the date of the claim, whichever is the greater.

4.49 Submissions agreed that compensation should be for the actual loss sustained. One reservation came from the Registrar-General of the Northern Territory⁶¹ which suggested that “actual loss” cannot be fixed with certainty unless the value of land at either the date of the claim or the date of the loss, whichever is the greater, is specified.

Time for making claims

4.50 In the Discussion Paper and Issues Paper⁶² the Commission suggested it was unclear whether the usual six year limitation period set down in the general limitation statutes, applies in New South Wales and Victoria to claims against the Registrar-General. The uncertainty on this point has been recently resolved in Cirino v Registrar-General.⁶³ In that case the Registrar-General failed to register on the title of the burdened property a restrictive covenant which was created at the time the property was being subdivided. The purchasers of this property brought an action against the Registrar-General claiming that they would never have purchased it if they had been aware of the covenant. Counsel for the Registrar-General argued that as the purchase had occurred outside the limitation period, any possible liability had come to an end. Justice Cole held that s 14(1)(d) of the Limitation Act 1969 did apply to actions against the Registrar-General under the compensation provisions of the RPA. Accordingly, if the loss or damage occurred at the time of purchase, the plaintiffs would be out of time as they purchased their property in 1978. However, relying on the High Court’s decision in Wardley Australia Ltd v Western Australia,⁶⁴ he went on to hold that the plaintiffs had not yet suffered loss or damage, but would do so, for example, when the benefit of the covenant (which had been registered) was exercised by the owners of the adjacent property. Accordingly, the limitation period had not yet started to run.

4.51 As this case demonstrates, and as was suggested in the Discussion Paper, in actions involving real property, there is a significant possibility of claims arising from errors and misconduct long past. Accordingly, in paragraph 53 of the Discussion Paper the Commission proposed the following:

The period of limitation should be six years from the date on which the claimant became aware or, but for his or her own default would have become aware, of the existence of his or her right to make a claim.

It seems that this very closely approximates the present law as stated in Cirino.

4.52 The Queensland Bar Association was of the view that injustice has resulted in the past from the imposition of a six year limitation period.⁶⁵ Other submissions generally supported the above proposal. Lang agreed, but suggested that as one party’s lack of knowledge was usually necessary for the perpetration by another of a successful fraud, the claimant,

who for many years is unaware of the loss should at least be able to overcome the limitation period by court order and not be excluded merely because “but for his or her own default would have become aware”.⁶⁶

FOOTNOTES

1. New South Wales Law Reform Commission, Torrens Title: Compensation for Loss (Discussion Paper 19, June 1989); New South Wales Law Reform Commission, Torrens Title: Compensation for Loss (Issues Paper 6, December 1989) at para 6.3.

2. NSWLRC DP 19 at paras 36-38; NSWLRC IP 6 at paras 6.4-6.6.

3. NSWLRC IP 6 at paras 2.12-2.14.

4. A Lang, Submission (21 February 1990) at 1 para 2.

5. Lang is not referring here to the option proposing improvement of the current legislative scheme: see A Lang, Submission (21 February 1990) at 2 para 5.

6. A Lang, Submission (21 February 1990).

7. NSWLRC IP 6 at paras 2.13 and 2.14.

8. Registrar-General, Submission (6 April 1990) at 2 para 7.

9. NSWLRC IP 6 at para 6.5.

10. Master Windeyer, Submission (28 August 1990). See also Registrar-General, Submission (6 April 1990) at 9 para 25.

11. Para 2.41.

12. See also NSWLRC IP 6 at para 6.19.

13. NSWLRC DP 19 at para 38; NSWLRC IP 6 at para 6.6.

14. R T J Stein, Submission (10 August 1989) at 6. See also Registrar-General, Submission (6 April 1990) at 9.

15. R T J Stein and M A Stone Torrens Title (Butterworths, Sydney, 1991) at 142; generally at 141-158.

16. NSWLRC DP 19 at para 38; NSWLRC IP 6 at para 6.6. Australian Bankers’ Association, Submission (19 October 1989) at 1-2, however, notes that the chattel securities legislation in Victoria does in fact provide for a system of compensation for those suffering loss as a result of the malfunction of the system of registered security interests in vehicles.

17. R T J Stein, Submission (10 August 1989) at 6. See also Registrar-General, Submission (6 April 1990) at 9.

18. NSWLRC IP 6 at para 6.23.

19. NSWLRC IP 6 at paras 2.15-2.20, 6.24-6.25.

20. A Lang, Submission (21 February 1990) at 2.

21. Lang further suggested that it may be appropriate to revisit the issue of private title insurance after Old System title, or most of it, has been eliminated; a comprehensive register of restrictions exists, preferably linked with the title; the issue of whether non-qualified conveyancers can do conveyancing for a reward has been finally resolved.

22. NSWLRC DP 19 at 13-17; NSWLRC IP 6 at 44-48.

23. NSWLRC IP 6 at paras 6.8-6.10.

24. NSWLRC DP 19 at paras 43-45; NSWLRC IP 6 at paras 6.11-6.13.

25. NSWLRC IP 6 at paras 6.11-6.13.

26. Australian Bankers’ Association, Submission (19 October 1989) at 1; Australian Bankers’ Association, Submission (23 March 1990) at 1; J S Grice, Submission (16 August 1989) at 1 para 4; Registrar-General, Submission (6 April 1990) at 10 para 29; Law Society of New South Wales, Submission (27 April 1990) at 2 paras (v) and (vi); A Lang, Submission (6 September 1989) para 1 (in relation to DP 19); A Lang, Submission (21 February 1990) paras 2 and 5; Northern Territory, Department of Law, Guarantee of Torrens Title in the Northern Territory (Discussion Paper, August 1990) paras 2, 5.1 and 5.2; K J Blume, Hill & Blume Pty Ltd, Submission (26 March 1990) at 4-5; R T J Stein, Submission (10 August 1989) at 9; Master Windeyer, Submission (28 August 1990) at 2 para 3; R A Woodman, Submission (14 November 1990) at 2.

27. Stein and Stone at 239-240; 255-258.

28. Now the Office of Land Information Policy and Co-ordination operating under the Department of Land and Water Conservation.

29. New South Wales, Land Titles Office, Annual Report 1991 at 14.

30. R T J Stein, Submission (10 August 1989) and I M Johnstone, A W Simpson & Co, Solicitors, Submission (15 January 1990).

31. I M Johnstone, A W Simpson & Co, Solicitors, Submission (15 January 1990).

32. NSWLRC IP 6 at para 6.13.

33. See Recommendation 15, at 5.18 below.

34. (1963) 64 SR (NSW) 98.

35. Woodman and Nettle at 646 [127.2].

36. NSWLRC DP 19 at paras 43-47; NSWLRC IP 6 at paras 6.14-6.15.

37. Australian Bankers’ Association, Submission (19 October 1989) para 2; J S Grice, Submission (16 August 1989) at 1; Law Society of New South Wales, Submission (27 April 1990) at 2 para (vi); A Lang, Submission (6 September 1989) para 1 (in relation to DP 19); R T J Stein, Submission (10 August 1989) at 9 para 47; Registrar-General, Submission (6 April 1990) at 10 para 31; Registrar-General (Northern Territory), Submission (8 August 1989) at 2; Bar Association of Queensland, Submission (21 December 1989) para 1; K J Blume, Hill & Blume Pty Ltd, Submission (26 March 1990) at 4.

38. Law Society of New South Wales, Submission (27 April 1990) at 2 para (vi).

39. NSWLRC DP 19 at para 47; NSWLRC IP 6 at para 6.15.

40. [1977] 1 NSWLR 22 at 30. See also para 2.13, above.

41. This would appear to have occurred in at least some cases involving surveyors and also one involving the error of a claimant’s solicitor: see Appendix B under “Other errors” at 116.

42. NSWLRC DP 19 at para 48; NSWLRC IP 6 at paras 6.16 and 6.17.

43. A Lang, Submission (6 September 1989) at 1 para 3.

44. Robinson v Registrar-General (1983) NSW Conv R 55-138.

45. Gill v Registrar-General (1991) 5 BPR 11,587.

46. Australian Bankers’ Association, Submission (19 October 1989) at 2 para 4.

47. Master Windeyer, Submission (28 August 1990) at 3; Registrar-General (Northern Territory), Submission (8 August 1989) at 2.

48. Robinson v Registrar-General (1983) NSW Conv R 55-138. See para 4.30 above.

49. NSWLRC DP 19 at para 49; NSWLRC IP 6 at para 6.17.

50. NSWLRC DP 19 at para 4.9.

51. A Lang, Submission (6 September 1989) at 1-2.

52. R T J Stein, Submission (10 August 1989) at 10.

53. See Recommendation 16, at 5.18 below.

54. Registrar-General, Submission (6 April 1990) at 11 paras 34-36.

55. See Mason CJ in Northside Development Pty Ltd v Registrar-General (1990) 170 CLR 146 at 151. Although he was speaking of the over extensive application of the “indoor management rule”, the same policy consequences can be seen to apply here.

56. Northside Development Pty Ltd v Registrar-General (1990) 170 CLR 146.

57. Registrar-General, Submission (16 August 1990) at 6.

58. NSWLRC DP 19 at para 51; NSWLRC IP 6 at para 6.19.

59. Registrar-General, Submission (6 April 1990) at 12-13.

60. NSWLRC DP 19 at para 52; NSWLRC IP 6 at para 6.20.

61. Registrar-General (Northern Territory), Submission (8 August 1989) at 2.

62. NSWLRC DP 19 at para 53; NSWLRC IP 6 at para 6.21.

63. Cirino v Registrar-General (1993) 6 BPR 13,260. But see Price v Registrar-General (NSW Supreme Court, Windeyer J, 14 March 1996, ED 2985/95, unreported) at 20 where it was held that the Registrar-General could not be subrogated to the rights of the plaintiff against negligent witnesses to a fraudulent mortgage, because the plaintiff’s right to action was barred by the Limitation Act 1969 (NSW) s 14(1)(b). The plaintiff had suffered damage when she had been deprived of her interest in the land.

64. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.

65. Bar Association of Queensland, Submission (21 December 1989) at 2.

66. A Lang, Submission (6 September 1989) at 2.