STATE GUARANTEE OF TITLE
5.1 The Commission recommends the introduction of a new statutory scheme, which will replace the current statutory compensation provisions and preclude any existing common law rights against the Registrar-General. Under the proposed scheme, persons suffering loss will be able to claim directly against the Registrar-General, without commencing a court action. The proposed scheme, in addition to according more closely with genuine compensation and insurance principles, should reduce litigation and related costs.1 The Registrar-General will be subrogated to any common law or statutory rights of the claimant against any person (including any form of association) which has contributed to the claimant’s loss or any fund which is liable to indemnify the claimant against the loss or the person responsible for the loss. Persons suffering loss as a result of the operation of the Torrens system will still be able to commence proceedings against any third party responsible for the loss without involving the Registrar-General, subject to a notification requirement.
BASIS OF RECOVERY AGAINST REGISTRAR-GENERAL
Recommendation 3
Compensation should be available for losses (whether or not involving deprivation of land) arising out of the operation of the Torrens system which result from fraud, negligence, the bringing of land under the Real Property Act, errors in the Register, and errors and loss of documents in the Land Titles Office.
5.2 The Commission is of the view that compensation should be available for losses resulting not only from mistakes in the Land Titles Office and forgery, but also from fraud generally and the negligence of third parties, such as solicitors and surveyors, where neither a mistake in the Land Titles Office nor forgery is involved. The definition of “loss” should include loss arising from the reliance by a claimant or plaintiff on a statement or representation in the Register. This definition,2 together with the basis for recovery being a loss arising in consequence of any error in the Register, will enable a claimant to recover loss arising from the mistake or negligence of his or her surveyor, solicitor, other agent, or the agent of a predecessor-in-title. Volunteers should not, in principle, be excluded from compensation. If a volunteer does not become entitled to compensation it will not be because he or she is a volunteer, but because he or she has suffered no compensable loss in reliance on the Register.
5.3 Losses which arise from an error or a misdescription in the Register, whether or not involving a mistake by the Registrar-General, should be compensated.3 Compensation should be available where “errors, omissions or misdescriptions” relate to those entries required by the RPA to be made as well as factual “errors, omissions or misdescriptions.”
5.4 The Commission also recommends that compensation be available for losses which result otherwise than by deprivation of land. As stated in Chapters 2 and 34 a deficiency exists in RPA s 126 and 127 as it is not clear whether they only contemplate losses resulting from the deprivation of land.
RESPONSIBILITY FOR LOSS
Claimants’ responsibility for losses attributable to themselves or their agents
Knowing participation in fraud
5.5 Claimants should be precluded from recovering where they are knowing participants in a fraud, rather than innocent victims of the action of others, including their agents. This last aspect of the recommendation is a departure from the proposal in the Discussion Paper which suggested that there should be an exception to the right to compensation in the case of loss totally attributable to the fraud or negligence of a solicitor or agent of the claimant. The proposal in the Discussion Paper stated:
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. 5
This proposal does not take account of the fact that agency principles do not attribute an agent’s fraud to the principal when the agent has embarked on an independent course of fraud.6 Where the claimant is a knowing participant in the fraud, he or she would be deprived of a remedy under the ordinary principles of law as no one can benefit from his or her own fraud.7
Negligence
5.6 Claimants will be unable to recover compensation where the whole of their loss is attributable to their own negligence. This endorses the proposal contained in the Discussion Paper.8 But a person should not be denied compensation when the loss is wholly attributable to the negligence of his or her agent because:
- claimants may have little, if any, choice in the selection of an agent;
- it would be unfair to force claimants to exercise greater than average care in their selection of agents;
- not all agents will be covered by professional indemnity insurance.
Corporate administrators performing unauthorised acts
Recommendation 5
Corporations whose administrators (directors and other officers in management) have knowingly performed unauthorised acts resulting in a compensable claim should be granted compensation in such a manner as to ensure that the administrators themselves do not benefit unfairly from compensation by virtue of their relationship with the company; for example, if the administrators who are fraudulent or negligent are shareholders of the company.
5.7 In this situation, these shareholders would not be the innocent victims of the unscrupulous acts of others, and should be precluded from benefit by such means as a statutory charge over their shares, securing to the Registrar-General that part of the compensation paid to the corporation proportionate to those shares.
RIGHTS OF ACTION
Right of claimant to bring action against Registrar-General
Right of plaintiff to bring action against third party
Recommendation 7
A person suffering loss can (without lodging a compensation claim) bring an action for damages against another person responsible for the loss other than the Registrar-General. The Registrar-General must be notified of the commencement of the action. After being notified, the Registrar-General may intervene as a co-defendant in the action and join other co-defendants, or compensate the plaintiff. If compensation is paid to the plaintiff, the Registrar-General is subrogated to the plaintiff’s rights as in Recommendation 9.
5.8 To accord more with the insurance principle underlying the State guarantee of title, the Commission recommends that claimants be encouraged to claim against the Registrar-General as a first option just as an insured under an insurance policy would usually do against an insurance company. Under the proposed scheme, claimants retain their rights of action against other wrongdoers and can commence proceedings against them without involving the Registrar-General, subject to a notification requirement. The Registrar-General will have the right to obtain information on the nature of the plaintiff’s claim, and be joined as a co-defendant if he or she considers it appropriate. The Registrar-General who is a defendant will also have the right to join anyone else as co-defendant. If the Registrar-General does not become a party to the proceedings, he or she will not be able to require the plaintiff to join other parties.
Where claimant compromises, settles, or withdraws claim
Recommendation 8
A plaintiff who has obtained judgment in respect of loss against a wrongdoer where notice has not been given to the Registrar-General, or who has compromised proceedings against a wrongdoer without approval of the Registrar-General cannot claim compensation for that loss against the Registrar-General.
5.9 This recommendation addresses the problem which arises where a potential or actual plaintiff compromises or settles a claim against a wrongdoer and then claims indemnity against the Registrar-General. In this situation the Registrar-General may be precluded from subsequently claiming against the wrongdoer, because of issue estoppel, even though it emerges later that, for example, fraud of the wrongdoer can be proved. The Commission recommends that the right of compensation should be lost where the claimant has obtained judgment in respect of the loss against a wrongdoer in proceedings of which notice was not given to the Registrar-General, or has compromised proceedings against a wrongdoer without the approval of the Registrar-General.
Where other issues need determination first
5.10 Problems have arisen in cases involving disputes primarily between other parties, when the Registrar-General has been joined as a party to such proceedings. One problem is where issues not relevant to the claim against the Registrar-General need to be litigated, and the early involvement of the Land Titles Office is costly and often unnecessary. In practice, it would be open for the Registrar-General to make an application to the Court for orders that the proceedings against him or her be suspended while those issues are determined. The Court could also make an order that the Registrar-General be bound by the judgment, unless he or she elects in writing not to be bound.
SUBROGATION OF REGISTRAR-GENERAL TO RIGHTS OF CLAIMANT
Recommendation 9
If the Registrar-General pays compensation to a person with a compensable claim, the Registrar-General is subrogated to that person’s rights and can recover the compensation from the person responsible for the loss or that person’s insurer, or where the wrongdoer is deceased or bankrupt or insolvent, against that person’s estate.
5.11 In addition to according with insurance principles, Recommendation 9 recognises that the Registrar-General is in a far better position financially to bring proceedings and to bear costs and delays, than the average plaintiff. Recommendation 10 gives effect to the Commission’s view that the limitation period should not run against the Registrar-General until he or she becomes aware of the compensable claim.
Proceedings against company officers
5.12 Should the facts in the Northside case recur,9 this recommendation will enable the Registrar-General to proceed against, for example, company officers for breach of their duties at common law and under the Corporations Law.10
Where managers of companies are not owners
5.13 The Commission has rejected the concept of entirely disallowing compensation to companies whose agents have without authorisation used company seals to transfer land.11 This would be inconsistent with the companies seal presumption in s 164(3)(e) of the Corporations Law, which states the following:
(e) that a document has been duly sealed by the company if:
(i) it bears what appears to be an impression of the seal of the company; and
(ii) the sealing of the document appears to be attested by 2 persons, being persons one of whom, by virtue of paragraph (b) or (c), may be assumed to be a director of the company and the other of whom, by virtue of paragraph (b) or (c), may be assumed to be a director or to be a secretary of the company...
Innocent shareholders and creditors of the company who do not take part in its management would be unfairly treated by such an exception. Particularly where these persons have inadequate legal remedies, and limited financial resources, the Registrar-General would be better able to bring proceedings against the managers or other agents of the company, or ultimately, bear the loss.
PROFESSIONAL AND OTHER INSURANCE FUNDS CANNOT CROSS-CLAIM AGAINST REGISTRAR-GENERAL
5.14 The Registrar-General will also be able to claim against any professional insurance funds or any other funds which are bound to indemnify the claimant against the loss or the persons responsible for the loss. If this recommendation is adopted, the Registrar-General would not be exposed to defending cross claims by these insurers, as has occurred in the past,12 where claimants have proceeded in the first instance against professional funds, which have then claimed indemnity from the Registrar-General.13 The amendment referred to above, only covers “professional indemnity insurers”, which, under the amending Act is defined in s 128(4) of the amendment to be:
...an insurer, scheme or fund (whether or not established by or under any Act or law) by or from which claims are payable, being claims made by persons sustaining loss or damage owing to the negligence, fraud or wilful default of a person carrying on business in a particular profession, trade or calling.
5.15 The Commission recommends that this provision should be expanded to preclude claims against the Registrar-General from being made by indemnity funds which insure against loss caused by any acts of the insured, whether or not the “wrongdoer” is a professional or person carrying on business in a particular profession, trade or calling, and whether or not the acts involve negligence, fraud or wilful default of the “wrongdoer”.
RECOVERY
Amount
Apportionment
5.16 This recommendation acknowledges the fact that claimants or plaintiffs can be responsible to some degree for their actions and those of their agents. Accordingly, the court should have the power to determine whether compensation should be reduced where claimants or plaintiffs are partly responsible for the acts of their agents which have contributed to a loss. In situations where agents are partly responsible for the loss and the Registrar-General has rejected a claim, it is contemplated that the plaintiff will commence proceedings against his or her agent and/or the Registrar-General. If the agent is not joined by the plaintiff, the Registrar-General should be able to do so.
5.17 As stated in paragraph 4.45, the Registrar-General expressed a reservation regarding involvement as a co-defendant in proceedings against other third parties responsible for losses, such as where an error of the Land Titles Office only occurs as a result of the negligence of a solicitor. In order to overcome this problem, the Commission recommends that the Court should be able to apportion any losses amongst the parties responsible for that loss.
LIMITATION PERIOD
5.18 Because the scheme gives effect to insurance principles, it is fair that claimants be required to notify their claims reasonably promptly to give the Registrar-General an opportunity to investigate them.
OTHER RECOMMENDATIONS
FOOTNOTES
1. It may be necessary to increase transaction charges associated with the Torrens Assurance Fund to accommodate any compensation payments beyond the current level.
2. This should ensure that a person is compensated in situations similar to that arising in Dempster v Richardson discussed in paras 3.9-3.12, where a claimant was denied compensation because the High Court found that an error in a certificate of title was the fault of the predecessor-in-title of Mrs Dempster or the predecessor’s surveyor, and not an error of the Recorder of Titles.
3. See the meaning of “omission” ascribed to s 42(1)(b) in Dobbie v Davidson (1991) 23 NSWLR 625 per Kirby P at 630-633.
4. Paras 3.6-3.8, 3.34, 2.43-2.50, above.
5. NSWLRC DP 19 at para 48. See also para 4.28 above.
6. Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576; see also discussion in R A Woodman and K Nettle, The Torrens System in New South Wales (Law Book Company, Sydney) at [43.8].
7. R T J Stein, Submission (10 August 1989) at 10.
8. NSWLRC DP 19 at para 49. See also paras 4.35-4.37, above.
9. Northside Development Pty Ltd v Registrar-General (1990) 170 CLR 146. For the facts of the case see para 4.43.
10. See also paras 4.42-4.44, above; and NSWLRC IP 6 at paras 3.31 to 3.34.
11. See paras 4.42-4.44, above.
12. Until a recent amendment contained in the Real Property (Compensation) Amendment Act 1992 was passed which affects claims for compensation involving professional indemnity insurers after 19 March 1992, but not claims commenced before that date.
13. Registrar-General v Gill (NSW Court of Appeal, 16 August 1994, CA 40059/92, unreported).
14. See para 4.22.
15. See para 4.40.
