The Torrens System of land registration operates in New South Wales under the Real Property Act 1900. It is a system whereby title to land is dependent on registration. This means that the person whose name is recorded on the Register as proprietor is, in most cases, assured of a good title free from any unregistered interests. However, from time to time, whether as a result of error by the Land Titles Office or fraud by a third party, a person may be wrongfully deprived of title. Where this occurs the Act provides for compensation to be paid. In effect the State guarantees good title.

The Commission’s terms of reference required it to review the compensation provisions (Real Property Act 1900, s126, 127). The Commission found that there have been significant problems of interpretation because these provisions are complex and obscure. The result was that the circumstances in which compensation is paid are very limited.

The Commission, in the course of its inquiry, considered the following options:

• 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 scheme.

The Commission recommends the fourth option, namely that the State guarantee of title should be retained but with improvements to the compensation provisions by relying more directly on principles of insurance. This approach was strongly supported in submissions to the Commission.

The Commission recommends the introduction of a new statutory scheme which will allow persons suffering loss to claim directly against the Registrar-General without first having to commence a court action to exhaust other remedies.

The Registrar-General will then be subrogated to any rights of the claimant against any person who has contributed to the loss or any fund which is liable to indemnify the claimant against the loss or person responsible for the loss. Proceedings against third parties responsible for the loss will still be available to a claimant, subject to a notification requirement.

The Commission has also recommended that compensation should be available for losses arising not only from mistakes in the Land Titles Office and forgery, but also losses arising from fraud generally and negligence of third parties.

The recommendations in this report have been framed bearing in mind the greater capacity of the Land Titles Office, relative to proprietors suffering loss, to pursue an action against a wrongdoer with respect to the Torrens System.