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Where am I now? Lawlink > Law Reform Commission > Publications > II. The Present Systems
Discussion Paper 19 (1989) - Torrens Title: Compensation for Loss
II. The Present Systems
Nature of fund
6. Originally, both the New South Wales and Victorian schemes were based on compulsory insurance schemes, the ‘premiums’ being paid into a separate fund. In New South Wales, the ‘premiums’ were charged on the conversion of deeds titles to the Torrens system, and on the transfer of land following death of a registered owner. In Victoria, the ‘premiums’ were charged for particular types of transaction which are viewed as carrying risk: for example, conversion of deeds titles to Torrens titles, the vesting of trust property, and the registration of titles based on adverse possession.
7. The separate Assurance Fund was abolished in New South Wales in 1906 when it was absorbed by the Closer Settlement Fund. Payments continued to be made from this fund until it was closed in 1988. All payments are now made directly from consolidated revenue, and no specific amount is set aside for claims. Compulsory contributions ceased in 1940. The Victorian fund was abolished in 1983, although a proportion of general fees is still notionally set aside from consolidated revenue as an insurance contribution by the Registry. Specific payments continue to be levied for certain types of transactions.
What claims are covered?
8. Both the Victorian and the New South Wales Acts adopt the view that compensation by the State should provide for:
- losses caused by the registration of another person’s interest; and
- losses resulting from mistakes within the Land Titles Office.
The main differences between the two pieces of legislation lie in their treatment of fraud and in the steps which must be taken before a claim can be brought against the Fund.
New South Wales
9. Section 126 of the New South Wales Act allows a person who has been deprived of land or an interest in land to bring an action for monetary compensation if the deprivation was:
a) in consequence of fraud;
b) through the bringing of the land under the Act;
c) by the registration of any other person as proprietor of the land or interest; or
d) in consequence of any error, omission or misdescription in the Register.
10. An action under section 126 is first brought against the person who applied for the erroneous registration or who acquired the interest or received money through the fraud or error. A person responsible for the erroneous registration ceases to be liable under section 126 once the land or interest is sold in good faith. This is not the case if he or she signed a fraudulent or erroneous document which caused the deprivation.
11. Where the person held responsible for the erroneous registration has sold the land for value and in good faith, the claimant may recover compensation from the Assurance Fund under section 126. Similarly, where the person liable is dead, bankrupt, insolvent or unable to be found within the State, a claimant may recover from the Fund. An action against the Fund may also be brought under section 127 if a person has sustained any loss by the registration of another interest and can neither bring proceedings under section 126 against the person responsible, nor regain legal possession of the land or interest. In addition, section 127 allows a claimant to recover compensation for errors made by the Land Titles Office, specifically:
a) any omission, mistake or misfeasance of office staff; and
b) any error, omission, or misdescription in the Register.
12. In practice, therefore, the New South Wales Act allows a claimant to recover from the Fund in cases of fraud (including forgery) and departmental error. In the case of fraud, the claimant must first sue the wrongdoer, or be unable to do so, before bringing an action against the Fund.
Victoria
13. Section 110 of the Victorian Act allows claimants to obtain compensation from the Registrar if they have sustained any loss or damage through:
a) bringing 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 of an interest in land;
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;
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.
The Act does not specifically include fraud as a category of recovery although some of these grounds for bringing a claim (particularly the registration of another person as owner) would allow a defrauded claimant to recover compensation.
Fraud
14. Originally, both States made specific provision for a claimant to obtain compensation for the loss of an interest in land as a consequence of fraud. The 1954 amendments to the Victorian Act removed this provision, although it may still be possible for a defrauded person to bring a claim under one of the remaining provisions of section 110 of that Act. In addition, section 110 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.
15. In New South Wales, a claimant may still obtain compensation for loss suffered through fraud, including the fraud of a solicitor or agent. In recent years, this provision has been expanded considerably by judicial interpretation. Parker’s Case 1 established that ‘fraud’ in this context is not limited to cases involving forged documents; compensation is also payable where the claimant is tricked into signing a document by a wilfully false representation. However, compensation is not payable for all losses caused by fraud. The facts of the case will determine whether a claim for compensation will lie.
16. A registered owner whose title is lost when a rogue registers it in his own name prior to making a fraudulent transfer to a bona fide purchaser for value must first seek compensation from the rogue under section 126 before claiming from the Fund. It is only if the rogue cannot be sued (because of death, bankruptcy, insolvency or absence from the jurisdiction) that an action lies against the Fund.
17. If the registered owner has been fraudulently deprived of land or an interest in land by someone who does not become registered as proprietor, no action is available under section 126. However, a claim may lie against the Fund under section 127. 2 Following Parker, compensation will always be payable for loss resulting from fraud in the wider sense of the term. If a registered proprietor is fraudulently induced to sign a transfer in favour of an innocent third party, a claim for compensation from the Fund would lie under section 127.
What exceptions are there?
18. Both the New South Wales and the Victorian Acts exclude compensation for loss caused by -
- a registered proprietor’s breach of trust, whether the trust is express, implied or constructive
- the inclusion of the same land in two or more Crown grants
- any land being included in the same folio of the register or certificate of title with other land through the misdescription of boundaries or land parcels, unless the person liable has absconded or is dead, bankrupt, insolvent or unable to pay the full amount awarded as compensation.
19. In addition, the Victorian Act excludes compensation where a claimant, or his or her solicitor or agent, causes or substantially contributes to the loss by ‘fraud, neglect or wilful default’. A claimant who derives title without payment of valuable consideration (for example, under a will or by gift) is also excluded if his or her transferor, or transferor’s solicitor or agent, was guilty of fraud, neglect or wilful default. The onus lies on the claimant to prove that the loss was not caused or substantially contributed to by this fraud or negligence.
20. Consequently, there are claims that would be payable in New South Wales, particularly those involving contributory negligence, that are not payable in Victoria. While the Victorian provisions deprive a claimant of compensation if the claimant or an agent caused or substantially contributed to the loss, there is nothing to indicate precisely what is meant by ‘substantially contributed to the loss’. Presumably, it would cover a case where the claimant negligently lost or gave up possession of the duplicate title. The Victorian provisions also exclude compensation for fraud or error by solicitors.
That type of loss is met separately through the Solicitors’ Guarantee Fund and compulsory professional indemnity insurance.
21. The Victorian Act also excludes compensation -
- for costs which the claimant has incurred in taking or defending legal proceedings without the consent of the Registrar, except for costs awarded against the Registrar in proceedings in which the Registrar is a party
- where the Registrar has not enquired whether a power of attorney was in force at the time something was purportedly done under the power.
Claims procedures
22. The scheme of the New South Wales Act is that claimants may obtain compensation from the Assurance Fund only after they have pursued the person primarily responsible for the loss, or are unable to fully recover the amount of the loss from the person at fault. In the case of loss attributable to Land Titles Office errors, a court order against the Registrar General is required to enable payment of compensation from the Assurance Fund.
23. In Victoria, a different approach is adopted. The legislation creates a direct right of action against the Registrar. There is no requirement that a claimant must first exhaust any remedies against the person responsible for the loss. A claimant may bring action against the Registrar as defendant or co-defendant. The Registrar is entitled to join any other person as a co-defendant and the Registrar may recover, against the person responsible for the loss, any amount paid from Consolidated Revenue.
24. In addition, section 111 of the Victorian Act allows the Registrar to pay a claim for compensation without the need for legal action to be commenced. The New South Wales legislation contains no equivalent provisions. Section 129 of the Real Property Act 1900 implies that final judgment must be obtained before money can be paid out of the Assurance Fund. However, compensation for a loss attributable to a mistake by the Land Titles Office is sometimes made as an ex gratia payment by the Registrar General.
Time limit for making claims
25. The Torrens legislation in both States has no specific requirement that an action for compensation be brought within a particular time. However, the Limitation Acts of both States may apply. Section 5(1)(d) of the Victorian Limitation of Actions Act 1958 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. This would normally be the date on which the loss or deprivation occurred. Section 14(1)(d) of the New South Wales Limitation Act 1969 is in similar terms.
Measure of damages
New South Wales
26. The New South Wales legislation does not deal with either the measure of damages or the closely related question of the date at which damages should be assessed. It is, however, accepted that the amount of damages recoverable must be full compensation for the loss actually sustained. The general principle was laid down in Spencer v Registrar of Titles (WA) 3 which recognised that a claimant should be put in the same position, so far as money will provide, as if the wrongful act had not occurred - but not in a better position. This view was adopted by Mahoney JA in Registrar General v Behn. 4 Mahoney JA also made comment on the date for assessing damages in Behn. It was his view that each case must be considered on its own facts. In the case before him, the appropriate date for valuation of the land was set at the date of the trial and not the date at which the plaintiff was deprived of the land as had been held by the High Court in Spencer’s case.
Victoria
27. In Victoria, a more restrictive approach is adopted in the legislation itself. Section 110(4) states that the indemnity provided from Consolidated Revenue is not to exceed the value of the estate or interest assessed either at the time of the relevant conduct or when the relevant amendment is made to the register book.
28. Although the point has not been taken in any reported case, these restrictions in Victoria could cause hardship if the value of the land increased significantly after the error was made, something which is likely to happen in times of high inflation.
Types and numbers of claims
New South Wales
29. During the 12-year period from 1977-1988, there were 28 claims for compensation from the Assurance Fund. Of these, 17 (75%) were for loss resulting from fraud; the remainder concerned departmental error and one case of surveyor’s error.
Table 1.1: Claims against the Assurance Fund
New South Wales 1977-88
| Status of Claim | Basis of Claim |
| | Fraud | Departmental Error | Surveyor’s Error |
| Settled | 7 | 2 | 0 |
| Outstanding | 10 | 8 | 1 |
| TOTAL | 17 | 10 | 1 |
Source: Land Titles Office (NSW)
30. Nine of the 28 claims have been paid, including seven involving fraud and two instances of departmental error, with a total payout of $211,460. A review of the 19 claims outstanding (based on fraud or departmental error) reveals both an increase in the amounts claimed in individual cases, and a potential for the total payout to far exceed those of any preceding period. It is estimated that the value of these outstanding claims is $1,500,000. The amount of damages is usually based upon the value of the property lost as at the date of the trial. Because property values have escalated in the past two years, this estimate of claims cannot be regarded as reliable.
31. The numbers and size of potential claims are less significant when viewed against the total number of dealings lodged for registration and the revenue obtained from them. For the period 1977-88, approximately 6,359,000 dealings were lodged for registration. Revenue from these dealings was $249.5 million approximately. The total expenditure of the Land Titles Office for the same period was $ 199.5 million, leaving a gross profit of $ 50 million.
32. In considering the total number of claims for compensation for the period 1977-88, the number of ex gratia claims paid by the Land Titles Office from general office funds for clear-cut cases of office error should not be excluded. There were approximately 50 of these claims of which 25 were paid, but the total payout figure did not exceed $1,500. Because of their minor nature and the fact that the Real Property Act requires a court order before a payment can be made from the Assurance Fund, these claims were paid on this purely informal basis.
Victoria
33. A total of 582 claims for compensation were made against the Assurance Fund during the period 1981-87. Unlike New South Wales, the Registrar is specifically authorised by the Transfer of Land Act to receive and assess claims. This specific authority may account for the large numbers of claims made in respect of office errors. Most of these claims relate to lost documents but others concern errors, delays, and one insignificant computer failure. They have resulted in a total payment of $292,190.66.
Table 1.2: Claims against the Assurance Fund
Victoria 1981-87
| Basis of Claim |
| Fraud | Departmental Error | Surveyor’s Error |
TOTAL | 3 | 570 | 0 |
Source: Land Titles Office (Vic)
34. The number of fraud claims (including one claim in which $58,000 was paid) is small in comparison to New South Wales because loss in consequence of fraud is not a specific basis of claim, and all claims resulting from the fraud or negligence of a claimant’s solicitor or agent are excluded.
35. Again, the number and size of potential claims are less significant when viewed against the total number of dealings lodged for registration and the revenue obtained from them. 3,151,519 dealings were lodged for registration for the period 1981-87. Revenue from these dealings was $296 million approximately. The total expenditure of the Land Titles Office for the same period was $106.5 million (including the functions of the Registrar General), leaving a gross profit of $189.5 million.
FOOTNOTES
1. [1977] 1 NSWLR 22; Behn v Registrar General [1979] 2 NSWLR 496; [1980] 1 NSWLR 589; (1981) 35 ALR 633.
2. Registrar of Titles (WA) v Franzon (1975) 132 CLR 611; Armour v Penrith Projects Pty Ltd [1979] 1 NSWLR 98.
3. [1908] AC 235.
4. [1980] 1 NSWLR 589.
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