Arguments for abolition of Compensation Scheme

36. In 1862, provision of a right to seek compensation for loss of title to land was considered an essential part of the Torrens scheme to complement the new concept of statutory indefeasibility and to placate the legal profession which was strongly opposed to the Torrens system. ¹ The possibility of confiscation of land without redress was one of the chief grounds of their opposition to the scheme.

37. However, there is no evidence that the concept of indefeasibility has caused significant loss. Even after the acceptance of immediate indefeasibility in 1967 when more claims could have been expected, there has been no significant increase in claims for loss resulting from fraud. The one area where State compensation for loss may be justified concerns losses resulting from staff errors in the Land Titles Office. Even in this area, the ordinary common law principles of tort law should provide adequate remedies to the person deprived.

38. The extent to which registration should confer the right to compensation on an innocent person who suffers loss in a land transaction is open to question. The State does not pay compensation if a title is unregistered, however diligent an innocent purchaser may have been. Similarly, the State does not compensate the innocent victim of wrongdoing or mischance in other fields of registration of property, for example, motor vehicle registration. Why should it do so when the loss is title to land?

Arguments for retention of Compensation Scheme

39. Arguments in favour of some form of compensation by the State rest on the changes that the Torrens system has made to the position of those dealing in land. First, compensation is provided for losses which could not have occurred under deeds conveyancing but which the Torrens system makes possible, principally by making transactions easier. A system in which the register is crucial and which allows title to be transferred by a simple process, permits frauds and forgeries to be more easily perpetrated. Second, because registration confers indefeasibility, the effects of forgery, fraud and Land Titles Office errors are far greater than under deeds conveyancing. At common law, remedies such as ejectment were available to a plaintiff against someone claiming title through a forged or fraudulent transaction. The Torrens system curtails these remedies in the interest of ensuring certainty of title as recorded on the register. Compensation by the State thus fills a vacuum created by the Torrens system and provides protection against its potential harshness.

40. The New South Wales Law Reform Commission is of the view that there is a case for abolishing the State compensation scheme for losses arising from operation of the Torrens system. Comments on this view are sought.