Astell v Australian Capital Territory
[2016] ACTSC 238
•22 August 2016
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Astell v Australian Capital Territory |
Citation: | [2016] ACTSC 238 |
Hearing Date: | 15 August 2016 |
DecisionDate: | 22 August 2016 |
Before: | Mossop AsJ |
Decision: | See [41] |
Catchwords: | STATUTORY INTERPRETATION – Whether plaintiff whose house was sold by an unidentified fraudster can recover damages from Territory under Land Titles Act 1925 (ACT), s 155 – What “remedy by action for recovery of damages” is provided for in Pt 16 – Meaning of “inapplicable” – Where evidence demonstrates little to not prospect of fraudster ever being identified – Remedies in ss 154, 143 inapplicable where fraudster cannot be identified because plaintiff cannot bring proceedings against an unidentified person DAMAGES – Test to be applied – Plaintiff to be put in the position she would have been but for the fraud – Value of property to be assessed according to current market value – Sale price does not reflect market value as fraudster cannot be considered a willing seller in an arms length transaction – Plaintiff entitled to market value of property, net loss of rent and transaction costs for purchase of equivalent house |
Legislation Cited: | Land Titles Act1925 (ACT), ss 143, 152, 154, 155 Legislation Act 2001 (ACT), s 139 |
Cases Cited: | Perpetual Trustees Victoria Ltd v Van Den Heuvel (No 2) (2009) 14 BPR 26, 765 Registrar-General (NSW) v Behn (1981) 148 CLR 562 Saade v Registrar-General (NSW) (1993) 179 CLR 58 |
Texts Cited: | Carruthers, P and Skead, N, “150 years on: the Torrens compensation provisions in the “last resort” jurisdictions” (2011) 19 Australian Property Law Journal 174 |
Parties: | Imera Astell (Plaintiff) Australian Capital Territory (Defendant) |
Representation: | Counsel Mr M Orlov (Plaintiff) Mr W L Sharwood (Defendant) |
| Solicitors CS Legal (Plaintiff) Australian Capital Territory Government Solicitor (Defendant) | |
File Number: | SC 337 of 2015 |
MOSSOP AsJ:
Introduction
The plaintiff was the victim of what is now commonly known as identity theft. A house in Canberra which she owned was sold upon the instructions of a fraudster who provided instructions to the real estate agent and a solicitor. Neither the real estate agent nor the solicitor undertook checks sufficient to identify that their instructions were being provided by a fraudster rather than by the owner of the properties. The property was sold and the proceeds lost. The fraudster has not been identified.
The plaintiff now claims damages against the Territory pursuant to s 155 of the Land Titles Act1925 (ACT) (Land Titles Act). Whether or not she is entitled to those damages depends upon the interpretation of that section and its application to the circumstances of this case.
Facts
The plaintiff was the owner of an unencumbered residential property at 35 Cumpston Place, MacGregor ACT 2615 (the property). She had acquired that property in September 1991. She had purchased the property using a loan from the Commonwealth Bank. By 2005 she had paid off the home loan. In 1995 she appointed Wright Dunn Real Estate as her agent to manage the property and shortly thereafter moved to Western Australia where she lived until 2002.
As at 2012 the plaintiff was living in South Africa. In October 2012, because of her concerns about the reliability of the South African postal system, the plaintiff instructed the real estate agent to send all correspondence to her by email at an identified email address which I will refer to as email address number one. In July 2013 she commenced to use an alternative email address for communications with the agent, email address number two. She received monthly statements from the agent to this email address up until September 2013. In September 2013 an unknown person impersonating the plaintiff, who I will refer to as the fraudster, emailed the agent notifying a change of email address from email address number two to an email address with a similar username and different service provider. I will refer to this as email address number three. The email said that the old email address had been “compromised” and it provided a telephone number. The agent, apparently without undertaking any further checks, updated the plaintiff’s contact details and notified the fraudster of that fact by email. Less than a week later the fraudster requested a current valuation of the property because “she” was considering selling it. There were communications back and forth between the fraudster and the agent by which the fraudster purported to authorise the agent to market the property. That process commenced at the end of October 2013. In preparation for the auction at the end of November, the agents recommended a reserve price of between $450,000 and $460,000, but the fraudster gave instructions to sell at anything over $400,000. The property failed to sell at auction. Although the fraudster had indicated that “she” was prepared to accept any offer over $400,000, after the auction the agent advised that that would be undervaluing the property and it was appropriate to aim for a figure closer to the mid-$400,000s. The fraudster gratefully accepted this advice and, in December 2014, an offer of $430,000 was accepted. The fraudster then signed a retainer agreement with a firm of solicitors known as Tuggeranong Legal. Contracts were exchanged in January 2014. The fraudster forged the plaintiff’s signature on the contract. The solicitor was able to retrieve the certificate of title and the discharge of mortgage which were kept in a “Safe Custody facility” at the Commonwealth Bank. The fraudster gave instructions for the proceeds of the sale to be deposited into an account in the plaintiff’s name held with Bank SBI Indonesia in Jakarta. In February 2014 the fraudster telephoned the agent and had a discussion with one of its staff members in relation to transferring the balance of the deposit through to the Jakarta bank account. Settlement of the contract occurred on 14 February 2014. The balance of the deposit was transferred to the Jakarta bank account on 19 February 2014. The transfer of the bulk of the funds, some $407,374, was made by Tuggeranong Legal on 21 February 2014 through a bank transfer from the Commonwealth Bank to the Jakarta bank account.
In June 2014 the plaintiff contacted the agent by email to enquire about the progress of maintenance work that had been agreed upon in September 2013. In July 2014 the plaintiff spoke by telephone to an employee of the agent who informed her that the property had been sold, ostensibly pursuant to instructions that she had given. The next day the agent reported the fraudulent sale to police. Police investigated the circumstances of the claim and the result of the police investigation was that the offender could not be identified. An Australian Federal Police (AFP) document outlines the steps taken to investigate the claim, including an attempt to trace the owner of the bank account in Indonesia. The AFP report indicates that the status of the investigation was “finalised” even though as at 6 August 2015 it was awaiting further information from “the Egmont group”, an international network of financial intelligence units which includes the Australian Transaction Reports and Analysis Centre (Austrac). The report notes that there is no time frame for this information being supplied and that the investigation will be closed, but may be reopened if the information once received generates new leads.
A report by the investigating officer concludes:
In my opinion you are an innocent victim of an overseas based criminal syndicate who have managed to successfully assume your identity to profit from the sale of your property. Due to the timeframe prior to this matter coming to notice and the international aspects of the matter no offenders have been identified. I do not believe that any offenders will be identified. At this stage I am only able to confirm that the funds from the sale of the property were transferred to an Indonesian bank account but I am unsure as to the current status of those funds.
Statutory provisions
The plaintiff’s claim is pursuant to s 155 of the Land Titles Act. In order to understand the operation of s 155 it is also necessary to refer to the terms of ss 143 and 154 of the Act.
Part 16 Civil rights and remedies
143 Damages in certain cases
In any case where a person against whom proceedings have been taken under section 154—
(a) ceases, under section 154 (5), to be liable for the payment of damages; or
(b)being liable for damages under that section, is dead, bankrupt or insolvent, or cannot be found within the jurisdiction;
the damages with costs of action may be recovered by action against the Territory.
...
154 Compensation for party deprived of land
(1) Any person deprived of land or of any interest in land—
(a) in consequence of fraud; or
(b) through the bringing of the land under this Act; or
(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 any grant, certificate of title or in any entry or memorial in the register;
may bring and prosecute an action for the recovery of damages.
(2)The action shall, in any case in which the land has been included in 2 or more grants, be brought and prosecuted against the Territory.
(3)The action shall in any other case, but subject to subsections (4) and (5), be brought and prosecuted against the person—
(a) upon whose application the land was brought under this Act; or
(b) upon whose application the erroneous registration was made; or
(c) who acquired title to the interest in question through the fraud, error, omission or misdescription.
(4)In every case in which the fraud, error, omission or misdescription occurs upon a transfer for value, the transferor receiving the value shall be regarded as the person upon whose application the certificate of title was issued to the transferee.
(5) Except in the case of fraud or of error occasioned by any omission, misrepresentation or misdescription in his or her application, or in any instrument executed by him or her, the person upon whose application the land was brought under this Act, or the erroneous registration was made, shall, upon a transfer of the land bona fide for value, cease to be liable for the payment of any damages which might have been recovered from him or her under this section.
155 When actions may lie against registrar-general as nominal defendant
Any person sustaining loss or damages through any omission, mistake or misfeasance of the registrar-general or any of his or her officers or clerks in the execution of their respective duties under this Act, or by the registration of any other person as proprietor of land, or by any error, omission or misdescription in any grant, certificate of title or any entry or memorial in the register, and who by this Act is barred from bringing an action of ejectment or other action for the recovery of the land or interest may, in any case in which the remedy by action for recovery of damages as provided in this part is inapplicable, bring an action against the Territory for recovery of damages.
These provisions involve a model of compensation in Torrens title legislation which is referred to as the “last resort” model. In the last resort model actions for compensation are, in the first instance, required to be brought against the person liable for the deprivation. It is only in limited circumstances that a claim may be made against the government for loss arising from the operation of the Torrens system. The operation of this scheme and the justifiable criticisms of it are usefully described in P Carruthers and N Skead “150 years on: the Torrens compensation provisions in the ‘last resort’ jurisdictions” (2011) 19 Australian Property Law Journal 174.
In the Land Titles Act the critical provisions are ss 154 and 155. Section 154 permits an action for recovery of damages against a person in particular circumstances (s 154(3)) or against the Territory in the very limited circumstances outlined in s 154(2). Because of its limited operation, I will say no more about s 154(2). In order to bring an action against the person identified in s 154(3) it is necessary to satisfy the various requirements in s 154(1). That identification process is informed by the terms of s 154(4). Section 154(5) provides that in certain circumstances the liability of the person who might otherwise be sued ceases.
Section 155 permits the recovery of damages from the Territory in particular circumstances. There are three elements to the operation of s 155 that must be satisfied. First, the person must sustain loss or damage for one of the reasons identified in the section. As applied in the present case, the plaintiff must demonstrate that she is a “person sustaining loss or damages … by the registration of any other person as proprietor of land”. The plaintiff submitted and the defendant accepted that this requirement is met in the present case.
Second, the plaintiff must prove that she is “by this Act … barred from bringing an action of ejectment or other action for the recovery of the land”. The purchasers of the property became registered proprietors of the land as bona fide purchasers for value. Pursuant to s 152 of the Act no action for ejectment or other action for recovery is available to the plaintiff because none of the exceptions in ss 152(1)(a)-(g) are applicable. As a consequence the plaintiff submitted, and the defendant accepted, that this requirement is satisfied.
Third, the plaintiff must establish that this is a “case in which the remedy by action for recovery of damages as provided in this part is inapplicable”. In other words, the capacity to recover losses from the Territory only applies where “the remedy by action for recovery of damages as provided in this part” does not apply. That is the essence of the scheme being one of “last resort”. It is upon this issue that the submissions of the parties diverged. This is the issue upon which the liability of the Territory turns.
Is the third precondition satisfied?
In order to resolve this issue it is necessary to determine:
(a)what “remedy by action for recovery of damages” is provided for in Pt 16 of the Land Titles Act; and
(b)what is meant by the word “inapplicable”.
Relevantly the action for recovery of damages as provided for in Pt 16 is that provided by ss 154 and 143. I will explain the operation of those provisions in the circumstances of this case in a step-by-step manner by reference to the requirements of the individual subsections.
Section 154(1) identifies the circumstances in which a person must be “deprived of land” in order for the person to be entitled to “bring and prosecute an action for the recovery of damages”. In the present case the relevant paragraph is s 154(1)(c): the registration of any other person as proprietor of the land. It is not paragraph s 154(1)(a) – in consequence of fraud – because the reference to fraud is confined to fraud by the person acquiring the interest: Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 at 618.
Section 154(3) identifies the person against whom the action may be brought and prosecuted. The relevant paragraph is s 154(3)(b). “Erroneous registration” includes registration of bona fide purchases for value where that purchase has been procured by fraud: Saade v Registrar-General (NSW) (1993) 179 CLR 58 at 68. Subsection 154(4) operates to identify who that person is by providing that the transferor receiving the value is to be regarded as the person upon whose application a certificate of title was issued to the transferee.
Subsection 154(5) identifies circumstances in which a person who would otherwise be liable under s 154 ceases to be liable. That section does not apply in the present case because this is a case “of fraud or of error occasioned by any omission, misrepresentation or misdescription”.
As a result, the plaintiff would have an entitlement under s 154 to bring and prosecute an action for the recovery of damages against the fraudster. The difficulty is that the fraudster has not been and is unlikely to ever be identified.
In certain cases, or where there are obstacles to recovery of damages under s 154 from the person identified in that section, there is an entitlement to bring proceedings against the Territory under s 143. However, the circumstances in which such an action may be brought against the Territory are circumscribed by the terms of the section. There is a requirement that proceedings “have been taken” under s 154. These words indicate that proceedings must actually have been taken prior to the section operating. They do not permit the section to operate in circumstances where proceedings have not been taken.
Section 143(a) does not apply because s 154(5) has no application in the present case. Section 143(b) covers the situation where proceedings “have been taken” under s 154, but the person against whom they are brought is “dead, bankrupt or insolvent, or cannot be found within the jurisdiction”. Thus it provides a remedy in a limited category of cases where the remedy provided by s 154 will be ineffective. In combination with s 154 it defines, relevantly, the scope of actions for recovery of damages provided by Pt 16.
In the present case, s 143(b) cannot apply because the fraudster has not been identified and hence it is not possible to (a) take proceedings under s 154(3) or (b) establish that the person is “dead, bankrupt or insolvent, or cannot be found within the jurisdiction”. That is despite the fact that if a person was identified it would be almost certain that the person would not be within the jurisdiction.
It is in these circumstances that it is necessary to decide whether the remedy by action for recovery of damages as provided in Pt 16 is “inapplicable”. On this issue the defendant drew attention to dictionary definitions of “inapplicable” as “not relevant or appropriate”, “not able to be used in a particular situation; not applicable or relevant” and “not capable of being applied”. It then submitted that whether or not a remedy was “inapplicable” under Pt 16 must be determined by analysis of the facts relevant to the elements of a claim for compensation and not by reference to the convenience of being able to successfully commence or conclude proceedings. It therefore submitted that only where, as a matter of law, the preconditions in s 154 were not satisfied could the section be said to be “inapplicable”. It submitted that in the present case the relevant facts identified a fraudster and the fact that as a matter of practicality the plaintiff has been unable to establish the identity of the fraudster is not sufficient to make the section inapplicable. That is because s 155 is not focused on the practical possibilities of success under s 154. Had that been the focus then words such as “unsuitable or “inconvenient” would have been used. It submitted that the plaintiff’s argument did not identify the extent of difficulty that needs to be experienced by a plaintiff before a remedy otherwise available under s 154 could be said to be “inapplicable”. It contended that the language of inapplicability was more consistent with the action being legally unavailable rather than practically problematic.
In reply the plaintiff embraced the definitions of “inapplicable” put forward by the defendant in so far as they reflected the word’s ordinary meaning, namely “not able to be used in a particular situation” and “not capable of being applied”.
The context in which this issue must be resolved is the scheme provided for by ss 154, 143 and 155. Section 154 provides the basic action against a person for damages resulting from the claimant being deprived of land. Where, for the reasons identified in s 143 the action is either not available or, for certain practical reasons, not valuable, then recovery may be made against the Territory. Where those provisions are “inapplicable” then the last resort is an action against the Territory under s 155.
Consistently with the definitions put forward by the parties, inapplicable extends to “not able to be used in a particular situation” and “not capable of being applied”. In theory s 154 would be available because the fraudster is a human or a group of humans. However, the fact that the fraudster cannot be identified means that s 154 is unable to be used because it is not possible to bring proceedings against an unidentified person. It is therefore “inapplicable” within the ordinary meaning of that word and the meaning of the word in s 155.
While I accept that there may be cases in which a more difficult question arises in relation to whether s154 is available because there is some prospect of the fraudster ultimately being identified, this is not such a case. The evidence, as reflected in the pessimistic conclusion of the investigating AFP officer, points to the fraudster remaining unidentified. I do not consider the theoretical possibility of there being a reduction in the incentive for a claimant to fully investigate the identity of a fraudster to be a proper reason for finding that s 154 is not “inapplicable” in the circumstances of this case. In any case under s 155 there will need to be a determination of whether or not the other provisions in Pt 16 are “inapplicable”.
Finding that the remedies in the part are “inapplicable” gives a more coherent operation to its provisions than if “inapplicable” meant legally possible even if practically impossible. If “inapplicable” meant legally possible even if practically impossible, the effect of s 155 would be that there would be a remedy if the police had identified the name of some person overseas – a person who “cannot be found within the jurisdiction” for the purposes of s 143 – but no remedy if the fraud was so effective that no person could be identified. Such an interpretation would give Pt 16 a somewhat arbitrary operation, inconsistent with a regime designed to underpin confidence in the Torrens title system.
In reaching the above conclusion I have not attempted to articulate the numerous issues which obviously arise because of the drafting of the provisions of Pt 16. The last resort provisions have been described as “archaic, contradictory [and] confusing” and various other unflattering terms: see Carruthers and Skead at 174, 175-176. These problems make it difficult to say that there is any clearly articulated policy reflected in the terms of the individual sections. However, in my view, having regard to the overall purpose of Pt 16 of the Act, the interpretation that I have given to the word “inapplicable” is the meaning compelled by the legislative command in s 139 of the Legislation Act 2001 (ACT).
Damages
The plaintiff is entitled to the damages “commensurate with the loss [she] has sustained in consequence of the wrongful deprivation-damages that will put [the plaintiff] in the same position, so far as money can do, as if the deprivation had not occurred”: Registrar-General (NSW) v Behn (1981) 148 CLR 562 at 568. The plaintiff submitted that if the fraud had not occurred then she would have continued to own the property and earn rental income from the property. Therefore counsel for the plaintiff submitted that in order to put her in the position that she would have been in had she not been deprived of her property she is entitled to:
(a)the price payable to purchase an equivalent property in the current market;
(b)legal fees and stamp duty payable for the purchase of a replacement property; and
(c)loss of net rent for the period plus interest on that rent taking into account when it would have been received.
The defendant submitted that the approach to be taken to compensation was equivalent to that articulated by Price J in Perpetual Trustees Victoria Ltd v Van Den Heuvel (No 2) [2009] NSWSC 483 at [19] (in relation to different statutory provisions in New South Wales), namely, damages in the amount that “will put the cross-claimant in the same position so far as money can do it, as if the wrongful act had not been done but not in a better position: Registrar of Titles v Spencer (1909) 9 CLR 641”. The defendant then contended that the appropriate means of compensating the plaintiff was the value of the property as at the date of the contract. It submitted that the actual price of $430,000 was “by definition the market value of the property” and that this amount plus interest should be awarded. It referred to the decision in Registrar of Titles v Mrsa [2015] WASCA 204 at [17] (Mrsa). It submitted that damages for loss of rent were not appropriate, pointing to uncertainties of calculation and the fact that net rent would be an equivalent to loss of interest so that both could not be claimed.
In my view, as a matter of principle, the approach contended for by the plaintiff is the correct one. The evidence of the plaintiff in the present case was that she intended to keep the property and ultimately leave it to her children. As a consequence, but for the fraud she would still have been in possession of the property. Therefore putting her in the position she would have been in but for the fraud means that she should be awarded the elements of damages for which her counsel contended.
I do not accept the defendant’s submission that the decision in Mrsa supports an approach in the present case of the value of the property at the date of sale by the fraudster plus interest. Indeed the approach adopted in that case is consistent with the approach contended for by the plaintiff. In that case the owner of the property had not intended to sell the property. Therefore the property would not have been sold until after his death. By the time of the trial of the action the owner had in fact died and the action was continued by his estate. The Court therefore assessed the value of the property that had been lost as at the date of a notional sale of the property following the owner’s death. Interest from the date was then awarded. The case does not support the proposition contended for by the defendant in the present case that the value of the property should be taken as at the date of the sale by the fraudster. The decision is consistent with the approach contended for by the plaintiff in the present case because it examines what would have happened in the absence of the fraud in order to assess the damages that are necessary in order to put the plaintiff in the position that the plaintiff would have been in but for the fraud.
In relation to the value of the property when it was sold, the plaintiff relied upon the valuation of Jordan Hayes, a valuer employed by Herron Todd White, who assessed the value of the property as at 14 February 2014 at $465,000. This valuation was provided on 1 December 2015 and, as at that date, Mr Hayes estimated market value to be $480,000. In re-examination Mr Hayes disclosed that the property was sold again in March 2016 for $512,500. There was, however, no evidence as to whether or not improvements had been made to the property between December 2015 and March 2016. The defendant, on the other hand, contended that the best evidence of market value was the actual sale price achieved in February 2014, namely $430,000. That was because a proper marketing period had been allowed and because there was evidence that the agent had been keen to ensure that market value of the property was achieved.
Because the plaintiff is entitled to be put in a position that she would have been had the fraud not occurred, the appropriate measure of damages is reflected by the current value of the property. The best evidence of that is the evidence of Mr Hayes of the value in December 2015. Because of the absence of evidence about improvements made between December 2015 and the sale of the property again in March 2016, it is not possible to say that the value of the property is higher than disclosed in his written report on 1 December 2015.
Adopting this approach, it is not necessary to resolve the difference in the evidence as to the value as at February 2014. However, I would not have accepted that the sale price of $430,000 accurately reflected the market value of the property because I consider that the fraudster could not be considered to be a willing seller in an arms length transaction because the fraudster was selling property which the fraudster did not own. Notwithstanding the efforts of the agent, there were clear indications in the evidence of a willingness to dispose of the property for any price above $400,000; a desire tempered only by the willingness to accept a higher price if that could be achieved promptly in circumstances where the fraudster would have been aware that pressing for a lower price might have raised suspicions.
The evidence in the affidavit of Gerald Santucci indicated that the legal fees and stamp duty on a replacement property would be $2176 and $12,660 respectively, giving a total of $14,836.
The claim for loss of net rent is articulated by reference to the rent available disclosed by the last lease which ran from June 2013 for 12 months, less agents fees, rates and land tax. These latter figures are demonstrated by the documentary evidence for the period prior to the sale of the property. The claim for rent is made over the period from 14 February 2014. The relevant figures disclosed by the evidence are as follows:
(a)rent $480 per week for 131 weeks ($62,880);
(b)agents fees including GST ($6,917);
(c)rates $3545;
(d)land tax $4746.
This gives a net figure of $47,672 ($62,880-$6917-$3545-$4746). Given that rental income was received throughout the period, it is appropriate to make an award of interest on half the amount over the period since 14 February 2014, namely $3760.
While the defendant raised in its submissions the possibility that the plaintiff’s loss might be reduced because of the tax she would have paid on her net income, there was no cross-examination on this issue. As a consequence there was no evidence as to whether in the relevant period she was liable to pay tax in Australia or South Africa, or any evidence as to her financial circumstances more generally, that might have allowed the assessment of the impact of taxation. In the absence of any such evidence is not possible to find on the balance of probabilities that her net loss should be reduced because of the effect of taxation on income that she would, but for the fraud, have earned.
The total award of damages is therefore $546,268 ($480,000 + expenses of $14,836 + loss of net rent $47,672 + interest on rent $3760)
Orders
The orders of the Court are:
1. Judgment for the plaintiff in the sum of $546,268;
2. The usual order as to interest;
3. The defendant is to pay the plaintiff’s costs of the proceedings; and
4. Order 3 does not take effect for 14 days and, if either party notifies my associate by email (copying in the other party) that it wishes to be further heard in relation to costs, does not take effect until further order.
| I certify that the preceding forty-one [41] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop. Associate: Date: 22 August 2016 |
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