Saade v Registrar-General (NSW)

[1993] HCA 73

HIGH COURT OF AUSTRALIA

DEANE, DAWSON, TOOHEY, GAUDRON AND McHUGH JJ

SAADE v REGISTRAR-GENERAL OF THE STATE OF NEW SOUTH WALES AND OTHERS (1993) 179 CLR 58, (1993) 68 ALJR 98,

(1993) 118 ALR 219

22 December 1993

Torrens System (N.S.W.)

Torrens System (N.S.W.)—Registration—Forged transfer—Statutory relief for registered proprietor deprived of interest in land—Erroneous registration—Persons liable for deprivation of interest—Person upon whose application certificate of title issued to transferee—Transferor receiving value regarded as applicant—Rights against assurance fund—Where person liable not within jurisdiction—Relevant time—Real Property Act 1900 (N.S.W), s. 126(1), (2)(b)(c), (3), (5).

Orders

Appeal allowed with costs.

Set aside the order of the Court of Appeal of New South Wales and in lieu thereof order that the appeal to that Court be dismissed with costs.

Decision

DEANE, DAWSON, TOOHEY, GAUDRON AND McHUGH JJ The issue for determination in this appeal is whether the Assurance Fund regulated under the Real Property Act 1900 (N.S.W.) ("the Act") is available to the appellant, Mrs Saade ((1) Claims under the Act as it stood at the relevant time are now payable out of the Torrens Assurance Fund established by s.133A of the Act: see the Real Property (Torrens Assurance Fund) Amendment Act 1992 (N.S.W.).).

The background

2. Mrs Saade was registered proprietor as joint tenant with her then husband, Mr Saade, in the former matrimonial home at 14 Seymour Parade, Belfield, in New South Wales. In 1976 Mr Saade forged his wife's signature to a memorandum of transfer of the property to the second respondent, Mr Khoury, whom the trial judge found to be a party to the forgery of the transfer (that is, the forgery of Mrs Saade's signature).

3. Mr Saade left Australia for Lebanon and could not be located at the time proceedings were commenced. He was named as a defendant but was not served with any process. The appellant became aware of his return to Australia on the second day of the hearing of her action and thereafter subpoenaed him to appear as a witness. Mrs Saade also brought action against Mr Khoury who filed a defence and a cross-claim seeking removal of a caveat the appellant had placed on the title to the property. However, he played no part in the appeal. Later
Mrs Saade joined as defendants the first respondent, the Registrar-General, and the third respondent, Mr Poppert, who was a solicitor involved in the transaction. Before this Court submissions were made only on behalf of Mrs Saade and the Registrar-General.

4. For reasons that are not relevant to this appeal, the trial judge dismissed the claim against Mr Saade and Mr Khoury. But he entered judgment against the Registrar-General in the sum of $53,000, assessed as the loss Mrs Saade suffered through the deprivation of her interest in the property by reason of the forgery. The Court of Appeal of New South Wales upheld an appeal by the Registrar-General with the consequence that the claim was dismissed against all defendants. It is the judgment of the Court of Appeal dismissing Mrs Saade's claim against the Registrar-General that is the subject of appeal to this Court.

5. Meagher JA delivered the leading judgment in the Court of Appeal. Sheller JA and Samuels AJA agreed with the judgment, the former adding some observations of his own. The appeal focused on ss.126 and 127 of the Act, each of which permits action against the Registrar-General and resort to the Assurance Fund in the circumstances there mentioned.

6. Meagher JA summarily disposed of the argument based on s.126 with these words:
"It is difficult to see how, on the learned judge's
interpretation of the facts, the Registrar General could possibly be liable under s.126. His Honour must, therefore, have taken the view that the Registrar General was liable under s.127." His Honour then proceeded to deal with and reject liability under
s.127 of the Act.

The Act: s.126

7. However, we are of the opinion that the Registrar-General is liable to Mrs Saade under s.126 of the Act. To explain why that is so it is necessary to set out s.126 as it stood at the time the fraud was perpetrated in 1976. It read:

" (1) Any person deprived of land or of any estate, or interest in land - (a) in consequence of fraud; or (b) through the bringing of such land under the provisions of this Act; or (c) by the registration of any other person as proprietor of such land, estate, or interest; or (d) in consequence of any error, omission, or misdescription in the Register, may bring and prosecute in any Court of competent jurisdiction an action for the recovery of damages. (2) An action under subsection (1) shall, in any case in which the land to which the action relates has been included in two or more grants, or a grant in respect of that land has otherwise incorrectly issued, be brought and prosecuted against the (Registrar-General) as nominal defendant and, in any other case, shall, subject to subsections (3), (4) and (5), be brought and prosecuted against the person - (a) upon whose application the land was brought under the provisions of this Act; (b) upon whose application the erroneous registration was made; or (c) who acquired title to the land, or the estate or interest therein, through the fraud, error, omission or misdescription. (3) 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. (4) Except in the case of fraud or of error occasioned by any omission, misrepresentation, or misdescription in his application, or in any instrument executed by him, the person upon whose application such land was brought under the provisions of this Act, or such erroneous registration was made, shall, upon a transfer of such land bona fide for value cease to be liable for the payment of any damages which might have been recovered from him under this section. (5) In any of the following cases, that is to say, - (a) where such person ceases to be liable for the payment of damages as aforesaid; or (b) when the person liable for damages under this section is dead, bankrupt, or insolvent, or cannot be found within the jurisdiction, such damages with costs of action may be recovered out of the assurance fund by action against the Registrar-General as nominal defendant."

8. It is convenient to set out also portion of s.127, again as it stood at the relevant time:
" (1) Any person sustaining loss or damages through any
omission, mistake, or misfeasance of the Registrar-General or any of his officers or clerks in the execution of their respective duties under the provisions of this Act, or by the registration of any other person as proprietor of land, or by any error, omission, or misdescription in the Register, and who by the provisions of this Act is barred from bringing proceedings in the Supreme Court for possession, or an action of ejectment in a District Court, or other proceedings or action for the recovery of such land, estate, or interest or to whose claim every such proceedings or action would be inapplicable may, in any case in which the remedy by action for recovery of damages as hereinbefore provided is inapplicable, bring an action against the Registrar-General as nominal defendant for recovery of damages."

9. In one sense the starting point for a consideration of s.126 is sub-s.(5) which identifies the situations in which damages may be recovered out of the Assurance Fund. But sub-s.(5) can only be reached by a person in the position of Mrs Saade where the requirements of the preceding sub-sections are met.

10. She is of course a person deprived of an interest in land "in consequence of fraud" ((2) As to the meaning of "fraud" in this context, see Registrar of Titles (W.A.) v. Franzon (1975) 132 CLR 611, at p.618.). She is also a person deprived of such an interest "by the registration of any other person as proprietor of such ... interest". She therefore falls within pars (a) and (c) of s.126(1);
that sub-section creates a statutory cause of action ((3) Registrar-General (N.S.W.) v. Behn (1981) 148 CLR 562, at p.568.). The action which she may accordingly bring for the recovery of damages under the section must be against a person identified by sub-s.(2). Relevantly, that can only be a person answering the description in par.(b) or (c) of sub-s.(2).

Section 126: Mr Khoury

11. It is convenient to look first at par.(c). The only person who acquired title to Mrs Saade's interest in the land through fraud was Mr Khoury. Action was brought against him by Mrs Saade but the Registrar-General contended that although in this respect s.126(2)(c) was met, s.126(5)(b) was not because Mr Khoury was not a person who "is dead, bankrupt, or insolvent, or cannot be found within the jurisdiction". That contention is clearly correct. He was a person against whom action was brought. He filed a defence and participated in the action. The claim against him was dismissed. Paragraph (c) of s.126(2) cannot therefore be the basis of a claim by Mrs Saade against the Registrar-General.

12. The question then is whether s.126(2)(b) of the Act has any application in the present case. The paragraph has two elements. One is that there be an "erroneous registration"; the other is that action be brought against the person "upon whose application" that registration was made.

Erroneous Registration: Registrar of Titles (W.A.) v. Franzon

13. As to the first element, although par.(b) speaks of "the erroneous registration", that phrase does not appear earlier in the section. Section 126(1)(d) refers to "error" but there is no true correspondence between that paragraph and s.126(2)(b).

14. Registrar of Titles (W.A.) v. Franzon ((4) (1975) 132 CLR 611.) concerned the forged signatures of the registered proprietors of land to a mortgage. The forgery was by the registered proprietors' solicitor; the mortgagee was innocent of the fraud. Speaking of "erroneous registration" in s.201 of the Transfer of Land Act 1893 (W.A.), Mason J, in a judgment with which the other members of the
Court (Barwick CJ and Jacobs J) agreed, said ((5) ibid., at p.619.):

" The difficulty is to describe the registration which ensued as an 'erroneous' registration. There was no disconformity between the registration and the instrument on which it was based and which was the foundation of the application. No error was made by the (mortgagee) or by the (Registrar of Titles) or by those acting for them in effecting registration of the mortgage."

The Registrar-General relied upon that passage to support his submission that s.126(2)(b) can have no application in the present case since there was no disconformity between the registration of Mr Khoury as proprietor and the instrument of transfer upon which it was based.

15. There is no basis for distinguishing s.126 of the Act from s.201 of the Western Australian Act so far as the place of "erroneous registration" in the two sections is concerned. At the same time it is clear that Mason J was influenced by the fact that the mortgagee was innocent of any fraud, for he followed the sentences already quoted with this passage ((6) ibid.):

"This concept of 'erroneous registration' is more consistent with the principle of indefeasibility, for the appellant's broad conception of 'erroneous registration' would expose the innocent registered proprietor of the mortgage to an action for damages, a liability that is hardly consistent with the principle inasmuch as it requires him to pay the injured party's loss although it leaves him on the register."

16. Franzon was followed in Armour v. Penrith Projects Pty. Ltd. ((7) (1979) 1 NSWLR 98.) where, although the forger of a transfer was joined as a defendant, the transferee was an innocent party. Referring to the judgment of Mason J in Franzon, Needham J said ((8) ibid., at p.102.):

"Applying that reasoning, as I think I must, I find that there was no erroneous registration of the transfer ... If that conclusion is right, it appears that in no case under s.126, so far as I can see, could a forger who did not himself take title to the land ever be subject to proceedings under the section. If that is the true purport of the section, then it seems to me that it lacks an essential protection to persons who are defrauded in their interests in registered land being taken from them by forgery."

17. Although counsel for Mrs Saade made formal application for leave to argue that the judgment of Mason J in Franzon should not be followed so far as it might be thought to determine the interpretation of "erroneous registration" in s.126(2)(b), the application was not strongly pressed and counsel preferred to put his case on a footing which distinguished Franzon. We shall explain.

18. The second element of s.126(2)(b) is that action be brought against the person "upon whose application" the erroneous registration was made. In fact the memorandum of transfer was presented for registration by Mr Khoury. However, counsel for Mrs Saade contended that there was an erroneous registration and that, by reason of the presence of sub-s.(3) of s.126, Mr Saade must be regarded as the person upon whose application the erroneous registration was made. Sub-section (3), in one form or another, is not unique in Australian Torrens legislation, but it did not appear in the Western Australian statute considered in Franzon. As will be seen, its presence in s.126 clearly distinguishes the New South Wales legislation, for the purposes of the present case, from that under consideration in Franzon.

19. The purpose of sub-s.(3) is to identify the person upon whose application the certificate of title was issued to the transferee. It operates in every case in which "the fraud, error, omission or misdescription occurs upon a transfer for value". The litany "fraud, error, omission or misdescription" appears of course in s.126(2)(c) and it may be thought that sub-s.(3) is correspondingly limited in its operation. But that cannot be so since par.(c) is concerned with action against the person "who acquired title to the land". It is of no relevance to par.(c) to identify the person upon whose application the transfer was registered. That identification is relevant only in the context of par.(b) of sub-s.(2) ((9) In The Real Property Act 1900 (N.S.W.), (1902), pp.185-186, Canaway associates s.126(3) with s.126(2)(c) but comments that "the section presents, all through, grave difficulties of construction": see also Stein and Stone, Torrens Title, (1991), p.354, where s.126(3) is associated with s.126(2)(b)
albeit obliquely.). This in turn lends support to the argument that "erroneous registration" in par.(b) has a
meaning beyond that attributed to the expression in Franzon.

20. The predecessor of s.126 was found in s.117 of the original Torrens legislation in New South Wales, the Real Property Act 1862 (N.S.W.). Section 117 contained a proviso which was very similar to s.126(3) but, it must be said, clearer in its intended operation. The proviso read:

"Provided always that in every case in which the fraud error or misdescription shall occur upon a transfer made for value the person making the transfer and receiving the value shall be regarded as the person upon whose application the certificate of title was issued to the transferee."

21. Millard, writing in 1894 ((10) An Appendix to Williams' "Law of Real Property" for the Use of Students in New South Wales, pp.283-284.), treated the proviso as a reference to what is now s.126(2)(b), commenting that an action could be brought:

"against the person upon whose application the land was brought under the Act, or through whom such erroneous registration was made (in the case of a transfer for value, the person transferring and receiving the value), or who acquired title through such fraud, error, or misdescription". (emphasis added)

22. In s.126(3) the words "person making the transfer" are replaced with "transferor". That term is not defined in the Act but would
ordinarily be taken to have a corresponding meaning ((11) Interpretation Act 1987 (N.S.W.), s.7.) to "transfer" which is defined ((12) s.3 of the Act.) as the "passing of any estate or interest in land". Counsel for Mrs Saade argued that as the Torrens system is a system of title by registration and not registration of title, a person who forges a form of transfer which is subsequently registered does effect a transfer of that interest notwithstanding that the person was not the registered proprietor of the interest transferred. This argument has force, but in any event the opening words of s.3 of the Act provide that the definitions only apply in the absence of inconsistent context and subject matter. The context and subject matter of s.126(3) are directed at the provision of remedies for persons affected by fraud and mistake within the Torrens system. Although the words used in the 1862 Act add greater clarity to the provision, it is apparent that, in terms of s.126(3), Mr Saade is the "transferor receiving the value". The form of and commentary on s.117 of the 1862 Act lead to the conclusion that s.126(3) is a section which identifies the person to whom s.126(2)(b) relates.

23. Mr Saade is therefore to be regarded as the person upon whose application Mr Khoury was issued with the certificate of title. In the absence of sub-s.(3) it would ordinarily be the case that it is the person who acquired title who is the person upon whose application registration was made. Clearly, the sub-section fastens on to the transferor as the person to answer that description, in the circumstances to which it refers. And it does so in order to widen the category of persons against whom the statutory cause of action will lie.

24. That conclusion will not assist Mrs Saade unless, at the same time, the registration of Mr Khoury as transferee of her interest can be described as an "erroneous registration" within s.126(2)(b). An argument against that description is the view of "erroneous registration" taken in Franzon. But, against that argument, effect has to be given to sub-s.(3) of s.126 which serves little, if any, purpose unless "erroneous registration" in par.(b) is given a meaning wide enough to cover the situation of a person deprived of land through fraud, error, omission or misdescription. In the context of
the Act, "erroneous registration" can be seen as a shorthand expression intended to cover the elements in s.126(1) which give rise to a cause of action. If it were not so, there would indeed be, as Needham J lamented, the lack of an essential protection to persons who are defrauded.

25. The words in s.126(2)(c) "who acquired title to the land ... through the fraud" point to fraud "perpetrated by or on behalf of the person who secures registration" ((13) Franzon (1975) 132 CLR, at p.618.). In the present case that is Mr Khoury. But s.126(2)(b), read in conjunction with s.126(3), grounds an action against Mr Saade as the transferor receiving the value in a situation in which he, having forged the transfer, caused an erroneous registration. On this view of s.126 action will not lie against an innocent registered proprietor, the aspect which troubled Mason J in Franzon ((14) Section 126 of the Real Property Act 1861 (Q.) is the counterpart of s.126 of the Act though differently worded. It provides that any person deprived of land in consequence of fraud, the issue of a certificate of title to any other person, or error or omission in the Register or in a certificate of title, may bring an action against the person who derived benefit by that event: see Breskvar v. White (1978) Qd R. 187, at p.189 and the discussion in McKelvey, "Fraudulent Deprivation and the Assurance Fund", (1993) 23 Queensland Law Society Journal 133.).

Could Mr Saade be found within the jurisdiction?

26. Because of this conclusion, the availability to Mrs Saade of an action against the Registrar-General under sub-s.(5) depends upon whether her husband could be found within the jurisdiction at the relevant time. A decision on that aspect requires a determination of what is the relevant time (or times) and an application of that determination to the facts.

27. Mr Saade could not be found within the jurisdiction at the time proceedings were commenced. Counsel for Mrs Saade submitted that this is the relevant time for determining the operation of s.126(5)(b). We agree. The right to bring action against the Registrar-General only arises "when the person liable for damages ... cannot be found within the jurisdiction". The right of action against the Registrar-General crystallises at that time. And, at that time, Mr Saade could not be found within the jurisdiction. If this approach were not right, there would need to be an inquiry as to the whereabouts of the person concerned at each stage of the proceedings up to and including the time of the hearing. This could cast an impossible burden on a claimant and is inconsistent with the purposes of an Assurance Fund designed to provide a practical scheme of compensation for persons who have suffered loss through the operation of the Torrens system of indefeasibility of title.

28. It must also be said that the existence of two persons against whom action may be brought under s.126(2) is no answer to a claim made, in this case, against Mr Saade and therefore the Registrar-General. The reason sufficiently appears from the judgment of Griffith CJ in Cox v. Bourne ((15) (1897) 8 QLJ 66.). As the Chief Justice pointed out ((16) ibid., at p.68.), the contrary construction would "(set) a trap for an innocent victim of fraud, which I cannot think that the Legislature intended". And as his Honour observed later in his judgment ((17) ibid., at p.69.):

"I think that when once the conditions set forth in (s.126) exist, with respect to the actual and immediate perpetrator of the fraud, the right of action is complete against the (Registrar-General), whose liability, it seems to me, is put in the place of that of the person defrauded. And even if the plaintiff knew of the existence of other parties to the fraud, it is ordinarily no answer to an action against one person for a wrong to show that some other person is also liable. I do not see any sufficient reason for holding the present case to be an exception."

If Mrs Saade had recovered any damages from Mr Khoury, her entitlement to claim compensation from the Registrar-General would, of course, be eliminated or to that extent reduced. Otherwise, her right of action against Mr Saade (and, in the circumstances of this case, the Registrar-General) is unaffected by any rights which she may have had, or may have unsuccessfully sought to enforce, against Mr Khoury.

29. It follows then that Mrs Saade is entitled to be compensated from the Assurance Fund on the basis that Mr Saade is a person upon whose application the "erroneous registration" of Mr Khoury was made and that Mr Saade is a person who "cannot be found within the jurisdiction".

30. This conclusion makes it unnecessary to consider the availability of the Assurance Fund through the operation of s.127 of the Act. For the reasons given the appeal must succeed and the judgment of the trial judge be restored.