THE DEPARTMENT OF THE DIRECTOR GENERAL OF LANDS AND MINES (FEDERAL): The Torrens Assurance Fund: ...

innocent dealers with interests in registered land were guaranteed either their interest in the land or monetary compensation Sir Robert Torrens (1859)
Mohd Shukri Ismail Research and Development Section, Department of the Director General of Lands and Mines Federal Malaysia mohdshukri@kptg.gov.my. Anesh Ganason Research and Development Section, Department of the Director General of Lands and Mines Federal Malaysia anesh@kptg.gov.my Yusri Zakariah Research and Development Section, Department of the Director General of Lands and Mines Federal Malaysia yusri@kptg.gov.my

Keywords- Indefeasible Title, Assurance Fund, compensation, claims, claimant.

I.

INTRODUCTION iii.

information that is obtained by the registry is the conclusive evidence of the title and it is guaranteed by the Government. Torrens Insurance Principle In the event the register fails to mirror absolute correct reflection of the title and a flaw appears; due to this misrepresentation the rights of a registered proprietor has been deprived, the government shall compensate for the losses obtained by the registered proprietor on a government guaranteed title. The incomplete Torrens System in Malaysia has been working like clock work since the operation of the National Land Code 1965. But with recent development in fraud and forgery cases on land titles have caused concern on the issue of rights of innocent registered proprietors being deprived by these unscrupulous means. The mirror and curtain principles practiced in Malaysia have come to be insufficient in maintaining the rights of registered proprietors from the elements of fraud and forgery. Land

The basis of the Torrens System is laid out by three simple principles which are: i. Torrens Mirror Principle The basis of this principle is that the register of titles reflects accurate and complete facts that are material to the title. The title should be free from all adverse burdens, rights and qualifications unless that are mentioned in the register. The mirror ideally should reflect all facts and matters relevant to the title of a land ii. Torrens Curtain Principle The register is the sole source of information for intending purchasers. This provides a mechanism that reduces the cost for purchasers to investigate the history of the title for validity without going behind the register of titles. The

administration is at a crossroad whether to introduce the third Torrens principle with the Assurance Fund vehicle in order to provide a complete protection to registered proprietors.
II.

ONTARIO ASSURANCE FUND

The Land Titles Assurance Fund in Ontario, Canada is established under Part V of the Ontario Land Titles Act R.S.O. 1990, Chapter L.5. The fund is established by funds from the Consolidated Revenue fund determined by the Lieutenant Governor in Council and shall have a minimum credit of $1,000.000.00. The Assurance Fund under the law provides compensation on certain financial losses due to real estate fraud, omission and errors of the land registration system. The type of claims that may qualify for a compensation are as such: Fraud in certain circumstances; Errors or omissions of the land registration system; Errors in recording by land being brought under the act; and Errors in recording an instrument in the automated land registration system. The fund will award compensation for the following losses obtained by the proprietor: Financial losses as a result of fraud or error; Reasonable legal costs relating to the claim; Other reasonable costs relating to the claim According to the law, a claimant has to file an application of compensation to the Land Registry Office within six years from the time of having suffered the loss. The Registrar of Titles will conduct a caution hearing to determine the claim qualifies for compensation from the Land Titles Assurance Fund (LTAF). In the case where the Registrar of Titles is unable to determine the element of fraud it is referred to court. Once the

decision is made that the claim qualifies for compensation, the Registrar of Titles shall make the necessary rectification on the Register of Titles and the title is reverted to the claimant. To obtain compensation, the claimant has to submit a compensation claim form to the LTAF through the Office of the Registrar of Titles. The Registrar will determine the whether compensation shall be given and what is the amount. Any appeals on the decision of the hearing shall be brought to the court.
III.

QUEENSLAND ASSURANCE FUND

The element of compensation is also practiced in Queensland, Australia. According to Part 9 Subdivision 2 of the Land Titles Act 1994, a registered proprietor that is deprived of his or her rights of a title or has suffered loss or damage shall obtain compensation from the State. The lost of rights of a title, loss suffered or damage that shall be considered for compensation in occurrence of these elements: i. fraud of another person; ii. the incorrect creation of an indefeasible title in the name of another person; iii. incorrect registration; iv. an error in an indefeasible title or in the register; v. tampering with the land register; vi. loss, destruction or improper use of a document deposited or lodged at the land registry or held by the land registry for safe custody; vii. an omission, mistake, breach of duty, negligence or misfeasance of or by the registrar or a member of the staff in the land registry; viii. the exercise by the registrar of a power in relation to an application or dealing with which the person had no connection; Unlike Ontario the claimant has to make an application to Court to determine whether he or she qualifies for compensation within 12 years of from the day the claimant become aware of the

loss or deprivation. The court shall determine the action of ordering the State to pay compensation to the claimant or make an order to the Registrar to make any correction or cancellation on the register of title or create a new indefeasible title or a new instrument. The Queensland method of compensation does not have the mechanism of a standalone fund to provide the compensation. The mechanism of obtaining the compensation for deprived registered proprietors is through lengthy court cases and payments are done by the State through a consolidated revenue fund owned by the State. This method of obtaining the compensation can be said has not customer friendly and the Registrar of Titles do not serve as Arbitrators in disputes on whether the claim does qualify or not for compensation and there is an integrity level of the register is high because the Registrar does not determine the actions of the Register but the Court which in a way may reduce mismanagement of information within the register of titles.
IV.

The conditions stipulated in the law that provides a claimant to obtain compensation for loss and damages on a loss or damage on title and interest is as follows: i. any act or omission of the RegistrarGeneral in the execution or performance of his or her functions or duties under this Act in relation to the land; the registration of some other person as proprietor of the land, or of any estate or interest in the land; any error, misdescription or omission in the Register in relation to the land; the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud; an error or omission in an official search in relation to the land; any error of the Registrar-General in recording details;

ii.

iii. iv.

v. vi.

NEW SOUTH WALES ASSURANCE FUND

In the state of New South Wales, Australia the origin of the Torrens System, the element of the Torrens Assurance Fund (TAF)is imbedded in Part 14 of the Real Property Act 1900 No.25. The TAF is established under the Special Deposits Account. The fund is generated by i. a percentage of fees charged for lodgment of dealings, caveat or withdrawal of caveat; ii. an amount stipulated by the Treasury of New South Wales to the Fund; iii. an amount that is appropriate that has been approved by the Parliament of New South Wales iv. any amount required by any other law to be paid to the Fund Any shortfall occurred by the Fund shall be obtained from the Consolidated Fund.

The amount of compensation that can be payable to a claimant is limited to the market value of the land at the date on which compensation is awarded plus any legal, valuation or other professional cost reasonably incurred by the claimant. A claimant has to make an application via an approved form under the Real Property Act 1900 No. 25 to the Registrar- General within 6 years from the date the loss of damage that has been occurred. The legislation stipulated that when an application of claim has been forwarded to the Office of the Registrar General, it is so that he/she is duty bound to convene a administrative proceeding for recovery of compensation. In lieu with the proceeding, the Registrar General may require integral information that will assist him with the proceedings to determine compensation shall be paid or refused. The claimant can proceed the recovery of compensation to Court if the proceedings of the Registrar General is unsatisfactory. The decision of the court is final and legal cost by the Registrar

General shall be bear by the claimant unless the court decides otherwise.
V.

SINGAPORE ASSURANCE FUND

Singapore has also established an Assurance Fund under Part XVII of the Land Titles Act 1993. A sum of 5% of registration fees collected by the Registrar under the Act is channeled to the Assurance Fund. The compensation that is paid out of the Assurance Fund are for registered owners that are deprived of their rights through omission, mistake or misfeasance of the Registrar, or any member of his staff only. The Singaporean concept varies from the Australian and Canadian Assurance Fund because the Singaporean Fund does not cater for loss or damage caused by fraud and forgery. The Registrar has the power to compensate an amount not more than $1000.00 if he is satisfied an act of omission, mistake or misfeasance of the Registrar has occurred. In the case where the compensation exceeds $1000.00, the right to disburse the sum is by writing from the Minister of order by Court. The compensation shall be paid from the Consolidated Fund in the case the compensation exceeds the credit of the Assurance Fund. The claimants shall file an application for recovery of compensation not more that 12 years from the date the damage or loss has been incurred.
VI.

a. The act of registration is generally accurate, transparent and rarity of mistakes; b. Fraud and forgery are adequately policed by the criminal justice system; c. Conveyance lawyers reliably verify a person purporting to covey an instrument is identical to the owner; and d. Rules and regulation pertaining to land disputes are clear and consistently applied by the courts to minimize competing interests. The Assurance Fund shall be established under the National Land Code 1965 and the money to fund the Assurance Fund can be obtained through: i. A percentage from all fees charged on all dealings under the Code as may be prescribed by the State Authorities in their State Land Rules, [i.e. 0.05% of registration fee for instrument of transfer is to be deposited into the Assurance Fund account; or A percentage of levies on land value which affected for dealings under the Code as may be prescribed in the State Land Rules, [i.e. 0.02% of the value of the affected dealings is to be deposited into the Assurance Fund account]; or States rights of subrogation i.e.; a) On payment of any compensation under provisions as to be enacted in the Code, the State is subrogated to the rights of the claimant against any other person, in relation to the deprivation, loss or damage. b) If the State, in exercising its rights under that provision enacted as desired in paragraph (i), receives an amount that is more than the amount it paid to the claimant, the

ii.

iii.

PROPOSED ASSURANCE FUND IN MALAYSIA

With the idea of enhancing service delivery it also comes with the ability to provide a secure and well guaranteed system of registration of titles. Before the concept of Assurance Fund is introduced in Malaysia, the land administration has to achieve certain prerequisites as such:

State must pay the difference to the claimant after deduction of the States costs. iv. All payments are made directly from the State Consolidated Fund and no specific amount is set aside for claims.

from the date of deprivation or within a limitation on time operates under the Limitation Act 1953. The procedures and refine regulations on how the claims can be done has to be regulated under the State Land Rules. To maintain the intergrity and the independence of the Assurance Fund, it is proposed that an Assurance Fund Board shall be established. The Board shall consist of a President, a such number of Deputy Presidents and 5 member appointed by the State Authority. All the names of the President, deputy Presidents and members of the board shall be notified in the State Gazzette. The function of the Board is to hear and determine the amount of claims that the Assurance will compensate. If the decision of the the Board is not accepted by the claimant, an appeal shall be made to the court and the legal cost of the Board shall be inccured by the claimant.
VII.

It is proposed that the Assurance Fund shall only disburse funds to person who have been deprived of their rights on land or interest under such circumstances: i. in consequence of fraud or misrepresentation to which the person or body, or any agent of the person or body was a party or privy; or in consequence of registration was obtained by forgery, or by means of an insufficient or void instrument; or in consequence of the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.

ii.

iii.

CONCLUSION

The proposed Assurance Fund shall not disburse any compensation under such circumstances: i. in respect of damages of the land pursuant to section 61 and section 393 of the Code; or in respect of any error or omission of any certificate of search pursuant to section 386 of the Code; and any such compensation as may be determined under section 434 of the Code.

ii.

The idea of creating an Assurance Fund in the Malaysian land administration system shall be seen as a maturity in providing an indefeasible title and sustaining a Government guarantee on interest of land. The need to include this concept may in a way enhance intergrity by virtue of having an accurate Register of Titles and provide additional efforts to combat fraud and forgery of documentation. Besides that this efforts shall bring confidence and support from the general public, investors and industry players towards a better land administration system. REFERENCES
[1] [2]

iii.

National Land Code 1965 (Act 56 of 1965),

A claimant shall make a claim to the Assurance Fund through the process of determining the loss or damage was caused by the elements of fraud through the Court or is unable to recover the damage and loss from the person at fault. The claims has to be done within 6 years

Land Titles Act R.S.O. 1990, Chapter L.5, Ontario, Canada Land Titles Act 1994, Queensland, Australia Real Property Act 1900 No.25, New South Wales, Australia. Land Titles Act 1993, Singapore.

[3] [4]

[5]

[6]

Mohd Shukri, Ismail, Defeasibility of Title: Does Assurance Fund Matter?, 2009 SKPP, Visiting the Singaporean Experience on the Torrens Assurance Fund, 2009 Mohd Shukri Ismail, Insight of the Proposed Insurance Principle of Malaysian Torrens System,2009 SKPP, What you need to know about the Torrens Assurance Fund, 2009 Mohd, Shukri Ismail, Terma-terma Rujukan Assurance Fund Sistem Torrens,2008

[7]

[8]

[9]

[10]