Saade v Registrar-General (NSW) [1993] HCA 73; (1993) 179 CLR 58; (1993) 68 ALJR 98; (1993) 118 ALR 219 (22 December 1993)

HIGH COURT OF AUSTRALIA

SAADE v REGISTRAR-GENERAL OF THE STATE OF NEW SOUTH WALES AND OTHERS [1993] HCA 73; (1993) 179 CLR 58, (1993) 68 ALJR 98, (1993) 118 ALR 219
F.C. 93/057
Number of pages - 11

Torrens System (N.S.W.)

HIGH COURT OF AUSTRALIA
DEANE, DAWSON, TOOHEY, GAUDRON AND McHUGH JJ

CATCHWORDS

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).

HEARING

1993, CANBERRA, October 13; SYDNEY, December 22
22:12:1993

ORDER

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."
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] HCA 41; (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] HCA 36; (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] HCA 41; (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.