assurance fun in malaysia lessons learnt from sir robert torrens

7/31/2019 Assurance Fun in Malaysia Lessons Learnt From Sir Robert Torrens

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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 theirinterest in the land or monetary compensation Sir Robert Torrens (1859)

Mohd Shukri IsmailResearch and Development Section,

Department of the Director General of Lands and Mines FederalMalaysia

[email protected] .

Anesh GanasonResearch and Development Section,


[email protected]

Yusri ZakariahResearch and Development Section,


[email protected]

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

I. INTRODUCTION

The basis of the Torrens System is laid out bythree simple principles which are:

i. Torrens Mirror Principle

The basis of this principle is that theregister of titles reflects accurate andcomplete facts that are material to the title.The title should be free from all adverseburdens, rights and qualifications unlessthat are mentioned in the register. Themirror ideally should reflect all facts andmatters relevant to the title of a land

ii. Torrens Curtain Principle

The register is the sole source of information for intending purchasers. Thisprovides a mechanism that reduces thecost for purchasers to investigate thehistory of the title for validity withoutgoing behind the register of titles. The

information that is obtained by the registryis the conclusive evidence of the title andit is guaranteed by the Government.

iii. Torrens Insurance Principle

In the event the register fails to mirror

absolute correct reflection of the title and aflaw appears; due to this misrepresentationthe rights of a registered proprietor hasbeen deprived, the government shallcompensate for the losses obtained by theregistered proprietor on a governmentguaranteed title.

The incomplete Torrens System in Malaysiahas been working like clock work since theoperation of the National Land Code 1965. Butwith recent development in fraud and forgerycases on land titles have caused concern on theissue of rights of innocent registered proprietorsbeing deprived by these unscrupulous means.

The mirror and curtain principles practicedin Malaysia have come to be insufficient inmaintaining the rights of registered proprietorsfrom the elements of fraud and forgery. Land
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administration is at a crossroad whether tointroduce the third Torrens principle with theAssurance Fund vehicle in order to provide acomplete protection to registered proprietors.

II. ONTARIO ASSURANCE FUND

The Land Titles Assurance Fund in Ontario,Canada is established under Part V of the OntarioLand Titles Act R.S.O. 1990, Chapter L.5. Thefund is established by funds from theConsolidated Revenue fund determined by theLieutenant Governor in Council and shall have aminimum credit of $1,000.000.00.

The Assurance Fund under the law provides

compensation on certain financial losses due toreal estate fraud, omission and errors of the landregistration system. The type of claims that mayqualify 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 thefollowing losses obtained by the proprietor:

Financial losses as a result of fraud orerror;

Reasonable legal costs relating to theclaim;

Other reasonable costs relating to theclaim

According to the law, a claimant has to filean application of compensation to the LandRegistry Office within six years from the time of having suffered the loss. The Registrar of Titleswill conduct a caution hearing to determine theclaim qualifies for compensation from the LandTitles Assurance Fund (LTAF). In the case wherethe Registrar of Titles is unable to determine theelement of fraud it is referred to court. Once the

decision is made that the claim qualifies forcompensation, the Registrar of Titles shall makethe necessary rectification on the Register of Titles and the title is reverted to the claimant. Toobtain compensation, the claimant has to submit acompensation claim form to the LTAF through

the Office of the Registrar of Titles. TheRegistrar will determine the whethercompensation shall be given and what is theamount. Any appeals on the decision of thehearing shall be brought to the court.

III. QUEENSLAND ASSURANCE FUND

The element of compensation is also practiced inQueensland, Australia. According to Part 9

Subdivision 2 of the Land Titles Act 1994, aregistered proprietor that is deprived of his or herrights of a title or has suffered loss or damageshall obtain compensation from the State.

The lost of rights of a title, loss suffered ordamage that shall be considered for compensationin 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 theregister;

v. tampering with the land register;vi. loss, destruction or improper use of a

document deposited or lodged at the landregistry or held by the land registry forsafe custody;

vii. an omission, mistake, breach of duty,negligence or misfeasance of or by theregistrar 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 withwhich the person had no connection;

Unlike Ontario the claimant has to make anapplication to Court to determine whether he orshe qualifies for compensation within 12 years of from the day the claimant become aware of the


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loss or deprivation. The court shall determine theaction of ordering the State to pay compensationto the claimant or make an order to the Registrarto make any correction or cancellation on theregister of title or create a new indefeasible title ora new instrument.

The Queensland method of compensationdoes not have the mechanism of a standalone fundto provide the compensation. The mechanism of obtaining the compensation for deprivedregistered proprietors is through lengthy courtcases and payments are done by the State througha consolidated revenue fund owned by the State.This method of obtaining the compensation can besaid has not customer friendly and the Registrar of Titles do not serve as Arbitrators in disputes on

whether the claim does qualify or not forcompensation and there is an integrity level of theregister is high because the Registrar does notdetermine the actions of the Register but the Courtwhich in a way may reduce mismanagement of information within the register of titles.

IV. NEW SOUTH WALES ASSURANCE FUND

In the state of New South Wales, Australia theorigin of the Torrens System, the element of theTorrens Assurance Fund (TAF)is imbedded inPart 14 of the Real Property Act 1900 No.25. TheTAF is established under the Special DepositsAccount. The fund is generated by

i. a percentage of fees charged for lodgmentof 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 beenapproved by the Parliament of New SouthWales

iv. any amount required by any other law tobe paid to the Fund

Any shortfall occurred by the Fund shall beobtained from the Consolidated Fund.

The conditions stipulated in the law thatprovides a claimant to obtain compensation forloss and damages on a loss or damage on title andinterest is as follows:

i. any act or omission of the Registrar-

General in the execution or performanceof his or her functions or duties under thisAct in relation to the land;

ii. the registration of some other person asproprietor of the land, or of any estate orinterest in the land;

iii. any error, misdescription or omission inthe Register in relation to the land;

iv. the person having been deprived of theland, or of any estate or interest in theland, as a consequence of fraud;

v. an error or omission in an official searchin relation to the land;vi. any error of the Registrar-General in

recording details;

The amount of compensation that can bepayable to a claimant is limited to the marketvalue of the land at the date on whichcompensation is awarded plus any legal, valuationor other professional cost reasonably incurred bythe claimant.

A claimant has to make an application viaan approved form under the Real Property Act1900 No. 25 to the Registrar- General within 6years from the date the loss of damage that hasbeen occurred. The legislation stipulated thatwhen an application of claim has been forwardedto the Office of the Registrar General, it is so thathe/she is duty bound to convene a administrativeproceeding for recovery of compensation. In lieuwith the proceeding, the Registrar General mayrequire integral information that will assist himwith the proceedings to determine compensationshall be paid or refused.

The claimant can proceed the recovery of compensation to Court if the proceedings of theRegistrar General is unsatisfactory. The decisionof the court is final and legal cost by the Registrar


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General shall be bear by the claimant unless thecourt decides otherwise.

V. SINGAPORE ASSURANCE FUND

Singapore has also established an Assurance Fundunder Part XVII of the Land Titles Act 1993. Asum of 5% of registration fees collected by theRegistrar under the Act is channeled to theAssurance Fund.

The compensation that is paid out of theAssurance Fund are for registered owners that aredeprived of their rights through omission, mistakeor misfeasance of the Registrar, or any member of his staff only. The Singaporean concept varies

from the Australian and Canadian AssuranceFund because the Singaporean Fund does notcater for loss or damage caused by fraud andforgery.

The Registrar has the power to compensatean amount not more than $1000.00 if he issatisfied an act of omission, mistake ormisfeasance of the Registrar has occurred. In thecase where the compensation exceeds $1000.00,the right to disburse the sum is by writing from

the Minister of order by Court. The compensationshall be paid from the Consolidated Fund in thecase the compensation exceeds the credit of theAssurance Fund.

The claimants shall file an application forrecovery of compensation not more that 12 yearsfrom the date the damage or loss has beenincurred.

VI. PROPOSED ASSURANCE FUND IN MALAYSIA

With the idea of enhancing service delivery it alsocomes with the ability to provide a secure andwell guaranteed system of registration of titles.Before the concept of Assurance Fund isintroduced in Malaysia, the land administrationhas to achieve certain prerequisites as such:

a. The act of registration is generallyaccurate, transparent and rarity of mistakes;

b. Fraud and forgery are adequately policedby the criminal justice system;

c. Conveyance lawyers reliably verify a

person purporting to covey an instrumentis identical to the owner; andd. Rules and regulation pertaining to land

disputes are clear and consistently appliedby the courts to minimize competinginterests.

The Assurance Fund shall be establishedunder the National Land Code 1965 and themoney to fund the Assurance Fund can beobtained through:

i. A percentage from all fees charged on alldealings under the Code as may beprescribed by the State Authorities in theirState Land Rules, [i.e. 0.05% of registration fee for instrument of transferis to be deposited into the Assurance Fundaccount; or

ii. A percentage of levies on land valuewhich affected for dealings under theCode as may be prescribed in the StateLand Rules, [i.e. 0.02% of the value of theaffected dealings is to be deposited intothe Assurance Fund account]; or

iii. States rights of subrogation i.e.;

a) On payment of any compensationunder provisions as to be enacted in the Code, the State is subrogated to the rights of the claimant against any other person, inrelation to the deprivation, loss or damage.

b) If the State, in exercising its rightsunder that provision enacted asdesired in paragraph (i), receivesan amount that is more than theamount it paid to the claimant, the


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State must pay the difference to theclaimant after deduction of theStates costs.

iv. All payments are made directly from theState Consolidated Fund and no specific

amount is set aside for claims.It is proposed that the Assurance Fund shall

only disburse funds to person who have beendeprived of their rights on land or interest undersuch circumstances:

i. in consequence of fraud ormisrepresentation to which the person orbody, or any agent of the person or bodywas a party or privy; or

ii. in consequence of registration wasobtained by forgery, or by means of aninsufficient or void instrument; or

iii. in consequence of the title or interest wasunlawfully acquired by the person or bodyin the purported exercise of any power orauthority conferred by any written law.

The proposed Assurance Fund shall notdisburse any compensation under suchcircumstances:

i. in respect of damages of the land pursuantto section 61 and section 393 of the Code;or

ii. in respect of any error or omission of anycertificate of search pursuant to section386 of the Code; and

iii. any such compensation as may bedetermined under section 434 of the Code.

A claimant shall make a claim to theAssurance Fund through the process of determining the loss or damage was caused by theelements of fraud through the Court or is unableto recover the damage and loss from the person atfault. The claims has to be done within 6 years

from the date of deprivation or within a limitationon time operates under the Limitation Act 1953.The procedures and refine regulations on how theclaims can be done has to be regulated under theState Land Rules.

To maintain the intergrity and the independenceof the Assurance Fund, it is proposed that anAssurance Fund Board shall be established. TheBoard shall consist of a President, a such numberof Deputy Presidents and 5 member appointed bythe State Authority. All the names of thePresident, deputy Presidents and members of theboard shall be notified in the State Gazzette. Thefunction of the Board is to hear and determine theamount of claims that the Assurance willcompensate. If the decision of the the Board is not

accepted by the claimant, an appeal shall be madeto the court and the legal cost of the Board shallbe inccured by the claimant.

VII. CONCLUSION

The idea of creating an Assurance Fund in theMalaysian land administration system shall beseen as a maturity in providing an indefeasibletitle and sustaining a Government guarantee on

interest of land. The need to include this conceptmay in a way enhance intergrity by virtue of having an accurate Register of Titles and provideadditional efforts to combat fraud and forgery of documentation. Besides that this efforts shallbring confidence and support from the generalpublic, investors and industry players towards abetter land administration system.

REFERENCES

[1] National Land Code 1965 (Act 56 of 1965),

[2] Land Titles Act R.S.O. 1990, Chapter L.5,Ontario, Canada

[3] Land Titles Act 1994, Queensland, Australia

[4] Real Property Act 1900 No.25, New SouthWales, Australia.

[5] Land Titles Act 1993, Singapore.


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[6] Mohd Shukri, Ismail, Defeasibility of Title: Does Assurance Fund Matter? , 2009

[7] SKPP, Visiting the Singaporean Experience on theTorrens Assurance Fund , 2009

[8] Mohd Shukri Ismail, Insight of the Proposed Insurance Principle of Malaysian TorrensSystem ,2009

[9] SKPP, What you need to know about the Torrens Assurance Fund , 2009

[10] Mohd, Shukri Ismail, Terma-terma RujukanAssurance Fund Sistem Torrens ,2008

assurance fun in malaysia lessons learnt from sir robert torrens

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