Land fraud victims needn’t
suffer
15/10/08 NST Salleh Buang
The Federal Court gave Malaysians an awful lesson in the Boonsom Boonyanit
case seven years ago – that under the local version of the Torrens system,
innocent landowners who are victims of fraudsters and scam artists cannot
expect to find justice in the law.
In the case, a con-person acting as Boonsom, the legal owner of a piece of
land in Penang, sold the property to a company known as Adorna Properties.
Although Boonsom was not guilty of any wrongful act or omission and was in
no way privy to the fraud, she could not get the court to rescind the
fraudulent deal when it was discovered as it held that Adorna was a bona
fide purchaser.
The justification for this decision was that, according to the court, we are
practising immediate indefeasibility.
If we say the case has been correctly decided, how do we then protect
innocent landowners who had lost their land through scam artists
fraudulently representing them?
One thing is clear. Under the National Land Code (NLC), there is nothing we
can do. Apparently, when we "borrowed" the Torrens system from Australia
more than a century ago, we did not do a complete job. We overlooked the
need to have an assurance fund or something like a state guarantee. We did
not introduce any machinery to compensate innocent victims such as Boonsom.
Malaysia is not alone in having a Torrens system without the assurance fund;
so are Fiji, Germany and Austria but that should not absolve us from our
mistake.
Sir Robert Richard Torrens, a former premier of South Australia and author
of the land registration system, said "a state guarantee is an integral part
of a system of registration of titles".
When Sir William Maxwell (the then British Resident in Selangor) first
implemented the system in the state towards the close of 19th century
without the state guarantee or the assurance fund, it was like a trainee
building up something new but with an important component missing, against
his instructor’s advice.
If we say there was no need at that point in time to have such a machinery
in place (as there were not many land titles in existence or land
transactions being done), surely when the situation changed in the
postindependence period, the matter should have been looked into.
Even when the Boonsom Boonyanit flak hit the ceiling, we still did not hear
of anything being done to correct the situation.
It was only in 2006 that we were told NLC was being revamped so that others
like Boonsom would not continue to suffer. Until today, no further details
are available to the public.
Is the situation better for victims of fraud in countries where a
compensation mechanism is in place?
In the Australian state of New South Wales, the prevailing law (the Real
Property Act 1900) requires the victims to commence action initially against
the person responsible for their loss. Apart from the law’s complexity, the
victims (claimants) also face considerable hurdles and delay in getting
their compensation.
In Ontario, Canada, a Land Titles Assurance Fund (LTAF) was created under
the Land Titles Act to compensate people for financial loss due to real
estate fraud, omissions and errors on the part of the land registration
system.
Aside from financial loss, a claimant may also recover legal costs in
relation to the claim, which must be made within six years from the time the
victim suffered the loss.
In British Columbia, Canada, a Government Assurance Fund is provided for in
the Land Titles Act 1996.
Under section 296(2) of the Act, a claimant who "is deprived" of any estate
or interest in land "in consequence of fraud or a wrongful act in respect of
the registration of a person other than the claimant as owner of the land"
may proceed in court "for the recovery of damages against the person by
whose fraud or wrongful act the claimant has been deprived of the land".
This means the victim must first sue the fraudster who caused his loss.
In suing the perpetrator of the fraud under section 296(2), the victim must
also cite the Minister as "a nominal party defendant" as a condition for
recovering damages and costs from the assurance fund.
In the event "the person liable for damages is dead, or cannot be found in
British Columbia", a claimant may (instead of suing that person) file action
in court for damages and costs directly against the Minister as the nominal
defendant and recover the amount of the damages and costs from the assurance
fund.
In British Columbia, an action for damages or compensation must be brought
within three years of the loss.
While these provisions clearly show a claimant must initiate proceedings in
court before any compensation can be obtained, section 305(1) of the Land
Titles Act allows the Minister, "without a proceeding being brought", to
admit or compromise a claim made against the assurance fund, and authorise
payment of all or part of the claim.
That shows that in many jurisdictions, corrective actions were taken more
than a decade ago to help innocent land fraud victims.
If only we had kept our eyes open to legal developments in other
jurisdictions and acted accordingly, Boonsom might just have her remedy
against the state.
