Sunday, 11 April 2010
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No Compensation to Foreign Direct Investors in Fiji Land Scams
IN my article on the Tan Ying Hong case, "Reversing the verdict just the beginning" (NST Property, Jan 29, 2010), I said the reversal of Adorna Properties Sdn Bhd v Boonsom Boonyanit by the Federal Court is only the first step in a series of corrective measures which should have been taken a long time ago.
There is still a lot to do if we want to make our Torrens System (which we borrowed from Australia over 100 years ago, but without the assurance fund component) still relevant in the 21st century.
While the Federal Court in Tan Ying Hong had corrected the judicial error committed by its predecessor in Boonsom Boonyanit, its judicial impact is only on the future. It was in no position to help the surviving family members of Boonsom
Boonyanit, who died while that case was making its way through the three ladders of the local judiciary.
In simple terms, while the decision changes the legal landscape in the future, it was in no position to correct the injustice done to the deceased lady and powerless to restore to Boonsom's children the RM12 million property sold by the fraudster to Adorna Properties.
If this case had happened in Australia or Canada or other jurisdictions where the assurance fund or compensation fund is in place, Boonsom's children might get a better treatment from the law.
The Torrens System guarantees security of tenure. If a piece of land is registered in your name, your title to that piece of land is indefeasible (unquestionable). In Peninsular Malaysia, this principle of indefeasibility is enshrined in section 340(1) of the National Land Code 1965.
Commentators said security of tenure has two faces: It means legal security and it promises economic security.
Legal security alone is meaningless until it comes with economic security - which is, if without your fault you lose your property, you should be compensated for your loss.
Unfortunately, the losing party in any land scam case here will have no remedy against anyone, not even the state, which guarantees the legal security.
If the facts in Boonsom were to occur again, and the dispute is then referred to the High Court (where the contest is between the registered owner and a person who has purchased the property directly from a fraudster), the trial judge will be obliged to follow the principle of deferred indefeasibility as laid down by the Federal Court in Tan Ying Hong.
In his decision, the trial judge will have to rule in favour of the registered owner, thereby making the purchaser the losing party. The purchaser, even if he is totally innocent of any fraud, will not get any help from the law.
J. Baalman, author of The Torrens System in New South Wales (second edition, 1974), said, "The act of the State in declaring titles to be indefeasible has its concomitant in the provision of State remedies for persons who thereby suffer loss."
Conversely, those who maintain that there is no need to have an assurance fund or provision for compensation in the law say Malaysia is not the only country that does not have the compensation component in its Torrens system, citing Sudan, Fiji, West Germany and Austria.
There is no telling when our authorities would think about the issue of compensation for loss for innocent victims of land fraud.
But if they do, they should consider the establishment of an assurance fund or a compensation fund, how the fund gets its money, the circumstances when compensation becomes payable, circumstances when compensation is not payable, the procedure for making claims against the fund, the government's right of subrogation (after compensation has been paid to the claimant), and time limit for making claims against the fund.
In Ontario, Canada, a law was passed in December 2006 (Bill 152), which restored the principle of deferred indefeasibility to the state and simplified the procedure for seeking compensation from the fund, established earlier under the Ontario Land Titles Assurance Fund.
Instead of taking years, claims can now be resolved in months under the new procedures. Penalties for fraud have also been increased, with fines up by five times and imprisonment up to two years.
To be eligible, a claimant must file his claim against the fund within six years of the date of the alleged fraud and must have tried other avenues (such as criminal, civil, title insurance) to rectify the fraud before applying to the fund.
He cannot recover anything from it if his own negligence caused or contributed to the loss, or if he knowingly participated or colluded in the fraud.
After a claim is filed, it will be assigned to an officer for investigation. The claimant may be required to submit further information or documentation to help clarify the claim.
If compensation is not paid out directly, hearings may be held by the Director of Titles. After that, the claimant will be notified of the Tribunal's decision in writing. There is appeal to the courts against that decision, but it must be made within 30 days.
Under the new amendment in 2006, the claimant is no longer required to pursue his loss through other means prior to seeking compensation from the fund.
New Straits Times 04-09-10
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