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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.


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