Reported Decision : 59 NSWLR 452 New South Wales Supreme Court CITATION : CHALLENGER MANAGED INVESTMENTS LTD v DIRECT MONEY CORP. P/L [2003] NSWSC 1072 HEARING DATE(S) : 05 & 06/11/2003 JUDGMENT DATE : 28 November 2003 JURISDICTION: EQUITY JUDGMENT OF : Bryson J at 1 DECISION : Plaintiffs entitled to subrogation: plaintiffs and 7 & 8D entitled to compensation from Torrens Assurance Fund: other orders: [88] CATCHWORDS : TORRENS SYSTEM - the Friels (7&8D) owned house in Paddington - fraudsters impersonating the Friels obtained new Certificates of Title for many parcels of land owned by the Friels on false applications under s.111 RPAct 1900 - then borrowed $500,000 from RHC (5D) which registered its mortgage over Paddington house - plaintiffs advanced $816,000 on fraudulent application for loan by persons claiming authority from the Friels and paid $515,000 of advance to RHC for discharge of registered mortgage - RG (9D) refused to register mortgage to plaintiffs as it was forged: held, plaintiffs entitled to rely on RHC mortgage by subrogation for $515,000: Friels entitled to compensation from Torrens Assurance Fund under s.129 of RPAct 1900: consideration of effect of amendments to RPAct Pt 13 & 14 by Real Property Amendment (Compensation) Act 2000 - subsidiary claims to recover other parts of plaintiffs advance of $816,000 which were not paid towards discharge of any mortgage. Local Government Act 1993 LEGISLATION CITED : Managed Investments Act 1998 (Cth) Real Property Act 1900 Australia & New Zealand Banking Group Ltd v. Westpac Banking Corporation (1988) 164 CLR 662 Banque Financière de la Cité v. Parc (Battersea) Ltd [1999] 1 AC 221 Boscawen v. Bajwa [1996] 1 WLR 328 Cochrane v. Cochrane [1985] 3 NSWLR 403 Consolidated Trust Co. Ltd v. Naylor (1936) 55 CLR 423 David Securities Pty Ltd v. Commonwealth Bank of Australia (1992) 175 CLR 353 CASES CITED : Diemasters Pty Ltd v. Meadow Corp Pty Ltd [2001] 52 NSWLR 572 Ghana Commercial Bank v. Chandiram [1960] AC 732 P T Ltd v. Maradona Pty Ltd [1991] 25 NSWLR 643 Porter v. Associated Securities Ltd (1976) 1 BPR 9279 Registrar General v. Gill (NSW CA 14 August 1994 unreported) Rosenberg v. Percival [2001] 75 ALJR 734; 205 CLR 434 Travinto Nominees Pty Ltd v. Vlattas (1973) 129 CLR 1 Challenger Managed Investments Limited - First Plaintiff Permanent Trustee Australia Limited - Second Plaintiff Direct Money Corporation Pty Limited - First Defendant Jacqueline Unity Stumer - Second Defendant Neville Stumer - Third Defendant PARTIES : Trevor John Brown - Fourth Defendant Residential Housing Corporations Pty Limited - Fifth Defendant The Mortgage Professionals Pty Limited - Sixth Defendant Manus Michael Friel - Seven Defendant Kevin Patrick Friel - Eight Defendant Registrar-General - Ninth Defendant FILE NUMBER(S) : SC 4850/2002 I. Wales SC & M. Ashhurst - P COUNSEL : J. Conomos 6D G.A. Sirtes (7&8Ds) I. Harrison SC (9D) Sunman & Walker Solicitors (P) Ryan & Boscher Lawyers (Pl ) (C-d); (2&3Ds) SOLICITORS : Bolzan & Dimitri Solicitors (D5) MD Nikolaidis & Co. (D6) Peter R. Murphy (7&8Ds) K C Hall (9D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J. FRIDAY 28 NOVEMBER 2003 4850/2002 CHALLENGER MANAGED INVESTMENTS LTD & ANOR v. DIRECT MONEY CORPORTION PTY LTD & ORS JUDGMENT 1 HIS HONOUR: These proceedings arise out of forgeries of mortgages and other documents in the Torrens System and frauds practised on the Registrar General and other persons. The plaintiffs take parts in the management under the Managed Investments Act 1998 (Cth) of the Howard Mortgage Trust; Challenger Managed Investments is the Single Responsible Entity and Permanent Trustee Australia is the Custodian of the Trust. 2 When the events opened in 2002 the seventh and eighth defendants Mr M.M. Friel and Mr K.P. Friel were registered proprietors of the land in Folio Identifier 2/33457 known as 2 Bennetts Grove Avenue, Paddington, and the eighth defendant Mr K.P. Friel was the sole registered proprietor of the land in Certificate of Title Volume 13206 folio 84, later Folio Identifier 1/253162, known as 2 Tasman Street, Bondi. Application 8536275 for a new Certificate of Title for the Paddington land and Application 8536292 for the Bondi land were lodged on 23 April 2002. The applications were supported by Statutory Declarations purportedly made by the Friels contending that the Certificates of Titles had been lost when a house in North Queensland in which they were stored was destroyed in a cyclone some years ago. 3 The applications were completely false. The Friels knew nothing about them. The Certificates of Title were not lost; they were in the custody of solicitors on behalf of the Friels. The Friels had nothing to do with the applications for new Certificates of Title, or with the statutory declarations, and their signatures were forged. Various details and circumstances referred to in the applications and the statutory declarations were untrue, as would have appeared from a searching inquiry. However the Land Titles Office acted on the applications and statutory declarations, and issued duplicate Certificates of Title the following day. At that time officers of the Land Titles Office had no information about the Friels, their land or the applications for duplicate certificates which should have generated suspicion. 4 Duplicate Certificate of Title 2/33457 was then used to register first mortgage 8620874Y dated 22 May 2002 (Exhibit B) over the Paddington land. The mortgage was given purportedly by the Friels to Residential Housing Corporation Pty Ltd to secure a loan of which the principal sum was $500,000 repayable on 22 August 2002 and the interest was $75,000 payable on the date of the mortgage (and presumably paid out of the advance). The mortgage itself contains no provision for payment of interest other than that payment of $75,000, and no provision for calculation of interest at a percentage rate or otherwise. (It is possible that there is such provision in Incorporated Memorandum Q860000, which is not in evidence). The purported signatures of the Friels on the mortgage are forgeries; the Friels had nothing to do with the mortgages or with the advance of $500,000. Residential Housing Corporation is the fifth defendant. It filed a submitting appearance in the proceedings. There was no contention from any source, and no discernible basis for any contention that Residential Housing Corporation knew that the loan transaction and the mortgage were fraudulent. 5 The Mortgage Professionals Pty Ltd is the sixth defendant. It carries on business as mortgage broker. Its involvement in presently relevant affairs began about 19 June 2002 when Mr Kevin Hamman of Investec Australia Ltd, which functions as a mortgage broker or in some related way, referred one Eric Shulkin of Australian National Finance Pty Ltd to Mr Ryce, a director of the Mortgage Professionals, and told Mr Ryce that the Friel family was very wealthy, had many properties in Sydney and were seeking to refinance their Sydney properties, and that Mr Shulkin had been referred to Mr Ryce with a view to assisting Australian National Finance to obtain a loan for the Friels. On the following day, Mr Neville Stumer, the third defendant spoke to Mr Ryce by telephone and told him that he was from Direct Money Corporation Pty Ltd (which is the first defendant) and would be assisting the Friels with their loan. Mr Stumer gave particulars of a requirement for a loan of about $10,000,000 to refinance and unlock equity in ten properties owned by the Friels; he said that at present they were looking for a loan facility of $5,000,000. Mr Ryce asked for some more information and was given a list of properties, a statutory declaration by Mr Trevor John Brown a Brisbane solicitor (who is the fourth defendant), information about the Friels from a Taxation Agent, a reference from one Gerd Werner Ziehmer and a statement about the Friels' affairs in a letter to Mr Hamman from Ryland Taxation Services Pty Ltd. These documents are fabrications; they and the information in them have nothing to do with the Friels. 6 Mr T.J. Brown is named in the Statement of Claim as the fourth defendant but he has not ever been served with process and he did not appear at the hearing. No order can be made against him. Direct Money Corporation is the first defendant, Jacqueline Unity Stumer is the second defendant and Neville Stumer is the third defendant; they all filed appearances but did not file Defences and they did not appear at the hearing. 7 Mr Ryce introduced the application to Mr Hitchings, who is employed by the first plaintiff as Executive Manager – Mortgage Finance. Mr Ryce spoke to Mr Hitchings about 19 June 2002, told him about the Friels' supposed interest in finance and sent him information about the supposed application, passing on information that had recently been forwarded to him or had been related to him by Mr Stumer. Mr Ryce was told some things which had influence towards disarming inquiry, and passed most of them on, to the effect that the Friels were very wealthy people, were very private, and did not wish their tenants to be disturbed by valuers; that they had very large incomes, owned a property portfolio which included, at last count, 256 properties and "as a gesture of sincerity they are prepared to allow registration of mortgage over the properties listed as security. In future … the principals would prefer to use documents in escrow". Indications that the business proposed was relatively small to the borrowers were later enhanced, after approval of a larger loan had been given, by a request to draw down part only of that loan on giving security of part only of what had been agreed to. Further documents and information were fed to Mr Ryce by Neville Stumer and by Mr T.J. Brown and used to support consideration by the plaintiffs of the proposed loan. 8 On 3 July 2002 Mr Hitchings, on behalf of the Howard Mortgage Trust, sent to Mr Ryce, nominally on behalf of the Friels, at the office of the Mortgage Professionals, a letter approving a loan of $5,000,000 but not exceeding 60% of current market value of security for five years at 7.5% per annum, on a number of conditions set out in that letter. Mr Ryce sent back an acceptance purportedly signed by the Friels. The plaintiffs were also given various purported authorities and other documents associated with the loan. Mr Hitchings obtained a valuation, and after considering the valuation the plaintiffs' credit committee reduced the offered loan to $4,605,000. Mr Hitchings instructed Messrs Sunman & Walker Solicitors to act on the loan transaction for the lenders on 22 August 2002. About 22 August Mr Ryce told Mr Hitchings that the borrowers had decided to borrow initially $1,959,000 against properties in Tasman Street Bondi and Bennetts Grove Avenue Paddington. On 29 August Mr Hitchings was told that the Friels wished to reduce the securities to No. 2 Tasman Street, Bondi and 2 Bennetts Grove Avenue, Paddington, and reduce the amount borrowed accordingly. Mr Hitchings agreed and instructed solicitors that the loan was to be $816,000. 9 Mr Sunman of Sunman & Walker conducted arrangements for settlement on 3 September 2002. It seems that arrangements were first made for settlement on 2 September 2002; some documents relating to settlement bear that date. Conveyancing agents for Mr Sunman attended settlement at 2.30 pm on Tuesday 3 September 2002 at the office of solicitors representing Residential Housing Corporation. It seems that by the time of settlement Sunman & Walker had already been given what purported to be a mortgage from the Friels over the land in Certificates of Title 2/334457 and 1/235162. Austates Conveyancers represented or purported to represent the borrowers. Mr Sunman's conveyancing agents received the two certificates of title and a discharge of Mortgage 8620874 by Residential Housing Corporation. Cheques drawn by Permanent Trustee Australia and available to effectuate the settlement were as follows: 1. The Mortgage Professionals $113,973.75 2. Office of State Revenue $ 3,255.00 3. Sunman & Walker $ 2,849.00 4. Bolzan & Dimitri Lawyers $ 2,287.45 5. Austates Conveyancers $ 1,364.80 6. ATS Land & Engineering $ 1,705.00 7. Residential Housing Corporation Pty Limited $515,000.00 8. Direct Money Corporation Pty Limited $168,588.81 10 The first cheque was handed to a representative of the sixth defendant who attended with what purported to be an authority from the Friels to collect it. The second and third cheques were sent back by the conveyancing agents to Sunman & Walker; they represented Stamp Duty on the mortgage taken by the plaintiffs and costs of Sunman & Walker, both payable by the borrowers out of the advance. Cheques 4 to 8 inclusive were disposed of by or as directed by Austates Conveyancers. Messrs Bolzan & Dimitri represented Residential Housing Corporation; presumably the cheque to them represented costs relating to discharge of the mortgage. The cheque for Residential Housing Corporation for $515,000 was delivered to Bolzan & Dimitri in exchange for the discharge of mortgage and certificates of title for Paddington. The eighth cheque was handed to a representative of Direct Money Corporation. These payments were supported by what purported to be authorities by or/on behalf of the Friels all of which were forged; Austates Conveyancers had no actual authority from the Friels. 11 Before settlement Mr Sunman gave the plaintiffs a careful certificate showing that everything was in order and assuring the plaintiffs that they would receive registered mortgages over the Bondi property and the Paddington property. On the morning of settlement he had final searches made which showed that the title register was in the state that Mr Sunman required it to be in if he were to settle the advance. 12 On 4 September 2002, Mr Sunman gave his conveyancing agents the Certificates of Title, the discharge of the Residential Housing Corporation Mortgage, the mortgage to the plaintiffs and other documents. He gave instructions to stamp the mortgage and lodge the documents for registration. The documents included applications for registration of changes of name; this arose from there being discrepancies in the forenames of the Friels at different places on the register and on documents to be registered; at some places each of the Friels was referred to showing two forenames and at other places each of them was referred to showing three forenames. The applications for changes of names were not found acceptable by the Land Titles Office which required further particulars relating to the changes of name and the identities of persons involved, and so the documents were rejected for registration when lodged on 4 September 2002. The difficulty was overcome in some way and they were lodged again on 22 September 2002. The events then intersected with another chain of events in the Land Titles Office. 13 The applications for new Certificates of Title were lodged at the Land Titles Office by Marsdens Law Group, claiming to act on behalf of the Friels. Application 8536275 relating to the land in Folio 2/33457, the Paddington land, was, according to its terms, made by Mr K.P. Friels and Mr M.M. Friel, and it was supported by a Statutory Declaration, purportedly by Mr K.P. Friel and Mr M.M. Friel before Leanne Ziemer, a Commissioner for Declarations of Queensland, a Certificate under Section 603 of the Local Government Act 1993 relating to the land, and a consent of Yeun-Oh Lau Caveator in Caveat 8305488 given by Mr Brian Deane Alcorn, solicitor of Marsdens Law Group, as solicitor for the caveator. 14 Application 8536292 relating to the Bondi land was made, according to its terms, by Mr K.P. Friel supported by a Statutory Declaration purportedly made by Mr K.P. Friel before Leanne Ziemer Commissioner for Declarations of Queensland, a Certificate under Section 603 of the Local Government Act 1993 and the consent of Andira Holdings Pty Ltd, Caveator in Caveat 8279675 given by Mr Brian Deane Alcorn as the caveator's solicitor. Both the applications were recorded on 23 April 2002 which was the day they were lodged, and Certificates of Title were printed and available for collection by Marsdens Law Group on 24 April 2002. The new Certificates of Title were Edition 4 of Certificate of Title 2/33457 for Paddington and Edition 1 Certificate of Title 1/253162 for the Bondi land formerly Volume 13206 Folio 84. 15 In issuing these certificates of title the Registrar General acted under s.111 of the Real Property Act 1900 which is in these terms: (1) Where a Certificate of Title of land under the provisions of this Act is lost, mislaid or destroyed, the proprietor of the land may apply in the approved form to the Registrar-General for the issue of a new Certificate of Title. (2) An application under subsection (1) shall be supported by such evidence as the Registrar-General may require. (3) The Registrar-General, if satisfied that a Certificate of Title has been lost, mislaid or destroyed, may issue a new Certificate of Title or new certificates of title for the land comprised in the firstmentioned Certificate of Title and may record in the Register that the new Certificate of Title or new certificates of title has or have been issued pursuant to this section. 16 It was the practice of the Registrar General to require that an application be supported by a Statutory Declaration by the registered proprietor explaining the application and showing how it was that it was claimed that the Certificate of Title had been lost, mislaid or destroyed. It was also the Departmental practice, although not required by the express terms of s.111 or by any regulation, to require the application to be accompanied by a current Local Council rate notice. The practice of requiring a rate notice was indicated in forms used in the Department; the printed and electronic form of application for a new Certificate of Title bore a note which said "The following evidence must accompany the application when lodged at LPI NSW: (a) Current Local Council rate notice …" 17 The departmental practice was that where an application for a new Certificate of Title was lodged by a solicitor a Certificate under s.603 was acceptable, but where it was not lodged by a solicitor a current rate notice was required to be produced. 18 The Department's Dealing Registration Manual, which is the manual of practice for Examination Officers, in Edition 6 Issue 15 page 247, which was in effect at 23 April 2002, said: It must be evident (and be stated in the accompanying statutory declaration) that the rate notice, certificate under s.603LG Act 1919, water rates notice, or a certified copy thereof, is for the subject land. It must be in the name of the registered proprietor. 19 In my finding there was no indication in the terms of the applications or the statutory declarations or in the certificates under s.603 of the Local Government Act 1993 that the information was unreliable or that the application was irregular or that some further inquiry, beyond the information accompanying the application, should reasonably be made. The applications were lodged by a prominent firm of solicitors and the accompanying consents of caveators were signed on behalf of the caveators by a solicitor from that firm. The Certificates under Section 603 of the Local Government Act 1993 showed that in the Local Government authorities' records the registered proprietors were the owners of the land. These circumstances could reasonably be seen as giving some assurance that the applications were in order; certainly they gave no indication otherwise. The two classes of documents have slightly different force, as rate notices are sent to owners of land whereas s.603 Certificates may be obtained by any person who pays the fee for them. The difference between one class of document and the other in terms of tendency to affirm an application for issue of a new Certificate of Title is very slight and is overcome by the degree of assurance, itself also slight, afforded by accepting s.603 certificates only from solicitors. The value of the information in either class of document as support for an application for a new Certificate of Title in which the Registrar General is to be satisfied that the Certificate of Title has been lost, mislaid or destroyed is very slight; the information about ownership in the records of the Local Government authority has no real bearing on whether the certificate has been lost, mislaid or destroyed, but in a rather remote way provides some confirmation that the registered proprietor is still regarded by another public authority as the owner. The principal bases before the Registrar General in these applications for attaining the state of satisfaction referred to in subs.111(3) were the terms of the applications and the information in the Statutory Declarations which, if accepted on their face, fully justified the applications. 20 With the benefit of hindsight it can be clearly seen that if a process of investigation and inquiry had been brought to bear on the applications it could well have produced reasons for refusing them, or for delay in acting on them. If the Registrar General had directly contacted one or both of Messrs Freil or had attempted to do so using information about where they could be found in the Statutory Declarations suspicion would have been readily generated. Similarly if inquiries have been made for them at the addresses of the properties, which were shown on the s.603 Certificates, it is well possible that the fact that they had not authorised the applications might have been exposed, depending on how far inquiries were pursued. Inquiries in the locality in North Queensland of the events in which it was said that the Certificates of Title had been kept in a house which had been destroyed in a cyclone would probably have exposed the falsity of the applications. The evidence does not show any circumstances which should have indicated to the Registrar-General that it was not appropriate to come to a view on the basis of the Statutory Declarations and other material submitted with the applications, and on the applications themselves. 21 The evidence of Mr G.D. Channell, a legal officer employed by the Department of Lands with the designation Deputy Manager, Litigation and Investigation, Legal Services, shows how it came to be understood in the Land Titles Office that dealings with the Paddington land and the Bondi land were irregular. At some time which has not been exactly established, but was later than 23 April and before 12 July 2002, Mr Channell undertook preliminary investigations into transactions lodged for registration by Mr Brian Deane Alcorn. Mr Campbell was prompted to do this by two reports by solicitors about irregular dealings with land. At first these reports appeared to be unrelated. A solicitor who was acting for one Grace English, the registered proprietor of some land in western Sydney, reported to a legal officer in the Land Titles Office that Grace English's registered title had been transferred to a company without her knowledge and then transferred back to her. The solicitor's concern arose out of the fact that after the retransfer the Grace English referred to on the Certificate of Title was not clearly his client, but was referred to as residing in Queensland; his client did not fit the description, and the Certificate of Title could have referred to another person also named Grace English. Mr Alcorn had given the solicitor the Certificate of Title, which was in Mr Alcorn's custody after the property had been retransferred. The solicitor wished to have the title rectified. 22 The second report was made directly to Mr Channell by another solicitor who reported concerns she felt because when she, on behalf of an intending mortgagee was handling, a proposal for a mortgage of land owned by Kevin Patrick Friel, she had looked at a registered document bearing a signature of Kevin Patrick Friel which did not appear to match the current signature on the loan documents. The property with which she was dealing was not the Bondi property or the Paddington property. When Mr Channell investigated information available in the Land Titles Office he observed that participation of Mr Alcorn was a factor common to the English transaction and the Friel transaction. Mr Channell then looked through the records in the Land Titles Office to identify applications for new Certificates of Title in which Mr Alcorn's firm was involved and found that about 11 or 12 of them had been lodged on behalf of the Friels in a period of some months. The fact that there were a number of such applications was not necessarily suspicious in view of the explanation given that the titles had been kept together and destroyed by a cyclone. Each of the applications had been supported by a s.603 Certificate. Mr Channell knew that it was the practice to accept such a certificate rather than a rate notice from a solicitor although not from other persons. Mr Channell had a copy of Mr K.P. Friel's signature from a document some 20 years old, but did not consider a document of that age to be reliable for a comparison of a signature and did not base any particular conclusion on the form of signatures, although they were not identical. 23 As a result of Mr Channell's investigations a meeting took place on 12 July 2003 attended by Mr Hall, Manager of Legal Services of the Department of Lands, Mr Channell, Mr Ray Collins Manager of Professional Standards of the Law Society of New South Wales and Mr Warren Gillet also a Law Society officer. The Law Society officers were told that notwithstanding that the Registrar General's officers had no evidence of wrongdoing they held some concerns over the general pattern of dealings lodged by Mr Alcorn, which should be further investigated. In correspondence on 16 July Mr Alcorn gave the Law Society copies of documentation he had compiled. 24 The next significant event was that Mr Collins telephoned Mr Channell on 1 August 2002 and told Mr Channell that the Law Society Council would be meeting the following day to appoint an investigator to examine the affairs of Mr Alcorn. He also told Mr Channell that the principal of Marsdens Law Group had asked the police to investigate the matter and the police were doing so. Mr Channell's view was that what Mr Collins told him confirmed that the officers in the Land Titles Office had valid suspicions, although they were not aware in detail what was happening. 25 As a result of his conversation with Mr Collins on 1 August 2002 Mr Channell arranged for "registration stoppers" to be placed on the titles for about 11 or 12 parcels of land owned by one or other or both of Messrs Friel, for each of which there had been an application for a new Certificate of Title. These parcels included the Bondi land and the Paddington land. The registration stoppers were placed on the titles on or about 2 August 2002. Placing them on the titles showed Mr Channell's consciousness of a need for close examination of any dealing that might be lodged. That is all that the registration stoppers would bring about. Mr Channell explained the registration stoppers in these terms: A so called "Registration Stopper" is an electronic flag that may be entered into the titling data base operated by the Registrar General and known as the Integrated Titling System (ITS) so as to ensure that dealings with that land are referred to the person directing the notification for further investigation, and possibly for requisition, prior to registration. This notification is used as an administrative tool where the Registrar General has concerns about possible transactions but does not have the evidence to warrant the placement of a Registrar General's caveat under s.12(1)(e) of the Real Property Act 1900. A Registrar General's caveat would prohibit the Registration of any dealings with the land whereas the registration stopper" requires that dealings be further investigated prior to being registered. A "registration stopper" does not appear on a search of the Register folio. 26 A registration stopper is not one of the memorials or entries which the Real Property Act 1900 expressly authorises or requires the Registrar General to enter on the register which constitutes title to land and is available for the public to search. The public could not find that the registration stoppers existed by searching the register. The registration stoppers did not of themselves prevent a dealing from being registered; they required that any dealing which might be lodged be referred to Leg 10, meaning Mr Channell's desk but in effect Mr Channell, rather than being dealt with by the Officers who examine and register the large flow of documents which routinely pass through the Land Titles Office. The register folios for the various parcels of land owned by the Friels remained in this state until 23 September 2002. 27 Mr Channell attended a meeting on 19 September 2002 in the Land Titles Office Legal Services section, attended by Mr Ken Hall and by Mr Laurie Ryan who is the Land Titles Office Manager, Litigation Investigation, with Mr John Mitchell who is the Law Society's Chief Trust Account Inspector. Mr Mitchell had been appointed by the Law Society to investigate matters relating to Mr Alcorn, and he related the results of his investigation which he said indicated that fraudulent dealings had occurred with land owned by Mr M.M. Friel and Mr K.P. Friel and also with land owned by other persons. Mr Channell asked to see the statements of persons whom Mr Mitchell had interviewed. Mr Channell and Mr Mitchell then took part in preparing a warning which was circulated by email by the President of the Law Society, it would seem on 19 September 2002. 28 The Warning Notice was in these terms: [23] The Law Society and Land and Property Information (LPI) have become aware of a 'scam' in which transfers are effected, and mortgage loans made, at times using illegally obtained title documents with the mortgagor taking over the identity of the Registered Proprietor. In some cases loans have been made to a mortgagor where a replacement Certificate of Title has been obtained from LPI following an Application requesting the issue of a substitute Certificate of Title based upon the alleged loss of the original. There may have been several transfers or mortgages affecting the title since the issue of the replacement. In other cases loans are sought to be protected by way of a caveat on which the consent of the registered proprietor appears to have been endorsed. The most effective method of investigating whether a transaction is tainted is to ensure that the mortgagor is fully and positively identified. Preferably personal identification of the borrower should be made. Tainted transactions to date have involved the names Friel, English, Maher, Phillips, Dore and Sherman. This list may not be exhaustive. Practitioners are warned to exercise caution, particularly when a replacement Title has been issued or the Title Deed cannot be handed over (for whatever reason) at the time of completion of the transaction. As a normal precaution practitioners should retain in their file a copy or note of the evidence used to specifically identify the mortgagor. 29 Mr Channell also prepared a departmental dealing, which he referred to as a warning notation; this was registered as Dealing 8976036 and placed on the Register, available to be seen by all who searched a number of folios in the Register including those for the Bondi property and the Paddington property. The notification said "All dealings to be referred to Legal Services (Leg 10) re. 2002 M30(4))." This warning appeared on the Register on 23 September 2002, at 12.39.47 pm. To enable it to be registered the registration stoppers were removed, but then applied again immediately afterwards. 30 When Mr Sunman settled the mortgage advance on 3 September, and again when the documents were re-lodged on 22 September, there was no information available to the public on search of the register which indicated that there was any difficulty in dealing with the Bondi property or the Paddington property. However the registration stoppers meant that any document lodged would not be registered without being considered by Mr Channell, and from 19 September onwards there was no possibility that Mr Channell would have allowed them to be registered. 31 In cross-examination Mr Channell was confronted with a number of matters put forward on behalf of the plaintiffs as particulars of negligence or otherwise as failings in the handling of these affairs in the Land Titles Office. 32 One matter was the suggestion that 11 or 12 applications for new certificates of title was a far greater number than would have been expected from one firm of solicitors in the ordinary course. In my understanding, involved in this was a suggestion to the effect that the number of applications should have been noticed and should have prompted investigation. Mr Channell's answer was to the effect that applications for new certificates of title are quite common, these were not lodged together but lodged over a period of months, and the explanation given would explain a number of documents being destroyed in the same event, a cyclone; hence that the number of applications is not of itself suspicious. 33 It was also put to Mr Channell that the fact that all of them were not supported by rate notices but by s.603 Certificates, which anyone can obtain on paying a fee, was an adverse circumstance. In my view Mr Channell's response, and general considerations of the slight significance of the information in and of ability to produce either a rate notice or a s.603 Certificate, show that this is not a matter on which a finding of negligence or other failing could be based. 34 The cross-examination to my understanding did not explicitly suggest but seemed to indicate that there was some failing in not taking significant action on or by 12 July 2003 when the material available was reported to the Law Society officers; and in particular that there was no comparison of signatures. In my view Mr Channell's evidence explained these circumstances adequately. It was suggested that the Registrar General's response to the information given on 1 August 2002 about the intended appointment of the investigator was inadequate. The plaintiffs' senior counsel marshalled a number of circumstances; that the Law Society Council was to appoint an investigator, that the police had been brought in, that there were a number of parcels owned by one or other or both Messrs Friel, and one owned by Mrs English, where there were suspicious applications for new certificates of title, that the explanation given for the transfer and retransfer of Mrs English's land in terms of a mistake was a fairly suspect explanation and that Mr Channell actually suspected that Mr Alcorn had been engaged in a fraud of some sort. On this basis it was suggested that it was appropriate for the Registrar General to initiate some more active inquiry, such as an endeavour to speak to Mrs English or to the Friels. In this connection I find that if an active inquiry had been initiated, the Registrar General would have probably contacted the Friels themselves and obtained information from them, with some investigation and with no great difficulty; this could have been done by following up the addresses of the properties, obtainable from the s.603 Certificates, by following up information in the Statutory Declarations, by pursuing inquiries from any tenants or other persons found at the properties, by identifying the properties from the Valuer General's records, by retaining a private investigator to pursue the inquiries, and by simpler measures such as directing letters to the Friels. 35 In his responses Mr Channell referred to the fact that the Land Titles Office does not have an independent investigative capacity, and his evidence indicated that it was not the practice to make such inquiries. More importantly he said "… We had already called the Law Society to begin an investigation." In relation to a number of dealings in which suspicion fell on a solicitor who was the common factor, and bearing in mind the functions and investigative powers of the Law Society, I find that this was a reasonable response. Its reasonableness was enhanced by the information that the police were investigating what had taken place. The Law Society and the police were both in a far better position, in terms of legal powers as well as in terms of organisation, than the Land Titles Office to investigate whether there had been a number of fraudulent dealings. 36 The Registrar General does not maintain a system of checking the identities of applicants for new Certificates of Title by requiring them to produce indications of their identity such as driving licences, passports and credit cards. This subject was raised but not explored in evidence. It would seem to involve requiring each applicant to attend the Land Titles Office in person to present the application and identify himself. The evidence left the suggestion that it was negligent not to have such a system at the level of impression. My impression is, strongly, that such a system is not practicable and the Registrar General is not at fault in not having adopted it. 37 A further matter on which cross-examination challenged Mr Channell was to the effect that placing the registration stopper on the titles on 2 August, while not taking any steps which drew the Registrar General's suspicions that there had been forged dealings or the fact that there was a registration stopper to public attention was an inadequate response, bearing in mind that the possibility is always present of there being some active dealing with property, even property with which there had been no active dealing for many years. Mr Channell's responses included that, in view of the investigations under way, he did not expect any further fraudulent dealings to be lodged, and that (t29) "A visible notation can have detrimental effects on any genuine dealings by the registered proprietor, so if there had been any it could have caused detriment." 38 From the action Mr Channell took it is obvious that the considerations he mentioned were outweighed when information was received from Mr Mitchell on 19 September and Mr Channell joined in preparing the Warning Notice issued by the President of the Law Society. In view of the information relayed by Mr Mitchell on 19 September the decision to notify publicly the concerns which were held is understandable. The matter at present under consideration is whether it was negligent or otherwise a failure on the part of the Registrar General not to give some such public notification by or before 3 September 2002, when Mr Sunman, in control of the plaintiffs' interests and relying on final searches, authorised payment out of their money for what proved to be a forged mortgage. 39 No party who appeared at the hearing before me was concerned to point out circumstances adverse to the interests of that party which would have been created by a public notification. Nor was there any person who was concerned to argue whether it would have been lawful for the Registrar General to notify a public warning before 23 September 2003, or indeed whether the warning which was notified by registering the departmental dealing on that day was itself lawful. There is no express provision of the Real Property Act 1900 conferring on the Registrar General authority to register such a dealing or to make such a notification. The Registrar General's powers include, under s.12(1)(f), power to record a Registrar General's caveat for the protection of any person interested in land; the departmental dealing may perhaps be defensible as a Registrar General's caveat under s.12(1)(f), but does not otherwise fall within any express authorisation, and some potential perils were incurred by placing it on the Register. Mr Channell explained the dealing as an exercise of the Registrar General's general powers of administration of the Real Property Act. The question whether there is power to make such a notification remains untested. 40 There was no reference in argument before me to the large question whether the general law of negligence, or the law relating to economic loss caused by negligent statements imposes a duty of care on the Registrar General with respect to information which he notifies to the public on the Register, or information which he could notify but does not. Consideration of this large subject would open with Graham Barclay Oysters Pty Ltd v. Great Lakes Council (2002) 77 ALJR 183. In my opinion, when regard is paid to the information and grounds for suspicion before the officers of the Registrar General as of 3 September 2003, and the action which had been taken up to that time, it was not negligent and it was not a failure of duty that the information and suspicions which had led to placing the registration stoppers on the titles had not been notified publicly. There is no need for me to come to any conclusion on whether there is a duty of care, and it is enough to say that if there is such a duty it was not negligent of the Registrar General to omit to make some such public indication as was made on 23 September at a date earlier than 3 September. 41 The plaintiffs' claim against the first defendant for recovery of $168,558.81 paid to the first defendant purportedly at the direction of the Friels at the settlement on 3 September 2002 was not resisted by the first defendant, which did not file a defence, can be taken to have admitted the allegations in the Statement of Claim relevant to the claim against the first defendant, and paid to the plaintiffs' solicitors, by a letter from the first defendant's solicitor dated 17 October 2002 (Exhibit M), $210,000 under some arrangement under which interlocutory restraining orders against the first, second and third defendants did not continue in effect. It should be taken that the payment of $210,000 represented a refund of $168,558.81 paid to the first defendant, together with some payment for costs. The plaintiffs did not ask me to give any judgment against the first defendant. 42 The plaintiffs did not in their Further Amended Statement of Claim seek any remedy against the fifth defendant, Residential Housing Corporation to recover the $515,000 paid to the fifth defendant on 3 September 2002. They claim a declaration that the fifth defendant held its registered mortgage over the Paddington property for the benefit of the plaintiffs, and a declaration that the plaintiffs were subrogated to the rights of the fifth defendant in respect of that mortgage. That is to say, the plaintiffs' claim against the fifth defendant was limited to orders establishing entitlement by subrogation to the protection of the registered first mortgage. 43 The plaintiffs claim against the sixth defendant repayment of $113,973.75 paid to the sixth defendant at settlement on 3 September 2002. This claim was based upon a number of grounds, not all of which need be adjudicated because the ground of payment under a mistake of fact and the claim to restitution of an unjust enrichment is well based and no submission disputing the plaintiffs' claim was made. The mistaken beliefs that the Friels had made an agreement with the plaintiffs to borrow money and had given the plaintiffs a mortgage and a direction for payment of part of the loan money to the sixth defendant were fundamental to the payment, and were entirely wrong, and there was no consideration for making this payment to the sixth defendant. The payment was money had and received by the sixth defendant to the use of the plaintiff, and clearly falls within the statement in Australia & New Zealand Banking Group Ltd v. Westpac Banking Corporation (1988) 164 CLR 662 in the judgment of the High Court at 673 of facts which give rise to a prima facie obligation to make restitution. In the present case the sixth defendant did not in its pleading or by its conduct of the hearing raise any substantial matter of defence to the claim for restitution, and its evidence was directed to showing (as was not disputed) that the sixth defendant was itself deceived and did not take part in any intentional deception of the plaintiffs, and to establishing the sixth defendant's entitlement in its turn to recover, under the fifth cross-claim, $49,484 which the sixth defendant paid on to Australian National Finance Pty Ltd, the ninth cross-defendant, supposedly as a share of commission earned by introducing the Friels and their business to the plaintiffs. There was of course no consideration for the payment on to Australian National Finance as there had been no transaction and no commission had been earned. Australian National Finance Pty Ltd did not appear in the proceedings and did not defend the fifth cross-claim. I am satisfied that the plaintiffs were entitled to succeed in their claim against the sixth defendant, and that the sixth defendant in its turn is entitled to succeed in the fifth cross-claim against the ninth cross-defendant. 44 In David Securities Pty Ltd v. Commonwealth Bank of Australia (1992) 175 CLR 353 at 376 to 370 Mason CJ and others made observations which cast doubt on whether the fundamentality of the mistake is essential for a right of recovery. Whatever it may be the correct position, for neither of these payments can there be any doubt of the fundamentality of the mistaken belief to the payment. 45 The plaintiffs claim that they are entitled to rely by subrogation on the registered first mortgage over the Paddington property to Residential Housing Corporation, to secure the plaintiffs to the extent of $515,000 paid to Residential Housing Corporation with the intention of securing a discharge of that mortgage. As the events have fallen out, the discharge of mortgage (almost uniquely a genuine document) has not been registered because the Registrar General has been unwilling to register any dealings with the title to the Paddington property. The plaintiffs' entitlement to subrogation now entitles them to prevent registration of the discharge of mortgage. 46 The plaintiffs' right to subrogation arises under the equitable doctrine of subrogation stated in Cochrane v. Cochrane [1985] 3 NSWLR 403 at 405 by Kearney J in these terms: I have been referred in argument to the authorities bearing on subrogation, particularly in the case of payment out of securities. They are to be found in Meagher, Gummow & Lehane, Equity Doctrines and Remedies , 2nd ed (1984), pars 912 et seq at 256 et seq. These cases deal, of course, with the position of a third party paying off a mortgage. The principle emerging from the Privy Council decision in Ghana Commercial Bank v Chandiram [1960] AC 732 is that in such case the third party is presumed, unless the contrary appears, to intend that the mortgage shall be kept alive for his benefit. This involves, of course, that in order to determine whether the presumption applies in any given case the circumstances of the case have to be looked at. I accept that in accordance with this principle, it must be shown that the circumstances are such as to displace such a presumption in the case of a third person. This principle is based on equity's concern to prevent one party obtaining an advantage at the expense of another which in the circumstances of the case is unconscionable. Hence, there is a common thread running through there relevant cases to the effect that the conscience of the mortgagor should be affected so as to cause the mortgage to be kept alive. This is illustrated in the text book examples first, of a third party not being entitled to a right by way of subrogation where he simply lends the money on an unsecured basis to the mortgagor who then uses such funds to pay off the mortgage; and secondly, of a third party being so entitled where he advances the money to pay out the mortgage on the understanding that security would be provided for such advance upon the mortgage being paid out. As a corollary to this basis for the principle, there is no occasion for equity to intervene by way of subrogation where there is available to the third party a remedy at law or in equity sufficient to avoid an unconscionable result. (I have inserted the Corrigendum at [1985] 3 NSWLR xi). 47 In the Fourth Edition (2002) of Meagher, Gummow & Lehane Equity Doctrines and Remedies the corresponding treatment of this doctrine is found at paras [9-060] to [9-075]. See too Fisher and Lightwood's Law of Mortgage Aust. Ed. (1995) at [14.6]. At [9-075] the learned authors of the 4th Ed of Meagher, Gummow and Lehane comment on the place in this doctrine of Banque Financière de la Cité v. Parc (Battersea) Ltd [1999] 1 AC 221 and the speech of Lord Hoffmann which applied unjust enrichment law to subrogation. 48 An explanation in terms of the intention or the presumed intention of the payer of the basis on which a person who pays off an existing mortgage is entitled to be subrogated to the position and the rights of the mortgagee who has been paid does not give the law a basis which is clear or can be readily understood. The reference to the intention or presumed intention of the payer may introduce an element which is not necessary for an understanding of subrogation but is unfortunately distracting, particularly where the intention is presumed or, it might be said, fictitious. It will be seen that in the first paragraph in the passage from Cochrane v. Cochrane which I have set out Kearney J referred to Ghana Commercial Bank v. Chandiram in which the Privy Council stated the rule in terms of presumed intention, but in the second paragraph Kearney J explained the principle in terms of the position in conscience of the mortgagor, to which the intention of the payer that he should or should not have security, if he had any intention about it, is relevant but not necessarily conclusive. Observations of Lord Hoffmann in Banque Financière de la Cité v. Parc (Battersea) Ltd at pp232-234 illustrate the difficulties of relating subrogation in this context to intention, when intention is a fictitious element and also when it is not. 49 References to the intention of the payer fail to express anything which is central to the doctrine of subrogation. It sometimes happens that the person to whom a presumed intention to keep a mortgage alive is imputed has actually acted to bring about its discharge; that is so in the present case. The essence of the doctrine is elsewhere than in an intention or presumed intention of the payer to rely on the mortgage which was paid off. Intention may be significant where it is for some reason clear that the payer did not intend to be secured at all; otherwise it appears to me to be unfortunate that it should have a part in a statement of the doctrine. 50 I would respectfully say that Lord Hoffman's relation, at 234, of subrogation to unjust enrichment was not articulated in the authorities to which his Lordship referred, and is not established in Australian case law. In my understanding explanation of subrogation in terms of restitution and unjust enrichment was introduced by Millett LJ in Boscawen v. Bajwa [1996] 1 WLR 328 at 334, and was not earlier found. Lord Hoffmann's reference to the law of restitution does not, in my respectful opinion, provide an explanation for the mortgagor's being treated as bound, in equity, to treat the person who paid off the previous mortgage as entitled to security under it. Restitution would provide a basis for treating the mortgagor as obliged to restore to the person who paid it the amount which had been paid to the mortgagee: the concept is inadequate for also treating the mortgagor as obliged to hold the payer secured. This is particularly clear where, as in this case, and in other cases where subrogation has been held to exist, the mortgagor in fact had no dealings with the payer, or where the payer believed that he was getting security under arrangements in which the mortgagor was not in fact involved. To my mind it is enough to see subrogation as an entitlement which equity accords to the payer, firmly established by judicial decisions notwithstanding that a satisfactory doctrinal basis is difficult to identify, and notwithstanding that classification of the mortgagor's position as unconscionable seems very attenuated. 51 On the facts of the present case the intention of the plaintiffs that they should have security over the Paddington property for the money they advanced is unmistakably clear; there is no room for a presumption, because their intention to obtain security was the whole basis of their involvement. Fortuitously the security to which they claim to be subrogated still exists in the highly concrete form of a registered and undischarged first mortgage. The plaintiffs did not intend that mortgage to continue to exist: they made firm preparations to discharge it, which were defeated by the Registrar General's intervention. The Friels were bound by that registered mortgage, having regard to the operation of s.42 of the Real Property Act 1900; Residential Housing Corporation was protected by s.42 because it was not involved in the frauds which brought that mortgage into existence and brought about its registration. 52 There was some discussion during the hearing of whether the Friels were bound by the personal covenants in the first mortgage; I am inclined to think that they were not, but the question is of no importance for disposition of the case because the effect of s.42 is that the Paddington land was fully and effectually charged with the debt due to Residential Housing Corporation, and the Friels would be advantaged by the discharge of their land from the debt in much the same way as if they themselves were discharged from personal covenants. The intervention of the plaintiffs and their payment of the mortgage debt under the influence of a further array of fraudulent conduct is a fortuitous set of circumstances, when viewed from the point of view of the Friels, in which a large sum of the plaintiffs' money has gone to relieve the Friels of an obligation charged on their land. It would be unconscionable of the Friels to take advantage as against the plaintiffs of the discharge of their land from that obligation, however unjust to the Friels were the circumstance in which that obligation was earlier charged on their land. 53 In P T Limited v. Maradona Pty Ltd [1991] 25 NSWLR 643 the facts before Giles J, and the facts in Travinto Nominees Pty Ltd v. Vlattas (1973) 129 CLR 1 and in Consolidated Trust Co. Ltd v. Naylor (1936) 55 CLR 423, the High Court decisions on which Giles J's opinion was based, did not include the element present here that the purported personal covenants were forged covenants with which the Friels had no association whatsoever. In the Residential Housing Corporation mortgage, as in P T Limited v. Maradona Pty Ltd, the mortgage did not specify the amount of money charged on the property except in the personal covenant, and that amount was ascertainable only by reference to the personal covenant and liability incurred under it. Notwithstanding that the language used in each of those cases supports the view that liability for personal covenants in mortgages is within the indefeasibility conferred by registration, in none of those cases was the present problem or anything at all like it actually addressed. The doubt I have expressed does not appear to me to have any influence on the outcome of the present case. The value of the property is such that it is unlikely that there would ever be any wish to enforce the personal covenant, and the personal covenant establishes the amount of money charged on the property whether or not it is enforceable personally against the Friels. Remedies which elsewhere in this judgment I find are available to the Friels make the question of enforcement against them personally academic. In the whole circumstances of the Friels it is unjust that any liability should be charged on their property, but the plaintiffs and Residential Housing Corporation are not involved in the frauds which make the circumstances unjust, and subrogation and related questions of conscience should be addressed in a narrower frame. 54 The principal basis of the submissions made by Mr Sirtes of counsel for the Friels was that there is no ground on which it is unconscionable of the Friels not to treat the plaintiffs as having security over the Paddington land, because the Friels had no part whatever in the chain of events, both as to Residential Housing Corporation's advancing money and acquiring security over the Paddington land, and also as to the plaintiffs' advancing money in the belief that they were obtaining security over the Paddington land, paying off the amount apparently due to Residential Housing Corporation, and failing because of intervention by the Registrar General to get the registered mortgage which the plaintiffs expected to have. The Friels took no part in the whole chain of events from beginning to end, and did nothing at all, by act or omission, to contribute to the plaintiffs' difficulties. Mr Sirtes submitted that as the Friels knew nothing about the fraudulent Residential Housing Corporation mortgage, or about the detriment the Friels had suffered by its registration, it cannot be said that there is some unconscionability on their part when the debt so charged on their land was relieved by payment by another person who was also a stranger to them. Mr Sirtes suggested that their position in conscience is not adversely affected by these transactions, and that no degree of unconscionability such as would support the plaintiffs' claim to subrogation could arise. Mr Sirtes contended that it was not to the point for the plaintiffs to assert that Residential Housing Corporation had an entitlement to make a claim against the Friels and their land because its first mortgage was registered and protected by s.42; the plaintiffs are not Residential Housing Corporation. 55 Mr Sirtes referred to the following passage in Registrar General v. Gill (NSW CA 14 August 1994 unreported) cited in Meagher, Gummow & Lehane Equity Doctrines and Remedies 4th Ed. at [9-070]: The equitable principles relating to subrogation aim to adjust the interest of three parties, such as a creditor, a debtor and an insurer or surety, in such a way as to avoid the unconscionable result of double recovery by the creditor or inequitable discharge of the liability of the debtor. 56 Mr Sirtes described his clients as an entirely innocent party who had nothing to do with any of the transactions, and contended that it would be contrary to the development of the law regarding the equity of subrogation that their behaviour should be said to be unconscionable, when the circumstances were entirely beyond their control. 57 I do not accept Mr Sirtes' submission because it does not appropriately attribute effect to the first mortgage and the entitlement of Residential Housing Corporation to a first mortgage over the Paddington land; these existed notwithstanding that the Friels had no part whatsoever in the events which brought them into being; they existed because s.42 of the Real Property Act gives effect to the first mortgage on its registration. The Friels' land was charged by the first mortgage, and the payment by the plaintiffs discharged the Friels' land of this obligation; the Friels were advantaged by the payment and to the extent of the payment, and no less so because of the unjust circumstances in which their land came to be bound by the first mortgage. 58 Mr Sirtes also submitted that (as is quite correct) it was not the intention of the plaintiffs that they should be secured by the first mortgage or by subrogation to rights under it. However in my opinion it is sufficient that the plaintiffs intended to have security of some kind and that their payment went towards discharging the previously existing security. (The intention that they should have security is spoken of in the authorities as presumed intention, and may not be a real requirement; but in the present case there is no doubt on the facts that the plaintiffs had an actual intention to that effect.) Mr Sirtes contended, correctly, that the plaintiffs had no actual intention to keep the registered first mortgage alive; quite the contrary they went to some lengths to have it discharged, and they did not choose to take an assignment of it. The terms of the security which the plaintiffs intended to have differed very markedly from the terms of the Residential Housing Corporation mortgage. 59 The position in conscience of the Friels is markedly different from the position of the Rices in Butler v. Rice; Mr Sirtes went to some lengths to develop the differences. The adverse comments which were made of the Rices in that case can have no parallel here. However the essential element that the plaintiffs paid money to discharge a mortgage over the Friels' property, and the further element, if it be essential, that the plaintiffs intended to take security for their payment, are present here. 60 Mr Sirtes referred to Porter v. Associated Securities Ltd (1976) 1 BPR 9279 and to this passage in the judgment of Needham J (at 9294-9295): As I have said, there is no doubt of the principle of subrogation as it applies to a person paying off a mortgage, or lending money for that purpose which is so used see Butler v Rice[1910] 2 Ch 277 and Ghana Commercial Bank v Chandiram [1960] AC 732. But in the present case, in my opinion, the defendant did not come within that principle. It financed the purchase by Edroga Investments Pty Ltd (thereby obtaining security for its advance over the beachfront land). The money used to pay off the mortgage to the Bank was money paid by Edroga Investments Pty Ltd (even though borrowed from the defendant) on account of the plaintiff. It was in every relevant sense the plaintiff's money, not the defendant's. 61 I observe that in Porter's case there was no subrogation where the money of the payer was advanced to the debtor notwithstanding that money could be traced as then having been used by the debtor to pay the secured debt. The circumstances showed that the payer did not intend to have security at all. 62 Mr Sirtes also contended that there are discretionary grounds on which I should withhold equitable relief from the plaintiffs. This contention was based on what he said was the high rate of interest provided for by the Residential Housing Corporation mortgage to which, as Mr Sirtes submitted, the plaintiffs must be taken to have asserted that they are subrogated, notwithstanding that their counsel sought the benefit of interest calculated in accordance with s.94 of the Supreme Court Act. This submission was not well based because the terms of the Residential Housing Corporation mortgage as established in evidence do not include any provision for the payment of interest at a calculated rate, or for the payment of any interest other than the one payment for which the mortgage provided. It provides only for payment of $75,000 interest payable once only, a nominated sum and not a sum calculated by the application of any rate to the principal. I interpose that in my view the circumstances show no ground upon which I should as a matter of discretion award interest to the plaintiffs against the Friels under s.94 of the Supreme Court Act. 63 In my view the plaintiffs are entitled by subrogation as against the Friels to have the security afforded by the registered mortgage treated as being available to the plaintiffs. Their right extends only to $515,000 which is the part of the advance which was paid to Residential Housing Corporation; this was not the whole of the advance or of the loss sustained by the plaintiffs. 64 Claims made by the plaintiffs, and by the Friels in the third cross-claim against the Registrar General fall to be decided under Pt.14 The Torrens Assurance Fund and in particular s.129 of the Real Property Act 1900. Part 14 was inserted by the Real Property Amendment (Compensation) Act 2000 which took effect on 15 September 2000. Part 14 and s.129 are parts of a comprehensive reform of provisions of the Real Property Act relating to civil rights and remedies, the earlier form of which was found in Pt.14 ss.121 to 135. The legislation was completely recast into new Parts 13 and 14 after extensive consideration by the Law Reform Commission of New South Wales leading to its Report 76 (1996) "Torrens Title: Compensation for Loss". The workings of the previous legislative scheme encountered considerable practical difficulties in the course of public administration, with complex and technical litigation in which the assurance fund was zealously defended and appeals were common, so that recourse to the assurance fund where the workings of the Torrens System imposed losses was not readily available. 65 In his Second Reading Speech in the Legislative Assembly on 3 May 2000 Mr Yeadon, the then Minister for Information Technology who had carriage of the Bill, said among other things The great advantages of the Torrens System over the common law title, also known as the Old System, are the relative speed, simplicity and low costs of conveyancing procedure. To a large extent these are made possible by the State guarantee of title and the related compensation provisions recorded by the Real Property Act 1900, the two major elements of the Torrens System of land title. The provision of compensation by the State is an essential component of the State guarantee of land title. Unlike the common law situation where a land owner may recover his or her land by legal action against a current owner who acquired the land through a forged or fraudulent instrument, under the Torrens System the registered proprietor's ownership cannot be disturbed unless he or she was a party to the fraud. In the case of Torrens Title, where an owner loses land as a result of forgery or other frauds, his or her right to recover the land is converted to right to compensation. The difference is that, under the old System, the owner recovers the land and the innocent purchaser forfeits the purchase price, while under the Torrens System the innocent purchaser retains the land and the former owner is compensated financially. The Torrens Assurance Fund provides monetary compensation not only to a person who is deprived of land by the operation of the Torrens System but also to a person who suffers loss through a mistake in the Land Titles Office or through an error, omission or misdescription in the register of titles. The benefit of the compensation scheme is that it reinforces public confidence in the State guarantee and in the integrity and accuracy of the Register of Title. Moreover, the compensation provisions are so deeply ingrained in the Torrens System that without such a scheme there would be significant and detrimental repercussions in conveyancing costs and practices. 66 As yet Pts 13 and 14 have received judicial consideration in few cases. In Diemasters Pty Ltd v. (Meadowcorp) Pty Ltd (2001) 52 NSWLR 572 at 584 Windeyer J: The words 'as a result of the operation of the Act' are new. It is quite unlikely that they were intended to make access to the Assurance Fund more restrictive than under the old s.126, which it replaced. That is apparent from the report of the Law Reform Commission: Report 76 (1996) Torrens Title: Compensation for Loss , and the second reading speech of the Minister: (Parliamentary Debates, Legislative Assembly, 3 May 2000 at 5187) 67 Conceptions basic to the Torrens System of title by registration, and the primacy given to the Register, require that where the operation of the Torrens System imposes loss or damage, compensation should be made available by the State. It can be readily foreseen that no matter how much care and skill are exercised by public officers who conduct registration processes and maintain the Register, the workings of the Torrens System will from time to time impose loss and damage; and it can also be readily foreseen that no matter how competent and well-intentioned the public officers are, from time to time they will make mistakes which will have consequences in the Register and will cause loss and damage. The word "Assurance" is often apposed to "Insurance" so as to refer to provision made for events which will certainly happen, in contrast with insurance as provision against events which contingently may happen. This may explain the choice of the word "Assurance" in the title of Pt.14; it is a fair certainty that there will be losses and claims. 68 As well as the claim of justice that compensation should be readily available in appropriate cases, the availability of compensation assists the effective conduct of business by public officers. An illustration that this is so is furnished by considering the applications under s.111 for new certificates of title which were made in the present case. Applications for new Certificates of Title could reasonably be met with responses of greatly varying intensity. Observations by counsel have indicated many respects in which the applications and claims made in them and documents brought forward in support of them could have been further investigated, by correspondence, by retaining private investigators, by following up references to addresses, telephone numbers and professional persons, by insisting on production of rate notices rather than s.603 Certificates, and in other ways. Under s.12 the Registrar General is well empowered to pursue inquiries and to compel production of information. In the administration of the Real Property Act the Registrar General must come to a decision fairly rapidly when confronted with an application for a new Certificate of Title about whether it is appropriate to accept the facts as represented in the application, and if not, about how intensely investigation should be pursued. There are very many applications for new Certificates of Title, very few of them are fraudulent and decisions about which of them should be accepted on their face, which should be investigated and how rigorously, and what time should be given to investigation are decisions in which the availability of compensation has a place. Effective administration requires some balancing of risks and remedies when adopting administrative practices to deal with such applications. 69 In Pt.13 s.120 authorises proceedings for the recovery of damages to be brought by any person who suffers loss or damage as a result of the operation of the Act in respect of any land, where the loss or damage arises from stated circumstances. Subsections (2) and (3) have the effect that where proceedings of a kind dealt with in s.120 are brought against the Registrar General they are to be taken in accordance with Pt.14. In my understanding s.120 does not create a cause of action or an entitlement to the recovery of damages, but by subs.(1) authorises proceedings for the recovery of damages to be taken; in most or perhaps all cases authorisation by s.120 is superfluous as an entitlement would exist under the general law. For present purposes the operation of s.120 which is significant is its direction of proceedings against the Registrar General into proceedings in accordance with Pt.14. 70 Part 14 includes s.129 which is in the following terms: 129 Circumstances in which compensation payable (1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from: (a) any act or omission of the Registrar-General in the execution or performance of his or her functions or duties under this Act in relation to the land, or (b) the registration (otherwise than under section 45E) of some other person as proprietor of the land, or of any estate or interest in the land, or (c) any error, misdescription or omission in the Register in relation to the land, or (d) the land having been brought under the provisions of this Act, or (e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud, or (f) an error or omission in an official search in relation to the land, is entitled to payment of compensation from the Torrens Assurance Fund. (2) Compensation is not payable in relation to any loss or damage suffered by any person: (a) to the extent to which the loss or damage is a consequence of any act or omission by that person, or (b) to the extent to which the loss or damage: (i) is a consequence of any fraudulent, wilful or negligent act or omission by any solicitor, licensed conveyancer or real estate agent, and (ii) is compensable under an indemnity given by a professional indemnity insurer, or (c) to the extent to which that person has failed to mitigate the loss or damage, or (d) to the extent to which the loss or damage has been offset by some other benefit to that person that has arisen from substantially the same circumstances as those from which the loss or damage has arisen, or (e) to the extent to which the loss or damage arises because of an error or miscalculation in the measurement of land, or (f) to the extent to which the loss or damage arises from: (i) the breach by a registered proprietor of any trust (whether express, implied or constructive), or (ii) the inclusion of the same land in two or more grants, or (g) to the extent to which the loss or damage arises from the recording, or the omitting to record, in the Register of an approved determination of native title or other matter relating to native title rights and interests, or (h) to the extent to which the loss or damage arises from circumstances in respect of which this Act provides that proceedings against the Registrar-General do not lie, or (i) to the extent to which the loss or damage arises from an error contained in a plan lodged in accordance with Division 3C of Part 2 of the Conveyancing Act 1919 . (3) Subsection (2) (g) applies whether the loss or damage is alleged to have been suffered: (a) by a holder of native title or a claimant for native title, or (b) by a person deprived of land or an estate or interest in land as a result of the making of an approved determination of native title, or (c) by any other person, but does not apply to an error made by the Registrar-General in the recording of matter in the Register. 71 Subsection (1) does not expressly refer to negligence or fault of the Registrar General, and entitlements to compensation from the Torrens Assurance Fund under subs.129(1) arise in the circumstances indicated in subparas.(a) to (f), some of which involve or could involve some negligence or fault of the Registrar General, but others of which create an entitlement in circumstances which may not include any element of fault. 72 In Cirino v. Registrar General (1993) 6 BPR 13,260 Cole J said (at 13,263):- Second, "omission" where used in s 127 does not necessarily involve failure to comply with a duty. It merely means absence of a material entry ( Dobbie v Davidson ) [1991] 23 NSWLR 625 (compare Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98). "Omission" has the same meaning in s 42(1)(b) as it does in s 126 and where secondly appearing in s 127(1) (see Priestley JA in Dobbie at 647). In my view "omission" where it appears in the present Pt.14 should be understood in the same way. 73 An omission of the Registrar General in the execution of performance of functions or duties (as in (a)) may involve something which could be regarded as a fault; an act of the Registrar General in the execution or performance of functions or duties under the Act (also as in (a)) very well may not. An error or omission in an official search as in para.(f) would probably involve some fault; an error, misdescription or omission in the Register referred to in para.(c) might well involve some fault but very well might not, depending on how the error, misdescription or omission arose. There will be many situations of fact in which there has been no fault of any kind of the Registrar General but a person who suffers loss or damage has an entitlement to payment of compensation. 74 Where a plaintiff alleges that there has been some fault in an act, omission, error, misdescription or otherwise, the plaintiff may prove it in the course of proving that the loss or damage arises from one of the cases in paras.(a) to (f). Paragraph (e), relating to a person's having been deprived of land as a consequence of fraud, will usually arise in a situation where some fraud has been practised which cannot be said to involve any fault of the Registrar General, who with others was a victim of it. The overall control mechanism in subs.129(1) is that the plaintiff must have suffered loss or damage as a result of the operation of the Act; and the workings of indefeasibility will usually have a part in the plaintiffs' rights' being in a worse situation than he was entitled to have them but for the operation of the Act. 75 To illustrate these observations by reference to s.111, deciding that he is satisfied that a Certificate of Title has been lost, mislaid or destroyed is something which subs.111(3) authorises the Registrar General to do, and issuing a new Certificate of Title is something which subs.111(3) authorises the Registrar General to do if he is so satisfied. Attaining a state of satisfaction and issuing a new Certificate of Title may, in later litigation, be shown to have been wrong in the sense that it was not true that the Certificate of Title had been lost, mislaid or destroyed; and this could have arisen because the Registrar General had no grounds to be satisfied of that matter, or because he decided that he was satisfied on grounds which are later criticised as inadequate, or because he decided that he was satisfied on grounds which were altogether convincing but in retrospect can be shown to have been wrong. In each of these situations the person who suffered loss or damage arising from the issue of a new Certificate of Title where the Certificate of Title had not in fact been lost, mislaid or destroyed is given an entitlement to payment of compensation. 76 The amendments enacted in 2000 were intended to be and operate as a wide ranging reform, a new beginning of statute law relating to compensation from the Torrens Assurance Fund. There are several illustrations of this in Pt.14. One is the specification in subs.129(2) of a number of circumstances in which compensation is not payable, including some circumstances which it would not be necessary to specify if the liability to pay compensation arose under the law of negligence or principles analogous to it. Section 130 authorises ex gratia payments. Section 131 establishes administrative procedures for determination of claims without litigation. Section 135 gives the Registrar General authority to settle claim without litigation. Provision is made in subs.134(4) for fees payable for lodgement of dealings to include an amount to be paid into the Torrens Assurance Fund. Overall a regime is established in which loss or damage as a result of the operation of the Act is compensated for as part of the ordinary workings of the Torrens System. Compensation is not an extraordinary remedy, and is not reserved for faults, blunders or enormities. 77 Mr Harrison Senior Counsel for the Registrar General contended that if the plaintiffs' claim to be subrogated to the rights of the Residential Housing Corporation under the registered mortgage succeeds the pleaded loss against the Registrar General would be shown not to exist. In making this submission Mr Harrison pointed out that success in resisting the plaintiffs' subrogation claim would bring with it exposure of the Registrar General to a corresponding claim by the Friels in respect of the charge to which their Paddington land was subject, as they would have been deprived of an interest in land, as in para.(e) of subs.129(1). I do not accept this submission because the subrogation claim can only protect the plaintiff to the extent of the moneys which were charged under the first mortgage to Residential Housing Corporation, that is $515,000, but the loss incurred by the plaintiffs is greater. 78 Mr Harrison contended that review of the provisions of Pt.13 and Pt.14 shows that it was intended that s.129 should cover the field of entitlements to claim compensation out of the Torrens Assurance Fund, and otherwise to make claims against the Registrar General for loss or damage arising as a result of the operation of the Act. 79 In view of the terms of s.120 and its mechanism which directs claims against the Registrar General into the procedures provided for in Pt.14, I am inclined of the view that proceedings against the Registrar General at common law on causes of action other than claims under s.129, such as claims based on negligence law, are not available. However I am not confident of this opinion because legislation is not usually given a construction which would bar negligence claims or other entitlements under the common law unless there is some altogether clear provision to that effect. Identification of a duty of care and the facts and circumstances which could give rise to a duty of care owed by the Registrar General are large subjects which received no real attention in the course of submissions by counsel in this case. The issue of new certificates of title, and allowing the register to remain in a state in which the public was not notified of the Registrar General's suspicion, could both be classified as claims under the law relating to economic loss caused by negligent statements; but other classifications could call for consideration, such as, in both cases, whether there was an act or omission in an operational aspect of public administration. As there clearly was, in my finding, no negligence either in consideration under s.111 and issue of new Certificate of Title or in the events which led to there being no public notification of the Registrar General's suspicion, I do not go further in consideration of the duty of care. 80 Mr Harrison contended that some fault needs to be shown in the claims by the plaintiffs and also by the Friels under s.129. Mr Harrison submitted that provisions of the Act do not make the Torrens Assurance Fund available to compensate everybody or anybody in all circumstances who suffers loss as a result of dealings associated with land under the Torrens System. He submitted that it was necessary for a plaintiff to show: · that he suffered damage as a result of the operation of the Act – the need to establish causally that damage has been suffered as a result of the operation of the Act; and · (in the case of para.(a) of subs.129(1)) that the damage arose from any act or omission of the Registrar General in the execution or performance of functions or duties under the Act. · that the act or omission was tortious or wrongful. 81 Counsel contended that it is necessary that the plaintiffs isolate or identify functions or duties executed or performed by the Registrar General in the performance of which it is said that the Registrar General's impugned act or omission arose; that there is no duty so wide as a duty to save harmless all who deal with Torrens land. In illustration of this counsel referred to para.13I of the particulars in the Further Amended Statement of Claim under subs.111(2) and contended that in order to succeed the plaintiffs would have to demonstrate that the discretion given by s.111 to the Registrar General to choose what information he would treat as satisfactory was exercised incorrectly. Counsel contended that it would be erroneous to determine whether the choice was exercised incorrectly from the retrospective point of view based on the later knowledge that a fraud was perpetrated. Counsel referred to judicial warnings against bringing a retrospective view to bear on decisions on negligence, and in illustration referred to Rosenberg v. Percival [2001] 75 ALJR 734 at [16] where Gleeson CJ pointed out the difficulties of evaluating events through the prism of hindsight. Mr Harrison contended to the effect that the reference in subpara.(a) to an act or omission is not a reference to any act or omission neutrally, and that is a reference to one of which, viewed in the circumstances when it took place, there was some ground for criticism. 82 In my view there is nothing in the text of either s.129 or related sections which indicates that the acts or omissions to which para.(a) relates are limited to acts or omissions which involve some fault, or some failure to comply with a duty. On the literal reading of s.129, any act of the Registrar General of which the decision to issue an issue of a duplicate Certificate of Title under subs.111(2) is an example, falls within subpara.(a) irrespective of whether the decision was right or wrong, judged as of the time when it took place or judged retrospectively. To give meaning to the concept of loss or damage it must become known at some time, whether or not it could be known at the time of the act or omission, that the act or omission should not have happened; otherwise the concept of loss or damage does not have any content. 83 On every business day the Registrar General registers many mortgages, perhaps hundreds, and at intervals of months or perhaps years one of them turns out to have been forged. Similarly the Registrar General grants many applications for new certificates of title, and a very small proportion of them turn out to have been fraudulent applications. Every mortgage and every application is susceptible of detailed investigation, inquiries of persons potentially adversely interested, and summoning and examining persons who might give information about them. Embarking on less than all conceivable investigations involves risks, with which Pt.14 deals. 84 I see s.129 and Pts.13 and 14 as machinery which among other effects, give assurance to the Registrar General that he is to go ahead and administer the Real Property Act in a confident and effective manner, without paying undue attention to the readily discernible possibility that in any particular transaction the Registrar General may have been deceived and may be acting on a wrong basis. If there is something suspicious the Registrar General can investigate it, but if not he can decide to act on what is put before him. The Registrar General is enabled to act on the confident basis that if he has made a decision which is later shown to be wrong, there is an assurance fund out of which any loss or damage can be paid for. The meticulous, expensive and perilous examinations and re-examinations in each transaction of titles, powers and the basis on which action was taking place which characterised the general law or old system of title are replaced by an effective system in which title consist of entries in the Register and the plainly discernible possibility that this will cause loss or damage either through mistakes which inevitably arise in public administration or without any mistake having been made, will be reliably paid for if it matures into fact. Recognising loss or damage and paying compensation become normal parts of the workings of Torrens System, and are not enormities requiring the intervention of the law of tort. The Torrens System pursues efficiency and promptitude in establishing land titles, and deals with the risks which pursuit of these advantages brings with it. 85 The principal fact in the causation of the Friels' loss is the issue of the new Certificate of Title. The registration of the forged mortgage is a factor of almost equal importance. Both are events within subs.129(1) which give rise to a claim for compensation. The Friels are obliged to pay to the plaintiffs $515,000 to obtain discharge of the first mortgage; as a matter mechanics, this discharge can be brought about by registration of the as yet unregistered discharge of mortgage given by Residential Housing Corporation, already lodged for registration. The amount so payable by the Friels to the plaintiffs becomes the principal element in the compensation which they are entitled. 86 Mr Harrison contended that the causation test to be applied is not the simple but-for test. In the causation of the loss incurred by the Friels several different events can be discerned. The primary cause is in the events in which applications for new certificates of title supported by falsehoods were made, the Registrar General decided to issue new certificates of title and did so. Without the new certificates of title the first mortgage could not have been brought into existence or registered. Other causative events are the fraudulent production of the first mortgage, prevailing on Residential Housing Corporation to accept it, and offering it for registration, followed by its registration; it can now be seen clearly that the document should not have been registered because it was not executed by the registered proprietors. It still is registered, and it can be removed by paying $515,000 to the plaintiffs. The loss or damage caused by these events constitute loss or damage suffered by the Friels' as a result of the operation of the Act, and loss or damage which arises from events which fall into several classifications in para.(a) to (f) of subs.129(1). Loss or damage arises from acts or omission of the Registrar General under para.(a). It arises from registration of Residential Housing Corporation as proprietor of the mortgage under para.(b). It arises out of the Friels having been deprived of an estate or interest in the land as a consequence of fraud, by the registration of the first mortgage. It is in my view quite clear that the Friels are entitled to compensation under s.129, and that their loss or damage includes payment of whatever sum is charged on their land under the first mortgage; this is just as much so in the present circumstances in which the plaintiffs are subrogated to rights of Residential Housing Corporation under that mortgage for $515,000 as it was when Residential Housing Corporation itself was entitled to enforce the mortgage. The principal element in their compensation is that to discharge their land from the first mortgage they must make a payment of $515,000 to the plaintiffs. The Friels are also entitled to compensation in respect of all expenses they have reasonably incurred and will incur in relation to this litigation, and in relation to discharging the mortgage. 87 It remains to formulate the orders I should make. I set out my Draft Orders. The parties should consider the draft, agree or exchange drafts and attend to settle the orders in about one week's time. 88 Orders: (1) The plaintiffs have leave to discontinue the proceedings against the first, second and third defendants. (2) Order that the first, second and third defendants each pay its, his or her own costs of the proceedings. (3) Declare that the plaintiffs are entitled as against the fifth defendant, the seventh defendant and the eight defendant to the benefit of mortgage 8620874 over the land in Certificate of Title Folio 2/33457 as security to the plaintiffs for payment of the sum of $515,000.00. (4) Leave to the plaintiffs to apply for further orders for the enforcement of the security referred to in Order 3. (5) Give judgment for the plaintiffs against the sixth defendant for $168,558.81 together with interest calculated in accordance with Schedule J to the Rules of the Supreme Court from 3 September 2002 until the date of this order. (6) Reserve further consideration of: (a) the claim of the plaintiffs against the ninth defendant. (b) the claims of the seventh and eighth defendants in the first, second, third and fourth cross-claims. (7) Upon the fifth cross-claim give judgment for the cross-claimant against the ninth cross-defendant for $49,484 with costs. In this draft I have not fully considered (1) disposition of cross-claims, or (2) costs orders, or (3) any need for a specific direction to the Registrar General relating to the registration or rejection of documents which have been lodged. ********** Last Modified: 12/16/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.