Land Law Assignment 1 - Impact of eConveyancing PDF

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Assignment on eConveyancing and the impact it has on Torrens Title System...

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Land Law Assignment 1 In every industry there comes a time where technology advances the methods engrained in its system. Like all other fields of work, legal methods are evolving with social change and technological advancement. The legal industry however, has not yet been radically transformed by a technological revolution. 1 But there have been new legal service providers that have caused problems for lawyers, where information for clients is a lot more accessible through online platforms, and legal documents such as contracts and wills are easier to obtain from online legal services. 2 Specifically in conveyancing law, there has been a radical change at the level of legislation whereby electronic conveyancing is paving the path of its future. 3Land titles fall under the Torrens System, a land registration system of land title that guarantees its own accuracy.4This shift to electronic conveyancing poses challenges to the contemporary ideals of the Torrens system which have been enforced since 1858 5. This shift can cause problems and there are potential risks such as security breaches that need to be properly managed. But, like all other industries, the legal industry needs to find ways to adapt to technological changes. If done properly electronic conveyancing will provide lots of benefits to the industry, making conveyancing a lot more efficient and cheaper to accomplish while also minimising the impact on the objectives and operation of the torrens system. Para 1: eConveyancing Put simply, conveyancing is the “passing of an estate or title to land by way of sale… from one landowner to another…” 6 Electronic conveyancing (or eConveyancing) is a registration system of legal interests that connect to land via an electronic platform. It alters the conveyancing process from a paper system to an electronic network. 7 In Australia this is done through PEXA, a company limited by shares that manages the online platform of electronic conveyancing and provides the platform itself. What is important to remember is that there is a difference between title documents and conveyancing documents. The Electronic Conveyancing Act 2012 NSW 8is achieving something new. There are already digitalised documents in the purchase of land, such as the contract of sale and title documents. The digitalisation of these documents it not what the legislation is trying to establish, rather the legislation is aiming to alter the system of how funds are collected, how title passes and how settlement occurs. eConveyancing is about changing the entire process to be completed almost instantly. For example the transfer of funds could be done instantaneously, where legal practitioners set up authorised digital signatures and certified bodies can do the entire conveyancing process for purchasers online. 1

https://www.collaw.edu.au/insights/ilaw-technology-changing-legal-profession/. How Technology is Changing the Practice of Law, Janis Blair. 3 Electronic conveyancing legislation. 4 Find source. 5 Find source- start of TS 6 The Impact of eConveyancing on Title Registration, pg 25. 7 The Impact of eConveyancing on Title Registration, pg 53. 8 Electronic Conveyancing Act 2012 NSW 2

Electronic conveyancing is made possible through the enactment of legislation. Section 4 of the

Electronic Conveyancing (Adoption of National Law) Act 2013 (VIC)9 act enables the New South Wales appendix 10 to have jurisdiction in Victoria. This appendix outlines the objectives of the new law, the process of electronic conveyancing and participation rules involved. This legislation together with the Model Participation Rules (MPR) form the regulatory framework of electronic conveyancing. There are many benefits for adopting an electronic approach to conveyancing and updating the traditional paper method which is currently in use. The availability of online settlements will save costs of attended settlements, eliminate need for paper financial transactions and losses when settlements fall through. Another benefit is the it will close the gap that arises between settlement and lodgement, which will result in fewer priority issues and conflicts between unregistered interests. 11 Perhaps the biggest benefit is that beyond the physical paperwork reduction and associated delays with exchanging documents, another clear advantage that arises is that it will make cross-border transactions easier to manage. 12 Andrew Perry noted the following in a June 2005 commentary on the proposal: “An additional benefit of a national e-conveyancing system is that it could facilitate the simultaneous settlement of sale of contracts where the purchase of a property in Melbourne, for example, is conditional on the sale of a property in Sydney … “ Therefore, once the finances are in order, the issues with mailing the paper copies disappears as the conveyance of interstate properties could occur simultaneously through this electronic system, saving time and money.

Para 2: TS The torrens system is not a registration of title but a system of title by registration. 13 The Torrens System is a registrar of land whereby title to land is established by registering land interests in Australia. 14The advantage of the Torrens system is that it provides an easy and accurate record of interests on a particular piece of land. It is a contemporary system of land registration that was formed in 1958. Since then it has gone through the transformation of being solely paper based to being electronically based. All titles to land are held in an electronic registrar, where the hardcopies of all properties plans, title history and current title are scanned

Electronic Conveyancing (Adoption of National Law) Act 2013 (VIC). ELECTRONIC CONVEYANCING (ADOPTION OF NATIONAL LAW) ACT 2012. 11 S. Birrell, J. Barry, D. Hall and J. Parker, "Is the Torrens System Suitable for the 21st Century" 12 A.Kidman Virtual contracts: the implications of e-conveyancing for law firms  (2006) INTLB 81 13 Breskvar v Wall ( 1971) 126 CLR 376 14 Australian Property Law, Samantha Hepburn, 3rd edition, LexisNexus Butterworths 2015, page 568. 9

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into one document. These documents are an accurate description of who has title to the land because it is a system where title is established through registration. 15 Registration under the torrens system has a specific set of objectives: - Providing a register from which persons who propose to deal with land can discover all facts relevant to the title; - Ensuring that a person dealing with land which is registered is not adversely affected by defects which did not appear on the registrar; - Guaranteeing the conclusiveness of the register and providing adequate compensation to any person who suffers loss as a result of this guarantee. The operation of the Torrens System is set out through the following principles: ● The mirror principle; ● The Curtain principle; and ● The Indemnity principle The mirror principle refers to the systems accuracy, how it is a reflection the current facts of the person or corporation that owns land. The curtain principle refers to the system's transparency. There is no need to go behind the registrar to find additional information, all the title information about the title is there for anyone to access (small fee). The indemnity principle is similar to an insurance policy for the title holder. The state guarantees its own accuracy, and if this accuracy is breached compensation will be given by the government to those who have suffered damages. The torrens system is not compulsory, but almost all land title holders have registered through the system. The reason is because once registered, the title becomes indefeasible, meaning the title holder is ‘...immune from attack by an adverse claim to the land or interest in respect of

which he is registered, which a registered proprietor enjoys.’ 16 Para 3: effect eConveyancing will have on TS One question is whether technology hinders or assists the core objectives and purpose of the torrens system. Another is whether the torrens system was more suitable during a time where large-scale fraud was not possible due to the one paper policy of the title. Will getting rid of the certificate of title create a higher risk of identity fraud? According to some it is submitted that not only does technology not hinder this criteria, but that indeed it can greatly assist in ensuring the aims of the torrens system. 17This submission is clearly evident in the benefit we looked at previously involving the cross-border properties all being settled simultaneously. In saying this there are still risks that if not minimised can create issues and impact the objectives and operation of the torrens system.

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FIND SOURCE.  razer v Walker [1967] 1 AC 569, 580 per Lord Wilberforce F 17 S. Birrell, J. Barry, D. Hall and J. Parker, "Is the Torrens System Suitable for the 21st Century"

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As mentioned earlier, electronic conveyancing is being adopted because it is time for technological change to make its mark on conveyancing law. However, the application of e-conveyancing raises a few concerns, the major concerns being risk management and also a greater chance of fraud. 18 The possible risks are: The need to maintain appropriate computer system security (virus and firewall compliance) and consequences of the failure to do so. In all electronic systems the titles are prepared electronically. The way places such as New zealand and Canada have combatted to potential of fraud is by creating identification authorisations through either ‘PINs’ or other similar methods. In some ways this restricts the potential of fraud to only people within the company and is an attempt to safeguard against large-scale fraud. 19 Another risk related to Fraud is concerned with one of the hallmarks of the current torrens system which is the principle of indefeasibility of title. This principle guarantees absolute security of a title for the registered proprietor a principle that Whalan calls the ‘keystone’ of the torrens system.20 An electronic lodgement of instruments will see changes to the registration practices. The fear that is attached to this is that allowing internet access to the land registry system may open greater possibilities for computer related fraud and potentially threaten the security and integrity of the title. 21 we can acknowledge that fraudulent practices have developed in the paper based torrens system however, the use of technology could potentially open up opportunities not only to commit the same fraud but also create new fraudulent methods. The issues associated with identity fraud and security are pertinent to an electronic registration system. They undermine the underlying premise of the torrens system. Graycar and Smith 22pointed out: “In the past, sophisticated paper-based systems were present to reduce the opportunities for fraud involving conveyancing transactions. As we move into on-line registration of titles and electronic transactions, new opportunities arise for people within organisations as well as for external customers to misrepresent themselves and to manipulate electronic transactions for financial gain.”

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The Impact of eConveyancing on Title Registration, pg 1. Low, Rouhshi (2009) From paper to electronic : exploring the fraud risks stemming from the use of technology to automate the Australian Torrens System . Bond Law Review, 21(2). pp. 107-132. 20  aw Book Co Ltd, Sydney, 1982, 19. D Whalan, The Torrens System in Australia, L 21 Low, Rouhshi (2005) Maintaining the integrity of the Torrens System in a digital environment: A comparative overview of the safeguards used within the electronic land systems in Canada, New Zealand, United Kingdom and Singapore . Australian Property Law Journal 11(2):pp. 155-178. 22 A Graycar & R Smith, Identifying and Responding to Electronic Fraud Risks , 30th Australasian Registrars’ Conference, Canberra, 13 November 2002, 1.

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The risk of identity fraud poses a threat against the doctrine of indefeasibility. If this risk ends up getting out of control then there will be a lot more issues and the integrity of the ‘keystone’ to the torrens system will be gone. Another potential issue with shifting towards and electronic system is when someone is entering into a contract and the contract says the settlement is 3 months. This is for purchaser to organise finance. Usually it is a 60 or 90 day settlement, but if e-conveyancing is adopted that may hinder the settlement. If settlement period is altered it may affect the purchaser's ability to be accepted for finance by the bank. This would create problems for purchaser’s as the banks would not be comfortable instantly handing out finance loans. Conclusion: Overall the main shift to electronic conveyancing is to adapt to the ever advancing technological change in society. This provides a more efficient way of handling property transfers and it is endorsed by the government. Essentially it is the future of conveyancing, it saves time, money and adds a variety of new benefits including simultaneous cross-border settlements.. It does pose a risk to the torrens system and its principle of indefeasibility due to security risks, however, with the implementation of safeguards aiming at minimising the opportunity for electronic based fraud the torrens system maintains its integrity and the shift does not have such a big effect on its core objectives or operation....