Background

Back in 2015, the nephew had been representing your client’s daughter in Family Court proceedings.    Your client’s daughter was in need of financial assistance, following her relationship breakdown.   The nephew offered to help your client’s daughter by organising finance for her.   Your client was told her home could be put up as security for her daughter’s loan.

The nephew arranged the loan and came to see your client to sign some mortgage documents.  Your client signed whatever documents were put in front of her by the nephew, thinking that she was helping her daughter.

Months after signing the mortgage documents, your client received a notice of default.   The notice of default refers to a loan of $120,000 and interest, charging rates between 42% and 150% per annum.   When questioned, the nephew downplayed the significance of the notice of default, saying that it was mistake.

Several months later, your client received notice of court proceedings.  The mortgagee who issued the notice of default was seeking an order for possession of your client’s property.   Your client and her daughter contacted the nephew.  The nephew said that he would look into the matter.   He assured your client that she had nothing to be concerned about.

Several more months passed by and your client then received a knock on the door at her home.  It was a sheriff’s officer coming to tell your client that she was being evicted from her home.  The mortgagee had obtained an order for possession.

Your client’s property was sold by the mortgagee to an arms-length purchaser in 2017 for fair market value.  The mortgagee has recovered its debt, but your client is left without a home and she is forced to move in with her daughter.

Your client later discovered that her nephew had forged her signature on loan documents and even forged an affidavit filed in the possession proceedings.  Instead of your client mortgaging her property to secure a loan to her daughter, the mortgage secures a loan to a fraudster who is associated with your client’s nephew and who never serviced the loan.  

What do you do in those circumstances?

The new owner of your client’s property is a bona fide purchaser who has paid fair market value for the property.

There is no prospect of recovering money from the fraudster who has long gone.  Your client has no prospect of recovering any money from her nephew either.  He is a bankrupt, has ceased to practise as a lawyer and he is about to be sentenced to a term of imprisonment.

You consider the possibility of making a PI claim against the law firm where your client’s nephew was working, in the hope that Law Claims will respond to the claim.   But you understand the prospects of the insurer responding to the claim are poor, not least because the policy does not respond where a solicitor has engaged in fraudulent conduct.

You also consider the possibility of making a claim against the Fidelity Fund, but you know that claims to the Fidelity Fund require a claimant to demonstrate that there is no reasonable prospect of recovering their loss elsewhere, and you are unsure if your client has exhausted all possible avenues.

In these circumstances, one option you might consider is the Real Property Act Assurance Fund.

The Assurance Fund

The Assurance Fund is a scheme established under Part 18 of the Real Property Act 1886 (SA) to compensate individuals who suffer loss due to errors or omissions in the land titles system.

It is a fund that is designed to provide financial redress to individuals who, through no fault of their own, experience a loss through the operation of the Torrens Title System, such as fraudulent transactions or administrative errors.

Before any proceedings are commenced, an eligible claimant can make an application to the Registrar-General seeking compensation pursuant to s 210 of the Act.    An application must be supported by an affidavit or declaration.

If the Registrar-General admits a compensation claim that exceeds the sum of $20,000, the State Treasurer is authorised to pay monies out of the Assurance Fund upon receiving a warrant signed by the Governor of South Australia and counter-signed by the Attorney-General.

Absent the Registrar-General accepting an application for compensation under s 210, a claimant may institute proceedings against the Registrar-General as the nominal defendant, pursuant to s 208 of the Act.

The limitation period to bring a claim for compensation under Part 18 of the Act is much greater than conventional claims in contract or tort.   Your client was the victim of a fraud perpetrated in 2015, nearly a decade ago.  Pursuant to s 215 of the Act, a claimant has 20 years to make an application for compensation and/or to bring an action seeking compensation.

Happy ending

The story of the client who lost her home because of the fraudulent actions of her nephew is, of course, a true story.   It has a happy ending as well.  The client was successful in making a claim for compensation from the Assurance Fund.

The client is compensated by receiving a cash sum equivalent to the current market value of her former home.  Not only has your client been restored back to the position she would have been in, had the fraud not occurred, she has avoided costly legal proceedings as well.

The next time you have a client who has suffered a loss through the operation of the Torrens Title System, you should consider whether there are grounds for making a claim against the Assurance Fund, pursuant to Part 18 of the Real Property Act.