The law of the land

By Sim Shuzhen

SMU Office of Research & Tech Transfer - Imagine that you’ve come into ownership of a piece of land, registered in the name of a trustee. But calamity strikes – in a breach of trust, your trustee sells the land to a third party and absconds with the money, leaving you and the purchaser to deal with the mess. Who now has the claim to the land – you or the purchaser?

The answer is far from simple. Even though you are the beneficiary of the land, your name was never on the land register, because a trust is not registrable. The third-party purchaser, meanwhile, is now the registered owner, but was unaware of your trustee’s breach of trust at the time of purchase.

Thorny questions like this intrigue Assistant Professor Alvin See, a scholar of comparative and property law at the Singapore Management University (SMU) School of Law. “In other areas of law, such as contract and tort, you are usually looking at a dispute between a wrongdoer on the one hand, and the victim on the other,” he explains. “But for property disputes, the competition is often between two innocent parties, so the solution is not immediately intuitive. I think this is what makes property law interesting.”

Torrens systems: common origin, different characteristics

One aspect of Professor See’s research focuses on how a widely adopted system of land titles registration, known as the Torrens system, resolves situations where there is competition between a prior unregistered title and a subsequent registered title, such as in the example posed at the outset.

First introduced in 1858 in South Australia by Sir Robert Torrens, the Torrens system provides registered owners a significant degree of protection against adverse title claims – a concept also referred to as indefeasibility of registered title. “This feature of the Torrens system is a significant departure from the old system of unregistered land, under which the original owner is given priority over the new owner,” explains Professor See.

But even the Torrens system does not grant registered owners absolute protection, adds Professor See. “There are recognised exceptions where the original owner can gain priority over the new registered owner. The most notable exception is where the new registered owner has committed fraud in acquiring the title.”

Other exceptions, however, are not as clear-cut or widely recognised, especially since Torrens legislation varies across jurisdictions. Today, each Australian state has its own version; so does Singapore, where Torrens legislation modelled after that of New South Wales, Australia, was introduced in 1956, says Professor See.

Purchaser or donee?

A much less cut-and-dried exception to indefeasibility arises in cases where the third party did not purchase the title from the defaulting trustee, but instead received it from the trustee as a donee. In a recent study currently under review, Professor See carried out a comparative analysis of how Torrens legislation in Singapore and in various Australian states addresses such instances.

In New South Wales, the principle of indefeasibility protects all registered owners, regardless of whether they are purchasers or donees. Interestingly, Singapore’s Torrens legislation – despite being modelled after New South Wales’ – has quite a different take on the matter.

“The Singapore Torrens legislation is predominantly a purchaser’s system. Its primary purpose is to facilitate land transactions by removing associated risks faced by purchasers. A person who acquires a registered title without paying money is not exposed to the same risks… if he is merely a donee, then generally the beneficiary’s unregistered title will prevail notwithstanding the fact that the third party is a registered owner,” explains Professor See, noting that this is also the position in the Australian states of Victoria and South Australia.

Lessons from the Singapore context, where the law is clear that third-party donees are generally not protected by the principle of indefeasibility, could inform future developments in Torrens legislation in Australia, where the law is inconclusive on the matter, says Professor See.

Torrens and the blockchain

Whether or not donees are protected is just one of many areas where there are conflicting views on the extent of Torrens indefeasibility, Professor See adds. “The divergent positions across various Torrens jurisdictions show that there is no one right solution to how the priority between competing title claims is to be determined; after all, we are dealing with a dispute between two innocent parties.”

Yet, the different legislations are at least consistent on one thing – no jurisdiction regards the principle of indefeasibility as absolute, says Professor See. This insight has implications for emerging questions in property law, particularly those to do with blockchain technology, which has been proposed as a platform on which the land-register can be built.

Some among the technology community advocate an immutable blockchain, says Professor See – that is, transactions, once added to the blockchain, should be irreversible, even if they are fraudulent. Yet, “no property law system in the world has gone that far,” says Professor See. “If people are going to build the land registry around the blockchain, you can quite immediately see that they are not going to insist on absolute immutability. They’re still going to apply the Torrens system, which recognises exceptions to the principle of indefeasibility.”

More generally speaking, blockchain and cryptocurrencies are unlikely to gain widespread acceptance if immutability is absolute, says Professor See. “You need to provide some assurance that where cryptocurrencies are stolen, users should at least have a chance of getting them back, and the idea of immutability wouldn’t stand in the way.”

Moving forward, the 160-year-old Torrens system still has many useful lessons to impart, says Professor See. “While there are no straightforward answers, a good starting point would be to draw on the development and experience of the Torrens system to determine why absolute indefeasibility has never been preferred, and what factors have contributed to the different views on how competing title claims are to be resolved.”

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