Chamberlain v Registrar-General of NSW

1981. 148 CLR 562 Registrar-General v Cleaver (1996) 41 NSWLR 713 Saade v Registrar-General of NSW (1993) 179 CLR 58 Scarcella v Lettice (2000) 51 NSWLR 302; [2000] NSWCA 289 Sinclair v Registrar-General [2010] NSWSC 173 Category: Principal judgment Parties: Christopher Mel Chamberlain in his capacity as liquidator of Gerard Cassegrain & Co Pty Ltd (in liquidation) (First Plaintiff) Gerard Cassegrain & Co Pty Ltd (in liquidation) (Second Plaintiff) Registrar-General of NSW (Defendant) Representation: Counsel: Mr B A Coles QC with Mr G B Colyer (Second Plaintiff) Mr P Walsh (Defendant)

Solicitors: McCabe Curwood (Second Plaintiff) Stephen Prent, Solicitor for the Registrar-General (Defendant) File Number(s): 2019/165634 Publication restriction: None

Nature of claim; Summary of salient facts

1. These proceedings concern a substantial claim for the payment of compensation from the Torrens Assurance Fund pursuant to Part 14 of the Real Property Act 1900 (NSW) ("the Act"). The claim is brought against the Registrar-General by Gerard Cassegrain & Co Pty Ltd (in liquidation) ("the company"). The company is named as the second plaintiff in the Amended Statement of Claim that was filed on 23 August 2019. The first plaintiff is the liquidator of the company. The company has been in liquidation since 24 July 2012. When the proceeding was commenced on 27 May 2019 the liquidator was the only plaintiff. However, the liquidator discontinued the proceedings so far as he was personally concerned on 15 November 2019.
2. The claim concerns eight parcels of land near Wauchope, which are together sometimes referred to as the Dairy Farm ("the property"). The company was, prior to 10 March 1997, the sole registered proprietor of the property. The property was unencumbered.
3. On 10 March 1997, upon registration of Transfer No 2892535 (expressed to be for a consideration of $1 million), Claude Cassegrain and his wife Felicity Cassegrain became the registered proprietors of the property as joint tenants. As will be seen, the transfer took place as part of a fraud perpetrated against the company by Claude Cassegrain.
4. On 18 April 2000, upon registration of Transfer No 6724658 (expressed to be for a consideration of $1.00), Felicity Cassegrain became the sole registered proprietor of the property. Subsequently, on 28 October 2004 and 21 March 2006, parts of the property became subject to registered mortgages in favour of Westpac Banking Corporation (Mortgage AB54426) and Commonwealth Bank of Australia (Mortgage AC189222).
5. In September 2008, a statutory derivative action was commenced on behalf of the company by a member of the company (Dennis Cassegrain) against Claude and Felicity Cassegrain. The relief sought included orders for the recovery of the land from Felicity Cassegrain, and equitable compensation from Claude Cassegrain. It was alleged, inter alia, that Claude and Felicity Cassegrain had become registered as proprietors of the land through fraud (see s 118 (1)(d)(i) of the Act). It was further alleged that Felicity Cassegrain was a person who derived her title as sole registered proprietor (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud (see s 118(1)(d)(ii) of the Act).
6. In essence, the conduct alleged to be fraudulent involved: 1. the assertion by Claude Cassegrain that he was personally entitled to $4.25 million out of a settlement paid to the company by the Commonwealth Scientific and Industrial Research Organisation; 2. the taking of steps by Claude Cassegrain to have the company acknowledge that it had a liability to him of $4.25 million; and 3. the arranging of the transfer of the property from the company to himself and Felicity Cassegrain in such a way as to create the false impression that in exchange for its interest in the property the company would receive the benefit of a $1 million reduction of an existing liability to Claude Cassegrain.
7. The evidence establishes that in the 1993-1994 financial year, following receipt of the settlement monies, entries were made in the books of account of the company to recognise a loan from the company to Claude Cassegrain of $4.25 million. As at 1 July 1996, Claude Cassegrain's loan account stood in credit in an amount slightly more than $4 million.
8. On 2 September 1996, the then directors of the company, Claude Cassegrain and his sister Anne-Marie Cameron, resolved to the effect: 1. that the property (and certain associated assets) be sold to Claude Cassegrain and Felicity Cassegrain for $1 million (plus the amount incurred by the company on improvements to the property since 21 September 1995); 2. that the loan account of Claude Cassegrain be debited for the amount of the consideration; 3. that such debiting be in full satisfaction of the amounts payable to the company; and 4. that the company shall relinquish all right, title and interest in the property (and associated assets).
9. The transfer from the company to Claude Cassegrain and Felicity Cassegrain is not in evidence. However, it appears that the transfer was dated 14 September 1996. As noted earlier, the transfer was expressed to be for a consideration of $1 million.
10. On 30 June 1997, following registration of the transfer, Claude Cassegrain's loan account with the company was debited in the amount of $1 million in respect of the sale of the property.
11. The derivative proceedings were heard at first instance by Barrett J (as his Honour then was) in 2011 (see Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156). His Honour found (at [121]) that the establishment in the books of the company of the loan account of Claude Cassegrain did not represent the recording of any genuine indebtedness of the company, and that to the extent Claude Cassegrain received payments from the company on that pretext he took monies of the company that he had no legal right to receive. Barrett J described the loan account as "a false loan account". His Honour further found (at [127]-[128]) that Claude Cassegrain's actions in relation to the loan account were dishonest such that when he drew on the loan account (including in connection with the first transfer of the property) he obtained the relevant money or value dishonestly. Barrett J thus held (at [129]) that on each occasion Claude Cassegrain obtained money or value from the company which reflected a reduction in the loan account balance he acted not only in breach of fiduciary duty, but also dishonestly. Claude Cassegrain was found liable to pay equitable compensation. An order was made in May 2012 for equitable compensation to be paid in an amount of almost $3.75 million.
12. In relation to Felicity Cassegrain (who by then had become the sole registered proprietor of the property), Barrett J held (at [167]) that the fraud exception to indefeasibility of title found in s 42 of the Act did not operate to detract from her registered title. His Honour held (at [176]) that because there was no fraud by her she cannot be said to have been registered as proprietor through fraud (see s 118(1)(d)(i)). His Honour further held (at [177]-[179]) that whilst Felicity Cassegrain was not a transferee of Claude Cassegrain's interest for valuable consideration, she did not derive her title from or through a person registered as a proprietor of the land through fraud (see s 118(1)(d)(ii)). This was because Claude Cassegrain's fraud was outside the process by which he obtained registration. The proceedings against Felicity Cassegrain were thus dismissed.
13. Appeals were brought by both Claude Cassegrain and the company. Claude Cassegrain's appeal was dismissed (see Cassegrain v Gerard Cassegrain & Co Pty Ltd [2013] NSWCA 454). An application by Claude Cassegrain for special leave to appeal to the High Court was dismissed on 20 June 2014. He became a bankrupt on 15 September 2015. It appears that the company has recovered only about $102,000 from the bankrupt estate.
14. The company was successful in its appeal against the dismissal of the proceedings against Felicity Cassegrain (see Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284; [2013] NSWCA 453). The Court of Appeal held, by majority, that Felicity Cassegrain held the property on trust for the company absolutely. She was thus ordered to transfer the property to the company. Both justices forming the majority (Beazley P and Macfarlan JA) found that Claude Cassegrain acted as Felicity Cassegrain's agent with respect to the first transfer (see at [37] and [155]), and thus held that the title she obtained as registered proprietor jointly with Claude Cassegrain was defeasible for fraud. Macfarlan JA also reached that conclusion on the basis that Claude Cassegrain and Felicity Cassegrain took title from the company as joint tenants who are thus treated by the law as in effect one person only (see at [156]-[157]). The majority further found (at [98] and [158]) that Felicity Cassegrain was a person who derived her current title (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud, s 118(1)(d)(ii) of the Act not being confined to the process of registration (see also Basten JA at [145]).
15. On 15 January 2014, Felicity Cassegrain filed an application in the High Court for special leave to appeal. It seems that in these circumstances she did not proceed to transfer the property to the company in accordance with the order of the Court of Appeal. On 20 June 2014 the High Court granted an application by Felicity Cassegrain for special leave to appeal. The appeal was heard on 13 November 2014.
16. The High Court delivered its judgment on 4 February 2015. By majority, the appeal was allowed in part (see Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2). The High Court did not accept that Claude Cassegrain acted as Felicity Cassegrain's agent with respect to the first transfer or that his knowledge of the fraud should be imputed to her (see at [41]-[42]). Neither was it accepted that fraud could be imputed to Felicity Cassegrain because she took title as a joint tenant with Claude Cassegrain (see at [44]-[45] and [53]). It was held (at [55]) that because the fraud of Claude Cassegrain was not brought home to Felicity Cassegrain, her title as a joint tenant was indefeasible. However, the High Court upheld the conclusion of the Court of Appeal that Felicity Cassegrain was a person who derived her current title from or through a person registered as proprietor of the property through fraud, within the meaning of s 118(1)(d)(ii) of the Act (see at [58]-[62]). Accordingly, the High Court concluded (at [65]-[66]): Felicity's title as joint tenant was not defeasible on account of Claude's fraud. Claude was not her "agent" in any relevant sense. Nor did it follow from Felicity's registration as joint tenant that her title was defeasible. Section 100(1) does not require that the fraud of one of the persons registered as joint proprietors denies all those persons the protection otherwise given by s 42(1). The fraud must be brought home to the person whose title is impeached. Claude's fraud was not brought home to Felicity. But the interest which Felicity derived from or through Claude (an interest as tenant in common as to half) may be recovered by GC&Co. Felicity was not a bona fide purchaser for value of Claude's interest in the land.
17. A declaration was made that Felicity Cassegrain held a one-half interest in the property on trust for the company absolutely, and an order was made that she transfer a one-half interest in the property to the company.
18. Later in 2015, the company commenced proceedings against Felicity Cassegrain seeking relief pursuant to s 66G of the Conveyancing Act 1919 (NSW). Orders for the appointment of trustees for sale were made on 24 July 2015 in respect of some of the parcels of land, and on 4 December 2015 in respect of all of the property. Orders were also made to the effect that for the purposes of any sale which involved the discharge of the Westpac Banking Corporation mortgage or the Commonwealth Bank of Australia mortgage, the amount required to discharge those mortgages was to be treated as a liability of Felicity Cassegrain alone. Felicity Cassegrain filed an appeal against those orders, but the appeal was dismissed on 16 May 2016.
19. The property was sold shortly thereafter for $3.2 million. The company received approximately $1.332 million from the net proceeds of sale in July 2016.
20. On 17 January 2017, the company, by its liquidator, lodged an administrative claim for compensation pursuant to s 131(1) of the Act. The documents that embody the claim are not in evidence, but the fact of its lodgement is admitted on the pleadings. So, too, is the fact that on 28 February 2019 the Registrar-General refused the administrative claim for compensation. It seems to be common ground that the claim was refused because the Registrar-General took the view that it was made out of time.
21. The company alleges, and the Registrar-General denies, that at the time of the refusal of the claim the company was entitled to compensation under Part 14 of the Act. The dispute is primarily centred upon competing contentions as to when the company became entitled to seek compensation under Part 14 of the Act, and as to whether the making of such a claim became barred by the operation of an applicable limitation provision.

Limitation issues

1. In this regard, the case pleaded by the company is essentially encapsulated in paragraphs 37-40 and 44 of the Amended Statement of Claim. It is alleged in paragraph 37 that the registration of Transfer No 2892535 on 10 March 1997 resulted in persons other than the company being registered as proprietors of the land, and that further registered interests in the land "occurred" when the two mortgages were later registered. It is then alleged in paragraph 38 that the company "thereafter suffered loss and damage arising from the matters referred to in paragraph 37" and that such loss and damage was a result of the operation of the Act where the company "was ultimately unable to recover its unencumbered interest in the whole of the land". It is alleged in paragraph 40 of the Amended Statement of Claim: At no time during the pendency of or following the outcome of any of the proceedings referred to in paragraphs 9 or 13 above, or prior to the outcome of the proceeding in the High Court referred to in paragraph 31 above, was it open to the plaintiffs, or reasonably practicable for the plaintiffs to bring any claim against the defendant for any loss or damage resulting from the operation of the Act.
2. The company then alleges in paragraph 44 that for the purposes of s 131(2)(b) of the Act, its entitlement to compensation "comprised loss and damage that had arisen during the six years prior to 17 January 2017". I note in passing that s 131 of the Act (which is within Division 3 of Part 14) relevantly provides: 131 Administrative proceedings for recovery of compensation (1) A person who has suffered compensable loss may lodge a claim for compensation, in the approved form, with the Registrar-General. (2) Such a claim may not be made more than 6 years after: (a) the date on which the act or omission giving rise to the compensable loss occurred, or (b) if the compensable loss arose after the date on which that act or omission occurred, the date on which the compensable loss arose.
3. Paragraph 40 of the Defence to the Amended Statement of Claim states: The Registrar General: (a) denies the allegations in paragraph 40; (b) says that from the commencement of the Real Property Amendment (Compensation) Act 2000 (NSW) ("RP Amendment Act") on 15 September 2000 GC&Co was able to claim from the Registrar General compensation for loss or damage suffered by it as a result of registration of Transfer 2892535 on 10 March 1997; and (c) says there has been no impediment to GC&Co making a claim against the Registrar General for compensation for loss or damage suffered as a result of registration of mortgage AB54426 on 28 October 2004 or mortgage AC189222 on 21 March 2006 from those dates.

Applicable legislation

1. It is necessary to refer to the legislation that was applicable at certain times since 1997.
2. At all relevant times s 14(1)(d) of the Limitation Act provided: (1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims: … (d) a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.
3. By s 12 of that Act, the provisions of Part 2 (which includes s 14) have effect subject to the provisions of Part 3 (which includes s 52). Section 52 at all relevant times provided: (1) Subject to subsections (2) and (3) and subject to section 53, where: (a) a person has a cause of action, (b) the limitation period fixed by this Act for the cause of action has commenced to run, and (c) the person is under a disability, in that case: (d) the running of the limitation period is suspended for the duration of the disability, and (e) if, but for this paragraph, the limitation period would expire before the lapse of three years after: (i) the date on which the person last (before the expiration of the limitation period) ceases to be under a disability, or (ii) the date of the person's death, (whichever date is the earlier), the limitation period is extended so as to expire three years after the earlier of those dates. (2) This section applies whenever a person is under a disability, whether or not the person is under the same or another disability at any time during the limitation period. (3) This section does not apply to a cause of action to recover a penalty or forfeiture or sum by way of penalty or forfeiture, except where the person having the cause of action is an aggrieved party.
4. Section 11(3) of the Limitation Act provides: For the purposes of this Act a person is under a disability: (a) while the person is under the age of eighteen years, or (b) while the person is, for a continuous period of twenty-eight days or upwards, incapable of, or substantially impeded in, the management of his or her affairs in relation to the cause of action in respect of the limitation period for which the question arises, by reason of: (i) any disease or any impairment of his or her physical or mental condition, (ii) restraint of his or her person, lawful or unlawful, including detention or custody under the Mental Health Act 1958, (iii) war or warlike operations, or (iv) circumstances arising out of war or warlike operations.

Submissions concerning limitation issues

1. The company referred to s 131(1) and noted that a claim for compensation by way of administrative proceedings is dependent upon the claimant suffering "compensable loss". The definition of that expression directs attention to ss 129(1) and (2). It was submitted that s 129(1) identifies those persons who are entitled to payment of compensation from the Torrens Assurance Fund, and s 129(2) then sets out various circumstances that negatively affect an otherwise qualifying person's entitlement to compensation (see Lincu v Community First Credit Union Ltd (2019) 19 BPR 39,351; [2019] NSWSC 568 at [106]-[107]). Accordingly, it was submitted, a person is only ever entitled to compensation if their circumstances fall within s 129(1) and the relevant loss or damage they have suffered as a result of the operation of the Act is not negatived by s 129(2).
2. The company next referred to s 131(2)(b), and submitted that the provision postponed the running of time in the context of administrative claims until the date upon which the compensable loss arose. It was emphasised that the provision showed that the legislature contemplated that such loss might not arise until some time after the occurrence of the act or omission giving rise to the loss.
3. The company submitted that no compensable loss arose prior to the decision of the High Court in 2015. It was put that prior to the appointment of the liquidator in July 2012 the books and records of the company showed that it had received the agreed value in exchange for the property in 1997, and by May 2012 the order for equitable compensation against Claude Cassegrain (which encompassed the sale price of the land) wholly negatived any entitlement the company might have had to compensation under s 129. It was submitted that essentially the same analysis is applicable in relation to the company's entitlement to claim compensation through proceedings in the Supreme Court against the Registrar-General pursuant to s 120(2)(b) of the Act.
4. The company further submitted that the reasoning of the majority of the Court of Appeal in Registrar-General v Cleaver (1996) 41 NSWLR 713 could be applied by analogy to the circumstances of the present case. It was put that damage was not suffered when Felicity Cassegrain acquired in 1997 what was ultimately held to be her indefeasible title as one of two joint tenants; rather, it was suffered when she first raised her successful argument in the High Court that she had indefeasible title as to one-half of the property. The company submitted that it had no reasonable prospect of success against the Registrar-General until 2015 because until then no entitlement to compensation had arisen under s 129(1), and even if it had, it was negatived by the operation of s 129(2) due to its successes in the course of the derivative proceedings.

Determination

1. On 10 March 1997 Transfer No 2892535 was registered in respect of the property. The company thereupon ceased to be the registered proprietor. In its place, Claude Cassegrain and Felicity Cassegrain became registered as proprietors as joint tenants. The transfer was effected as part of a fraudulent transaction orchestrated by Claude Cassegrain in the course of the period from about September 1996 to 30 June 1997. The transaction involved the dishonest use of the false loan account of Claude Cassegrain that had been established in the books and records of the company. A false impression was thereby created that the company would receive, and indeed had received, the stated consideration for the transfer. In truth, the company received no consideration for the transfer of the property to Claude Cassegrain and Felicity Cassegrain.
2. In these circumstances, the company was a person deprived of land in consequence of fraud within the meaning of s 126(1)(a) of the Act as it then stood. By virtue of s 126(1), the company had a right to bring an action for the recovery of damages. Any such action could be brought against any person who acquired title to the property through the fraud (see s 126(2)(c); Saade v Registrar-General of NSW (1993) 179 CLR 58 at 68). However, unless s 126(5) was satisfied, there was no entitlement to recover damages out of the Torrens Assurance Fund by action against the Registrar-General. The right of action against the Registrar-General would only crystallise when s 126(5) was satisfied (see Saade v Registrar-General of NSW (supra) at 68-9; see also Registrar-General (NSW) v Behn (1981) 148 CLR 562 at 571). That did not occur prior to the repeal of those provisions, and the introduction of the new Parts 13 and 14 of the Act, on 15 September 2000.
3. In the meantime, Felicity Cassegrain became the sole registered proprietor of the property on 18 April 2000 when Transfer No 6724658 was registered. As held by the High Court (at [65]-[66]), the interest she thereby derived from Claude Cassegrain was able to be recovered by the company, but her former title as a joint tenant was indefeasible.
4. As from 15 September 2000, s 120(1) of the Act provided, inter alia, that any person who suffers loss or damage as a result of the operation of the Act, where the loss or damage arises from fraud, may commence proceedings in this Court for the recovery of damages. By s 120(2), such proceedings may be taken against the persons whose acts or omissions have given rise to the loss or damage, or against the Registrar-General. Proceedings against the Registrar-General have to be taken in accordance with Part 14 of the Act. In Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452; [2003] NSWSC 1072 Bryson J (as his Honour then was) expressed the view (at [69]) that s 120 did not itself create a cause of action or an entitlement to the recovery of damages, but authorised the taking of certain proceedings. It appeared to be common ground between the parties that the proceedings contemplated by s 120 could be taken against either or both of the person whose acts or omissions have given rise to the loss or damage, and the Registrar-General (see Pedulla v Panetta [2011] NSWSC 1386 at [48]-[49]). I observe that in some cases (for example, where the loss arises from an error in the Register) they would be one and the same. The transitional provisions operated so that the new Parts 13 and 14 applied to any matters in respect of which proceedings were commenced after 15 September 2000, including any matter that occurred before that date.

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