Saying goodbye to the Duplicate Certificate Title

The biggest problem, and this appears to have been overlooked due to all the other distractions and debates, is the duplicate title. If you are going to replace paper based systems with paperless electronic systems, you need to get rid of the duplicate title. The first step in paving the way for electronic conveyancing is eliminate the paper duplicate certificate of title. To do this, you need policy, legislation and implementation.

I just cannot see how electronic conveyancing can be introduced and work successfully unless the duplicate has been eliminated. If it just too hard to abolish the duplicate title, I really think we are better off thinking about other things, like cars, long weekends and other fun things.

At the moment there is no clear policy on dealing with the duplicate. And certainly nothing that goes close to a uniform national approach from all eight jurisdictions. Queensland has come closest to abolition of the duplicate, but even there it is optional for a party to request a certificate. Only a current title search will reveal if a certificate of title has been issued.

In Victoria, the duplicate certificate of title has not been abolished, but the issue was addressed in the context of electronic conveyancing which as we know is living in a state of limbo. But if we were to wake up one morning and find ourselves using the ECV system, one has to look at the requirements and standards that conveyancers must observe. The key provisions deal with identity and clients need to be properly identified to prove they and only they have the right to deal with the land on the Register. The Transfer of Land Act was amended with the insertion of section 27AB Verification of Identity.

The Registrar is not required to register an instrument under section 27A if the Registrar is not satisfied as to the identity of any person by or on behalf of whom the instrument was executed.

Item 3.3 of the gazetted Registrar's requirements for subscribers to identify a client, being an individual are at least 100 points in accordance with Schedule 6.

Schedule 6 is in three parts. The first part is the straight forward 100 points proof of identity credentials. Checking the passport, birth certificate, drivers licence, medicare card, rate certificate etc.

As the Registrar correctly recognised, the 100 points standard is deficient unless the credentials are verified. This makes perfect sense to avoid identity fraud - either title fraud or mortgage fraud. Anyone can photoshop a drivers licence. Well not anyone but anyone with a crooked bent can. It now looks like the life of a conveyancer is not conveyancing but becoming a pseudo detective to catch the crook. The second and third parts of the identity check is to -

Part 2. keep a copy of the identity documents (although this could lead to breaches of personal privacy data if these documents were lost) and list the type of document, names, as in the extract published below

Part 3. detail the methods and sources of verification for Checks. In an exercise of futility I dutifully rang Vic Roads to ask how I would go about verifying a client's driver licence which equates to 40 out of 100 points. Kerry-anne of VicRoads was very helpful and liaised with her departmental manager and advised the following is required for any licence verfication check -

VicRoads has three requirements.

1. Consent from person in writing (privacy) for VicRoads to divulge information to lawyer / conveyancer
2. License Search Request: providing Name; Licence No; DOB; Address.
3. Search application fee of $7.80

Delivery methods

In person - done over the counter
By Mail - 5 working days (only 5 days!)

God help us if there were more than one individual registered on title.



So you see the conundrum. If we want to replace paper based conveyancing with electronic methods, we first have to abolish the duplicate title. If we abolish the duplicate, we have to replace it with a methodology of identification requirements. When you take a hard look at the issues of identity, you can come up with a system that has all the appropriate safeguards, but and the but is you can end up engineering a system that is worse than the current system we already have, know and works.

Caveats Online

Electronic Conveyancing: "Saving you time, money and effort". Well that's the official spin from ECV. For the moment that is hollow rhetoric. It might save your client the odd $20 on statutory fees. But it is questionable when it comes to saving time and effort. This is demonstrated by the process for lodging one of the simplest of instruments – a caveat

How much time did it take above the manual system when lodging caveats online? I estimate it took over 20 minutes of additional time (which would be better spent on hold trying to book a settlement with the banks). In the old fashioned manner of paper and print, a simple purchaser's caveat takes just a few minutes to print, sign and post. The electronic alternative takes over 20 minutes. The couple of caveats we lodged online each took well in excess of 20 minutes to complete. One took 26 minutes, the other about 25 minutes. With repetition, you might just get it under 20 minutes, but I don't think I will be persevering too much longer because of the time factor. Unless it saves you time, using the system will translate into higher costs to the client. Still, if the matter was one of urgency, I would lodge electronically, but not otherwise. The irony is to lodge a caveat online, first I printed out the caveat to assist me in completing the fields online. In addition, the process is simply bewildering.

Authenticating Paperwork

Schneier on Security
A blog covering security and security technology.

June 25, 2009
Authenticating Paperwork
It's a sad, horrific story. Homeowner returns to find his house demolished. The demolition company was hired legitimately but there was a mistake and it demolished the wrong house. The demolition company relied on GPS co-ordinates, but requiring street addresses isn't a solution. A typo in the address is just as likely, and it would have demolished the house just as quickly.

The problem is less how the demolishers knew which house to knock down, and more how they confirmed that knowledge. They trusted the paperwork, and the paperwork was wrong. Informality works when everybody knows everybody else. When merchants and customers know each other, government officials and citizens know each other, and people know their neighbours, people know what's going on. In that sort of milieu, if something goes wrong, people notice.

In our modern anonymous world, paperwork is how things get done. Traditionally, signatures, forms, and watermarks all made paperwork official. Forgeries were possible but difficult. Today, there's still paperwork, but for the most part it only exists until the information makes its way into a computer database. Meanwhile, modern technology -- computers, fax machines and desktop publishing software -- has made it easy to forge paperwork. Every case of identity theft has, at its core, a paperwork failure. Fake work orders, purchase orders, and other documents are used to steal computers, equipment, and stock. Occasionally, fake faxes result in people being sprung from prison. Fake boarding passes can get you through airport security. This month hackers officially changed the name of a Swedish man.

A reporter even changed the ownership of the Empire State Building. Sure, it was a stunt, but this is a growing form of crime. Someone pretends to be you -- preferably when you're away on holiday -- and sells your home to someone else, forging your name on the paperwork. You return to find someone else living in your house, someone who thinks he legitimately bought it. In some senses, this isn't new. Paperwork mistakes and fraud have happened ever since there was paperwork. And the problem hasn't been fixed yet for several reasons.

One, our sloppy systems generally work fine, and it's how we get things done with minimum hassle. Most people's houses don't get demolished and most people's names don't get maliciously changed. As common as identity theft is, it doesn't happen to most of us. These stories are news because they are so rare. And in many cases, it's cheaper to pay for the occasional blunder than ensure it never happens.
Two, sometimes the incentives aren't in place for paperwork to be properly authenticated. The people who demolished that family home were just trying to get a job done. The same is true for government officials processing title and name changes. Banks get paid when money is transferred from one account to another, not when they find a paperwork problem. We're all irritated by forms stamped 17 times, and other mysterious bureaucratic processes, but these are actually designed to detect problems.

And three, there's a psychological mismatch: it is easy to fake paperwork, yet for the most part we act as if it has magical properties of authenticity.
What's changed is scale. Fraud can be perpetrated against hundreds of thousands, automatically. Mistakes can affect that many people, too. What we need are laws that penalise people or companies -- criminally or civilly -- who make paperwork errors. This raises the cost of mistakes, making authenticating paperwork more attractive, which changes the incentives of those on the receiving end of the paperwork. And that will cause the market to devise technologies to verify the providence, accuracy, and integrity of information: telephone verification, addresses and GPS co-ordinates, cryptographic authentication, systems that double- and triple-check, and so on.
We can't reduce society's reliance on paperwork, and we can't eliminate errors based on it. But we can put economic incentives in place for people and companies to authenticate paperwork more.

This essay originally appeared in The Guardian.

Court win for apartment buyers leaves developers reeling

VICTORIANS buying houses and units off the plan have secured new legal rights to demand their money back, under a landmark ruling that has sparked fears of a collapse of projects across Melbourne.

In a setback for an industry already reeling from the credit crunch, the Supreme Court of Victoria has found that off-the-plan buyers can tear up their contracts and get their deposits back when projects are not completed on time.

The ruling came in a case involving two luxury apartment buyers in Geelong who won the right to have their deposits refunded and contracts revoked because the developer took several months longer to finish the project than agreed.

Until this ruling, it had been standard practice for developers to put clauses into off-the-plan contracts allowing for the extension of completion dates.

Reasons for late completion could have included labour strikes, planning approval delays, shortages of materials or labour and weather.

But in a ruling this month, Justice Bernard Bongiorno said such clauses were invalid because they put the risk of delay onto home buyers, leaving them with no way out.

The decision is an unwelcome one for an industry already faltering in the credit crunch, with more than $2 billion worth of Melbourne projects delayed or abandoned since September because of a lack of finance.

A leading property lawyer estimated the decision had put 10 per cent of Melbourne projects at greater risk of collapse.

One of those involved in the case, Jennifer Clifford, said developer Solid Investments had asked for three time extensions to complete her $2 million apartment overlooking Corio Bay. "None of it was the developer's fault," she said. "Things just kept going wrong. I mean there were objections and they struck an underground creek.

"(But) why should we as the prospective purchasers just have to keep hanging on for who knows how long?"

The Edgewater project, in which businessman Frank Costa paid a record Geelong price of more than $3 million for a penthouse, was completed in March.

Edgewater developer Murray Stone, who is appealing against the Supreme Court decision, said the ruling "opened a can of worms" for the industry. "Any contract that now goes over the sunset clause becomes void," Mr Stone said. "Even if buyers want to settle the contract they can't. They have to enter a new contract and not get the stamp duty savings."

He said it was difficult for developers to simply make sunset clauses longer, say five years, because banks would not normally lend beyond a 30-month completion date.

"All projects will now be under an enormous amount of pressure and the banks will probably not loan."

Freehills property partner David Sinn, whose firm was not involved in the case but advises many developers, said it set a precedent that had the industry worried about project collapse.

"Any current development where they have pre-sold apartments and are struggling to get finance is now at risk of buyers terminating their contracts and getting refunds," he said.

The Age Marika Dobbin
June 25, 2009

Clifford & Anor v Solid Investments Australia Pty Ltd

Date: 2 Jun 2009

Citation: [2009] VSC 223

Jurisdiction: Victorian Supreme Court

This case concerns a dispute as to whether the purchasers of two lots on a plan of subdivision have lawfully rescinded the contracts. The contracts were conditional upon registration of the plan of subdivision of the development, and conferred the right on the purchasers to avoid the contract if the plan was not registered by a certain date. The contract also provided for the date for registration to be extended by the vendor under the terms of the contract. The vendor gave notice of the extension of the date. The purchasers gave notice of rescission of the contracts, asserting that the contract term was ineffective to permit the extension under Sale of Land Act 1962 s9AE. The vendor refused to accept the notice of rescission. The Court considered (para 23) Everest Project Developments Pty Ltd v Mendoza and Ors which "held that the purpose and social policy underlying ss 9AA to 9AH of the Act was the protection of that section of the public which comprised purchasers of lots on unregistered plans of subdivision." In this instance, the Court said that the same reasoning applies to s9AE(2), which specifies that if the parties wish to stipulate a period other than the statutory period provided by that section, that other period must be specified in the contract itself. The Court ordered declarations that the contracts were lawfully rescinded by the purchasers. Link to Judgement

Commentary by Herbert Geer on Clifford case

E-conveyancing plan thrown a $2m lifeline

The Australian
Chris Merritt, Legal Affairs editor | June 19, 2009

THE push to establish a national electronic conveyancing system gained fresh impetus this week when the NSW government allocated $2 million to the project.

The extra funding, which was made available in the state budget, comes soon after NSW, Victoria and Queensland were given the leading roles in planning the national system on behalf of the Council of Australian Governments.

It also comes soon after Kevin Rudd was warned that the project was at risk of collapse because no funds had been allocated to establish the company that would run the system.

NSW Lands Minister Tony Kelly said his government had long been a supporter of a national e-conveyancing system and the extra $2m would help pay for its contractual and logistical expenses.

The extra funding has been allocated to the Lands Department, but if the company that will run the national e-conveyancing system is established before July next year, the $2m from NSW will be redirected to support the new entity, Mr Kelly said.

"A single national electronic conveyancing system would be a significant step towards creating a seamless national economy and NSW is working with Victoria and Queensland for it to be operational from 2010," Mr Kelly said.

He said an independent study by KPMG had indicated that the potential annual cost savings in NSW from a single national e-conveyancing system (NECS) would amount to $50m.

"Costs for the average conveyancing transaction are expected to fall by $170, providing both home buyers and sellers overdue cost relief," Mr Kelly said. "The process efficiencies available to industry as a result of NECS include less data entry and document preparation, settlement and lodgment savings, courier and bank cheque savings, and lower process administration costs generally."

The extra funding for the national system comes soon after the Victorian government was asked to hold an independent audit into why its state-based e-conveyancing system had cost an estimated $50m to build yet had been used for just one completed property settlement.

State opposition frontbencher David Davis called for the audit after telling parliament that the state government was continuing to spend about $6m a year on its e-conveyancing system, which is known as Electronic Conveyancing Victoria.

Consultants had made "tens of millions of dollars" from the project, but there had been no return for the Victorian community, Mr Davis said. "It seems a very expensive approach given the very small number of transactions that have been achieved with that system."

In the 18 months since the system had been available for use, it had been used for one transaction and had not been endorsed by key industry groups such as the Law Institute of Victoria and the Australian Bankers Association, he said.

Mr Davis said the national approach to e-conveyancing, which had been endorsed by COAG, seemed like a significant step forward because it would provide a low-cost approach.

He said there was "enormous resistance" from other states and the federal government to the idea of using the Victorian system as the proposed national system.

"ECV would have to be massively adapted and would not necessarily work in a simple way," he said. "But the key thing here is that ECV has seen massive expenditure by the state government and has been a massive opportunity for consultants, who have made tens of millions of dollars."

The Victorian government declined to answer questions from The Australian about whether ECV had in fact cost $50m, as alleged by the state opposition.

The government also declined to say whether it would allow the expenditure on ECV to be audited.

Innovation Minister Gavin Jennings, who is responsible for ECV, said in a statement that the government was continuing to work with state and federal governments and believed ECV "provides the basis for a national approach to electronic conveyancing".

His statement said ECV had "successfully processed over 600 transactions".

When asked through his spokesman if all but one of those transactions concerned the lodgment of documents rather than property settlements, Mr Davis declined to answer. He also declined to provide a breakdown showing the type of transactions that had been processed by ECV.

"Victoria is an active participant in the COAG process and is continuing to work with all jurisdictions and industry groups in the development of a national EC system," the statement said.

While Victoria is one of the three states with a key role on the national project, the state government has a significant financial commitment to its own state-based system, a government document shows.

The same document shows the financial plan underpinning the government's expenditure on ECV could be at risk unless most property transactions go through the state-based system.

A regulatory impact statement, dated July 2007, for new fees on land transfer says: "... the government has provided over $29.4m toward the development of the electronic conveyancing project".

Although that figure only covers expenditure up to July 2007, the regulatory impact statement shows the government was expecting to spend a further $49.5m on the project between 2007-08 and 2013-14.

The figures contained in the regulatory impact statement indicate ECV could cost the Victorian government $80m by 2013-14. The document shows also it had been planning to spend a significant amount of that money employing contractors and consultants.

It says the state government "has indicated that the full implementation and ongoing operational costs should be recovered from users of the services of Land Victoria".

But it warns that the amount of revenue generated by ECV will depend on how many transactions are processed using the system and it says the expected take-up rate for ECV is 26.5 per cent of all property dealings in 2009-10, rising 69.8 per cent in 2013-14.

The year in which expenditure on ECV would be greatest was expected to be 2008-09 when the system was expected to have cost Victorian taxpayers $9.7m, the regulatory impact statement says.

The year with the smallest government expenditure on ECV was expected to be 2012-13 when the system was tipped to cost $5.7m.

Over the seven years covered by the regulatory impact statement, the biggest single item of expenditure was expected to be "application development and support", which was predicted to cost the state government $18.5m over that period.

This includes the costs of developing and supporting the software that underpins the system and of a contract with what the document refers to as an "application development and support service provider".

Salaries for public servants and contractors working on the project were expected to be $18.1m over the same period. According to the document, 10 contractors were working on ECV in various roles.

"Major items comprise project management, business operations, user acceptance testers and the roll-out team that will train potential users and provide support," the regulatory impact statement says.

Rumour or Fact

AUSTRALIAN E-PROJECT ABANDONED
By Kelly Ng | 15 June 2009

FutureGov website

The Australian federal government has ignored a funding request and has withdrawn its involvement in a national online conveyancing system.

The National Electronic Conveyancing System (NECS) requires A$20 million (US$15.7 million) to establish itself and recruit executives. According to Les Taylor, Chair of the Steering Committee, industry participants – lawyers, bankers and conveyancers – will abandon the project if sufficient funding does not materialise.

The federal government allocated A$550 million (US$433 million) to the Council of Australian Governments (COAG) to reform and harmonise regulation across states. Some of this money was meant to fund the e-conveyancing project. However, of the A$100 million that will be paid out this year, none has been earmarked for this project, said Taylor.

NECS, was started in 2005 was supposed to be completed by next March, will allow practitioners to electronically transfer property ownership and make payment online. It is expected to reduce costs of buying and selling property by A$250 million annually because consumers will pay less legal and conveyancing fees.

The federal Government cuts link to ailing e-scheme

Chris Merritt, Legal affairs editor | June 05, 2009
Article from: The Australian

THE federal Government severed one of its last links with the moves to establish a national electronic conveyancing system last week after being informed that the scheme was on the brink of collapse.

The decision to reduce the Government's involvement was taken last Friday by an inter-governmental committee that reports to Finance Minister Lindsay Tanner and Small Business Minister Craig Emerson.

That group, the business regulation and competition working group, decided to hand responsibility for the planned system to the governments of Victoria, NSW and Queensland.

The decision came a week after Kevin Rudd was warned that the project was at risk of "complete failure".

This warning was contained in a letter to the Prime Minister from Les Taylor, a former general counsel at the Commonwealth Bank, who heads the steering committee that has been planning the national e-conveyancing system since 2005.

Mr Taylor told Mr Rudd that unless $20million in repayable seed funding could be found to establish the company that would run the new system, lawyers, bankers and conveyancers were likely to abandon the project.

While the commonwealth has promised the states $550million if they undertake a series of micro-economic reforms, including e-conveyancing, no funds have been earmarked for the project.

Friday's decision to shift responsibility for the scheme to Victoria, NSW and Queensland was taken by government officials at a meeting that was not attended by ministers.

One of those familiar with the meeting said it was normal for responsibility for major national projects to be divided between the states.

However, Opposition legal affairs spokesman George Brandis urged the Government to take back the lead role on the project and end years of bickering between the states that have alienated the private-sector players in conveyancing. "It has been a shambles for more than a year now and the Attorney-General has shown a complete lack of leadership in trying to resolve the problem," Senator Brandis said.

"There is a very significant risk that because of the delay and lack of leadership from the commonwealth in particular, that this whole project might fall over.

"The optimal result of a seamless national system is going to be lost and we may well end up with a set of arrangements that are no better than the current arrangements."

He said the problems with e-conveyancing went much deeper than the lack of funding to establish the new system.

"The various participants cannot even agree on a model that they are prepared to work towards," Senator Brandis said.

"Until the state governments are able to reach agreement on that threshold question, there is no point in talking about funding for the system."

He said the lack of agreement between the states appeared to be associated with the fact that the Victorian Government had continued to develop a state-based e-conveyancing system while industry and other state governments wanted a national one.

Last October, it was revealed in The Australian that the Victorian Government was continuing to develop its system -- less than four months after Mr Rudd had announced that all states would be using a national e-conveyancing system by March 2010.

In a joint statement with Mr Tanner, Mr Rudd said last July industry groups had estimated that "a national electronic conveyancing system could reduce the costs of buying and selling property by $250million a year".

"Consumers will save money by spending less on expensive legal and conveyancing fees," the joint statement said.

They said the agreement to establish a national system "is only possible because all states and territories have agreed to co-operate".

The delayed start date of late 2011 will deprive house buyers and sellers of cost savings that on the estimates used by Mr Rudd and Mr Tanner are worth about $437million.

The later start date was put in place after all state governments failed last year to meet a series of deadlines for seven key decisions on establishing the new system that had all been listed in the July statement by Mr Rudd and Mr Tanner.

At the same time, the Victorian Government continued to develop its state-based system, which would be at risk had the states reached agreement on the matters listed in the July statement.

The deadlines that the states missed had been set after e-conveyancing was placed on the agenda of the Council of Australian Governments following a summit in February last year of the key industry groups.

That meeting was chaired by one of the most senior officials in the federal Attorney-General's department, Richard Glenn.

Mr Tanner and Mr Emerson were then given responsibility for a working group of officials that was to prepare options for the structure of the system.

But in March, it emerged that the federal and state governments had agreed to delay the new system and responsibility for the project had moved back to the states.

Senator Brandis said the hiatus over the national e-conveyancing system could be resolved if Mr McClelland ensured the project was given priority by the standing committee of attorneys-general.

Land Victoria - Request for an audit

Land Victoria: electronic conveyancing

Mr D. DAVIS (Southern Metropolitan) -- My adjournment matter is for the attention of the Minister for Environment and Climate Change, who is responsible for the Land Victoria section of the Department of Sustainability and Environment. It concerns in particular Electronic Conveyancing Victoria, known as ECV, an electronic conveyancing system that seeks to replace paper transactions with electronic conveyancing. The Victorian government has expended a significant amount of money -- $50 million on recent estimates and more than $40 million 18 months ago -- and is continuing to spend around $6 million a year on the ECV project. The national approach that was endorsed by the Council of Australian Governments about a year ago was a significant step forward, because it would have provided a low-cost approach to conveyancing transactions around the country. Unfortunately Electronic Conveyancing Victoria, despite expenditure of more than $50 million, has only had one transaction in the 18 months it has been in operation. It seems a very expensive approach, given the very small number of transactions that have been achieved with that system. I am very aware that the Australian Bankers Association, the Law Institute of Victoria and other key groups, like the conveyancers, have not endorsed ECV and the electronic conveyancing approach in Victoria. What I now seek from the Minister for Environment and Climate Change, after the expenditure of at least $50 million of public money for a single completed conveyancing transaction, is an audit. I seek that he order a clear external audit that would achieve an understanding of how this money has been wasted and how the government proposes to put this into the national scheme. There is still enormous resistance from the other states and the national government to the simple approach of putting ECV in as the national system. ECV would have to be massively adapted and would not necessarily work in a simple way, but the key thing here is that Electronic Conveyancing Victoria has seen massive expenditure by the state government and has been a massive opportunity for consultants, who have made tens of millions of dollars with no return to the Victorian community, so I ask the Victorian environment minister to immediately launch an audit.

Hansard. Upper House. 3 June 09

Westpac sorry for security 'stuff-up'

FULL DISCLOSURE / MARK HAWTHORNE / THE AGE
June 4, 2009

A SECURITY breach has allowed confidential Westpac shareholder information to be included in an official document published on the Australian Securities Exchange website.

A document Westpac released to the ASX in March contains the security holder reference numbers (SRN) and holder identification numbers (HIN) of up to 20 different accounts controlled by global investment bank JPMorgan and retired 65-year-old shareholder Peter Liddle, who resides in the Northern Territory. Such details could be used by share "bottom feeders" such as David Tweed to gain control of the shareholdings.

The addresses and account details of JPMorgan Nominees and Mr Liddle are hidden in white type in the PDF document, which was issued by Westpac company secretary Anna Sandham on March 13.

The details cannot be read — but if the words are highlighted and copied into another document, such as an email, they can be converted into black type.

Several business websites, such as wotnews.com.au, converted the PDF document into text, and in doing so published the SRNs and account details on the internet.

The letter was sent to holders of St George Bank shares and hybrid securities, offering the chance to convert them into new Westpac securities. The two banks merged last year.

A spokeswoman for JPMorgan said she was "astonished" to learn Westpac was responsible for the security breach, but assured the bank's institutional customers that their shares were safe. "These are nominee accounts and no transfer of the shares can be done without the approval of the actual account holder," said Claire Linton-Evans.

Such safeguards are not in place for retail shareholders such as Mr Liddle, who only discovered his account details were public knowledge when BusinessDay contacted him.

"I'm absolutely horrified to find that all of my personal account details can be read on the internet," Mr Liddle said. "I've already had that Tweed bloke trying to get his hands on my wife's Woolies shares once this year, and my SRN is on the internet. It's my 65th birthday today, and now I have to sort out this mess."

Westpac spokesman David Lording admitted that a "stuff-up" had led to the release of the information. "It was our mistake, it was our fault, and we have already apologised to the people affected," Mr Lording said. "We contacted them today and apologised, and will be implementing new procedures to ensure it doesn't happen again."

Mr Lording said he was aware the information had "originated" in an official release from the bank to the ASX. "Somehow the information was in that document. It was an inadvertent mistake, not a deliberate one, and we apologise to the shareholders affected."