DM & Longbow Pty Limited v Registrar-General of NSW

By a Summons filed on 27 September 2016, the plaintiffs apply under s 122 of the Real Property Act 1900 (NSW) (“the Act”) for a review of a decision made by the Registrar-General of New South Wales on 13 September 2016 declining to exercise power under s 12(1)(d) of the Act to correct an error in the Register. The plaintiffs had requested the Registrar-General to exercise the power so as to reinstate the second plaintiff (Lexingcross) as the registered proprietor on Folio 2/605537 of the Register, which pertains to a property in Hart Street, Lane Cove (“the property”). In essence, it was claimed that in 2013 the first plaintiff (Longbow) replaced Lexingcross as the registered proprietor of the property as a result of a mistake, namely, an erroneous belief that the property was property subject to a trust known as the Chang Family Trust. Longbow had become the trustee of that trust in place of Lexingcross.

In support of the application the plaintiffs read an affidavit of Mr Michael Chang, the sole director of each of the plaintiffs; an affidavit of Mr Donald Junn, a solicitor who acted for Mr Chang and the plaintiffs at various times including when the change in registered proprietorship of the property was effected; and an affidavit of Mr Jeremy Glass, the solicitor on the record for the plaintiffs in these proceedings.

There are two defendants, the Registrar-General of New South Wales and the Chief Commissioner of State Revenue. Both have filed submitting appearances, save as to costs.

Section 122(1) of the Act provides that a person who is dissatisfied with a decision referred to in s 121(1) of the Act may apply to the Court for a review of the decision. Section 121(1)(c) refers to decisions of the Registrar-General to have exercised or performed in relation to land any function or duty which, by the Act, is required to be exercised or performed by the Registrar-General. It has been held that a decision by the Registrar-General to refuse a request to exercise the power under s 12(1)(d) of the Act is a decision of a kind referred to in s 121(1)(c), so that a person dissatisfied with such decision may apply for a review under s 122 (see Sahade v Owners Corporation - Strata Plan 62022 [2013] NSWSC 1791 at [26] - [29]). I will follow that decision. It seems to me that a decision by the Registrar-General to decline to exercise a discretionary power conferred upon the Registrar-General under the Act may be regarded as a decision to exercise a function in relation to land that is required by the Act to be exercised by the Registrar-General within the meaning of s 121(1)(c).

A review under s122 is of the nature of a de novo review on the merits (see Goodman Court Pty Ltd v Registrar-General of New South Wales [2014] NSWSC 1828 at [23]). By s 122(4), the Court may either uphold the decision of the Registrar-General or order that the Registrar-General take such action in relation to the matter raised as the Court considers appropriate, being action that the Registrar-General could, but for the order, have taken.

The salient facts that are established by the evidence are as follows. Between 1997 and May 2000 Mr Chang resided in Brunei, although he visited Australia occasionally on holidays. It seems that by August 1999 he was intending to return to live in Australia. On about 12 August 1999 Mr Chang instructed his solicitor, Mr Junn, that he wished to purchase the property to live in when he returned to Australia. Mr Chang gave instructions to Mr Junn to attend an auction of the property on his behalf and to bid on his behalf. He further gave instructions that Lexingcross would hold the property as his nominee. Lexingcross had recently been incorporated in the British Virgin Islands. At all relevant times Mr Chang was its sole shareholder and director.

On 14 August 1999 Mr Junn successfully bid at auction for the purchase of the property for a price of $1,200,000. A Contract for Sale was entered into in which the purchaser was named as "Michael Chang or his nominee". On about 21 August 1999 Mr Chang transferred $120,000 from an account of his in Hong Kong to the trust account of the vendor's solicitor in payment of the deposit required under the Contract for Sale.

In early October 1999 a stamp duty issue arose. As a result, the Contract for Sale was rescinded by agreement and a new Contract for Sale was entered into which named Lexingcross as the purchaser. In all other respects the contract was unchanged. Mr Chang then arranged for the payment of the requisite stamp duty, and on 2 November 1999 he arranged for the balance of the purchase price to be transferred from his account in Hong Kong in order to complete the purchase. Settlement of the purchase did not take place until about 22 November 1999. Lexingcross became the registered proprietor on 2 December 1999.

I am satisfied that Mr Chang provided all of the funds required for the acquisition of the property.

Also in late 1999 Mr Chang instructed Mr Junn to establish a discretionary trust which Mr Chang intended to use as a vehicle for business ventures following his expected return to Australia. In about May 2000 Mr Chang (as the sole director of Lexingcross) signed a Deed of Settlement that established a discretionary trust of which Lexingcross was named as the trustee. The trust became known as the Chang Family Trust. The Deed of Settlement is dated 5 November 1999. However, the evidence (which includes records of Mr Chang's movements in and out of Australia) indicates, and I accept, that the deed was not executed by Lexingcross until about May 2000.

There is no evidence that following the establishment of the Chang Family Trust the property ever became part of the trust property. The financial statements prepared for the Chang Family Trust are consistent with that being the case. On about 30 April 2011 Lexingcross was deregistered as a company due to a failure to file annual returns. Lexingcross was not restored to the register of companies until 29 January 2016. The terms of the Deed of Settlement which established the Chang Family Trust provided, in effect, that upon the deregistration of Lexingcross it automatically ceased to be the trustee of the Chang Family Trust and Longbow became the trustee in its place. However, it appears that it was not until 2013 that steps were taken to deal with this situation.

In advising Mr Chang as to the appropriate steps to take as a result of the deregistration of Lexingcross, Mr Junn mistakenly assumed that the property was held by Lexingcross as trustee of the Chang Family Trust. Operating on that assumption Mr Junn advised Mr Chang that the new trustee should be entered as the registered proprietor of the property.

Mr Chang executed certain documents acting on the basis of this advice. These were:

I accept the evidence given by Mr Chang that he relied on Mr Junn and signed those documents without turning his mind to whether they correctly reflected the situation in respect of the property. I further accept his evidence that he had no intention to make the property an asset of the Chang Family Trust.

The application to record a new registered proprietor was duly dealt with. Longbow became the registered proprietor of the property on 13 December 2013.

Issues subsequently arose concerning stamp duty. The Chief Commissioner of State Revenue raised an assessment of ad valorem duty in respect of the transaction by which Longbow became the registered proprietor. The Chief Commissioner also raised assessments for land tax on the basis that the property was subject to a "special trust" within the meaning of the Land Tax Management Act 1956 (NSW). This led to proceedings in the New South Wales Civil and Administrative Tribunal (“the Tribunal”). Those proceedings are presently adjourned pending the outcome of the proceedings in this Court. As noted earlier, the Chief Commissioner of State Revenue was named as a defendant to these proceedings but has filed a submitting appearance save as to costs.

On 21 October 2015 the plaintiffs applied to the Registrar-General pursuant to s 12(1)(d) of the Act for Lexingcross to be reinstated as the registered proprietor of the property on the basis that the registration of Longbow as the registered proprietor occurred in error, due to a mistake. Ultimately, on 13 September 2016 the Registrar-General advised that it declined to exercise the power under s 12(1)(d) of the Act and provided reasons for that decision. The reasons were stated as follows:

I take the reference to the matter currently before the Court to be intended as a reference to the proceedings that were then on foot in the Tribunal.

Section 12(1)(d) of the Act relevantly provides:

The Court of Appeal has held that "errors and omissions" within the meaning of s 12(1)(d) are not confined to those that may be described as "departmental errors and omissions" see Sahab Holdings Pty Ltd v Registrar-General [2011] NSWCA 395 at [183]). I note that this decision was reversed in the High Court but not on this point - see Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149; [2013] HCA 11). In Sahab Holdings Pty Ltd v Registrar-General (supra) the Court of Appeal continued (at [184] – [193]):

Reference should also be made to Sahade v Owners Corporation - Strata Plan 62022 (supra) at [45] where Kunc J stated:

In the present case Longbow became the registered proprietor pursuant to an application based upon s12(4) of the Trustee Act. Section 12 of the Trustee Act relevantly provides:

The relevant instrument of appointment in the present case was the Deed of Confirmation of Vacation of Trustee and Appointment of New Trustee. That instrument concerns the Chang Family Trust. However, the property was not property held subject to the Chang Family Trust. The property did not form part of the relevant trust property. The Deed of Confirmation had no operation in respect of the property. Accordingly, the property could not have thereby been vested in Longbow pursuant to the provisions of the Trustee Act (ss 9 and 12), and Longbow ought not to have become recorded as the registered proprietor of the property.

I accept the submissions of the plaintiffs that the property was at all relevant times held by Lexingcross as trustee of a resulting trust in favour of Mr Chang. As I have mentioned, Mr Chang provided all of the money for the acquisition of the property (including for stamp duty). There is no evidence that Mr Chang has ever transferred or disposed of any part of his beneficial interest in the property. I further accept that the mistaken belief that the property was trust property of the Chang Family Trust led to Longbow becoming the registered proprietor, and explains how Longbow came to be so registered, in place of Lexingcross. I consider that in these circumstances there is an error in the Register within the meaning of s 12(1)(d) of the Act.

Moreover, I accept the submission of the plaintiffs that the mistaken transfer to Longbow would be liable to be set aside at the suit of Lexingcross on the grounds of mistake (see Pitt v Holt [2013] 2 AC 108 especially at [115] and [122] to [128]). The mistaken belief to which I have referred was basic to the transaction whereby the transfer occurred. In any event, Longbow joins in with Lexingcross in seeking to have Lexingcross restored as the registered proprietor.

There is no suggestion that there are any third parties with an interest in the property who might be adversely affected if Lexingcross is restored as registered proprietor. Correction of the error would not impinge upon any right to which indefeasibility attached. That being the case, and in the absence of any contradiction by the Registrar-General, I consider that there is in this case an error in the register of a character which can be corrected pursuant to s 12(1)(d) of the Act (see Sahab Holdings Pty Ltd v Registrar-General (supra) at [190]).

In these circumstances I think it is appropriate to order pursuant to s 122(4)(b) of the Act that the Registrar-General take action to correct the Register in respect of Folio 2/605537 by reinstating the second plaintiff (Lexingcross) as registered proprietor in place of the first plaintiff (Longbow). The Court will make an order to that effect.

The Court was informed that the plaintiffs did not press the claim for costs against the defendants. Accordingly, the Court will also order that there be no order as to costs.