An elusive goal

In modern times, most countries have a system of keeping records of rights of the people over property and transfer thereof. Generally, these systems are classified into two broad categories, viz., deed registration and title registration. The title registration system is also sometimes referred to as 'System of Conclusive Title,' 'System of Guaranteed Title' or 'Torrens System.'

In the deed registration system, a written conveyance deed executed by the parties in respect of a transaction in property is registered with a registrar who does not go into the legal validity of the transaction. The record of registration is evidence of the transaction of the property but it is not conclusive proof of the transfer of title. In the title registration system, the registrar plays an active role and registers the transaction in a public register only if he is satisfied that the transferor has a clear title on the property and there is no legal hindrance in passing the title to the transferee. The title registration system provides a state guarantee of registered titles through an indemnity fund to compensate owners whose interests are defeated due to an error made by the registrar.

The main feature of a title registration system is described as 'conclusiveness of registered title' which is mostly interpreted as the indefeasible and unchallengeable title. This characteristic of title registration immediately appeals to a country struggling with multiple problems in its land administration. On the face of it, title registration offers a panacea for all the problems regarding land disputes and related matters. It appears sometimes that once a conclusive and indefeasible title is written in the title register, all the litigation will just go away. However, the reality is something entirely different.

Theodore Ruoff in his famous book 'An Englishman looks at the Torrens System' has laid down the 'mirror', 'curtain' and 'insurance' principles as defining features of a title registration system. The 'mirror' principle means that register accurately reflects all the material facts relating to the title, the 'curtain' principle implies that for ascertaining the title no investigation beyond the register is necessary and the 'insurance' principle requires the state to guarantee the correctness of the register and to compensate any bona fide claimant suffering a loss due to an incorrect entry in the register. These principles describe the ideal state which a title registration system of a country would try to achieve, but in reality, no country has ever achieved it. The degree to which each of these principles can be achieved depends on the actual provisions in the title registration law of each country. There is often a large gap between the ideal state as laid down by these principles and the actual situation on the ground.

The 'mirror' principle assumes that the title recorded in the register is a true reflection of the legal rights. It is never so in reality. Many interests are recognised by law but not recorded in the title register. Further, due to genuine mistakes of the registrar or fraud played by some people, a person other than the true owner may find a place in the title register. In the case of the death of an owner, the names of his heirs may not appear in the register for a long time. A person holding an adverse possession has the right over the land but his right is not registered in the title register. Thus, the register is not always a true image of the legal reality, but under the 'curtain' principle, it is 'declared' to be the legal reality. The 'mirror' principle works the other way round, where a supposed image is projected as the real object. Therefore, while assessing the usefulness of the title registration, it must be kept in mind that in no country, title register is the true image of the legal reality on a continuous basis. There are always certain differences between the legal reality and the title register which, are dealt with as per provisions of the law in this regard.

Whatever adjective we may ascribe to a registered title, it is as conclusive or as indefeasible as the actual legal provisions of the law make it. Title registration laws of various countries demonstrate that conclusiveness is not as robust as is made out to be by proponents of this system. The 'curtain' of the title registration system has many chinks in it.

Penny Carruthers in 'A Tangled Web Indeed: The English Land Registration Act and Comparison with the Australian Torrens System', has identified many exceptions to the indefeasibility in the Australian Torrens Acts like fraud exception, qualified indefeasibility, 'in personam' claim, power of the registrar to correct the register and overriding legislation. John L. McCormack, a legal scholar who has made an in-depth study of land registration systems of various countries, in 'Torrens and Recording: Land Title Assurance in the Computer Age' has observed that experience with title registration in the United States and elsewhere in common law countries indicates that conclusiveness of the register is an elusive, often unattainable goal. According to him, the title register is never conclusive in any of the title registration systems. Some exceptions to the conclusiveness are always there in the law and some additional exceptions are sometimes created through court judgments. In many common law countries having title registration laws, the civil courts have recognised unregistered rights as equitable interests which is against the very concept of conclusiveness of the registered title.

While in the deed registration system, a genuine but unregistered owner can recover his property from a registered owner, in the title registration system, this is not possible due to the indefeasibility of the registered title. Title registration systems in many countries provide for a state guarantee through an indemnity fund to compensate the genuine right holder who loses his right in the property due to the operation of the 'curtain' principle of the title registration law. Though the state guarantee appears to provide complete security of title to the registered owner and the subsequent buyer, in reality, there are many gaps in the coverage provided by the state guarantee. The experience of Australia and England show that the procedure for claims from the indemnity fund is not as simple as it appears to be.

In Australia, a person gets a claim from the indemnity fund only when it is not possible to recover the loss from the defaulter through court proceedings. This is called the 'last resort' model which causes considerable hardship to the claimant. The provisions creating remedies against third parties are so complex that in some cases, claimants have difficulty in identifying the right person to sue and the right remedy to pursue. Many states in Australia have amended their laws to deny compensation in those cases where the loss is caused wholly or partly due to the negligence of the claimant. Thus, a genuine owner who loses his property due to the operation of title registration law is not assured of full compensation for his loss.

In England, an indemnity claim can be directly submitted to the registrar but there are several limitations on such claims. No indemnity is payable if the loss was suffered as a result of fraud by the claimant himself. If, however, the loss was suffered as a result of the claimant's lack of proper care, then the indemnity payable is reduced to the extent of the claimant's share of the responsibility for the loss. Indemnity will not be payable when the claimant's lack of proper care is held to be solely responsible for the loss.

As we know, title insurance is the unique feature of the deed registration system of the USA where private insurance companies insure against any defect in the title of the seller. Ideally, title insurance should have no place in the title registration system because the entries in the title register are conclusive proof of title and due to 'mirror' and 'curtain' principles, there should be no possibility of any defect in the title. Further, loss to a person due to a mistake in the register or subsequent rectification of the register is compensated by the state indemnity fund. However, in the USA, title insurance is very common even in those states where title registration is followed. The title insurance business is increasing in Canada and Australia also. This is an indication that title registration does not provide perfect security of title, forcing people to go for additional security in the form of title insurance.

Thus, there is a wide gap between the theory and the actual practice in the case of title registration systems across the world. Any country contemplating switching from deed registration to title registration must weigh all the pros and cons before taking a final call on this issue.

The writer is the Secretary, Lokpal of India. Views expressed are strictly personal