Land Transfer Bill

This is debate on clauses 3 to 8, and schedule 1.

It is a great pleasure for me to rise to confirm Labour’s support for this great bill. Rarely would we have a piece of legislation that would catch the attention of almost everybody—yes, almost everybody. Buying and selling properties, mortgaging and leasing land, getting the relevant instrument registered, and duly becoming a legal owner would affect almost everybody in New Zealand. In the 21st century we need a new land transfer Act to support this largely electronic system. We need an Act that is accessible and written in plain and modern English. The Law Commission, with the assistance of Land Information New Zealand (LINZ), has drafted such a kind of Act.

Some provisions in the 1952 Act have remained and changed from the first Act that was passed to implement the so-called Torrens title system, which is well over 100 years old. A comprehensive review of the Land Transfer Act 1952 is long overdue. The result is a mix of hopelessly outdated and obscure provisions alongside more effective and modern provisions, some reflecting only the paper registration system and others focused on electronic registration, with considerable duplication and lack of clarity.

This is not a simple amendment bill. It will become the new principal Act in this area. It will replace the Land Transfer Act 1952 and the Statutory Land Charges Registration Act 1928, both of which will be repealed by this bill. Most of the content is uncontroversial. It is a major piece of legislation in this policy area, so deserves proper scrutiny by the Committee.

It is a big day, not only for lawyers, not only for financial institutes—banks, mortgagees, property owners, and, probably, real estate agents; it is a big day for everybody. As the newest new, old member, it is the first time for me to have the opportunity to have a look at the bill itself.

💬 Phil Twyford: Welcome back, Raymond.

Ha! Thank you very much. Immediately, I decided that I like the bill. I would like to take this opportunity to thank the Law Commission for such great work to shape and reshape this bill in this current form. When I flick through the bill itself, lots of familiar names emerge, so it gives us a great opportunity for me to say a thankyou to the law commissioner, Professor John Burrows QC; his predecessor, Professor Geoffrey Palmer; the Hon Simon Power; the Hon Maurice Williamson; and the Hon David Cunliffe for their contributions. Over the last two terms, as Labour’s spokesperson for building and construction, I did work very closely with the Hon Maurice Williamson, especially on the Building Amendment Bill (No 3) and Building Amendment Bill (No 4), which duly became the Building Amendment Act 2012 and Building Amendment Act 2013.

Back to the bill—Part 1, clause 6, “Meaning of fraud”—I believe it is the first time for us to give a legal definition as to what constitutes fraud.

💬 Paul Foster-Bell: Mortgage fraud, specifically.

Mortgage fraud? Well, I am sure my colleague Phil Twyford will cover that part later on when we come to the specific clauses—[Interruption] Well, if the National members are really passionate about that specific clause, I believe my colleague, together with colleagues from New Zealand First, will contribute more. We will come to that part later on.

Coming to “fraud”—specifically of interest to the National backbenchers—this is the first time for us to have a legal definition, but one thing we need to take note of is submissions from relevant stakeholders such as the New Zealand Law Society, the Auckland District Law Society, and the Bankers’ Association. For instance, the New Zealand Law Society and the Auckland District Law Society submissions assumed that mortgagors would have to do more than is currently required under the LINZ e-dealing certification identity verification standards, and that would in turn mean increased costs for mortgagors, which would be passed on to consumers. We are talking about compliance costs and probably more complicated due process for the relevant parties, including lawyers and conveyancers, to fulfil the requirements under the proposed changes.

The New Zealand Law Society, in its submission, showed that it is particularly concerned that where a mortgage is executed under power of attorney, the mortgagee would be required to verify the identity of the donor mortgagee, rather than the attorney. This would defeat the purpose of giving someone power of attorney in the first place.

What I am talking about is really the balance between the way we are proposing to impose on the relevant parties—as I said, including the conveyancers and the lawyers—to fulfil the requirement under this bill, and also the compliance costs that may be incurred under the strengthened regime.

One thing I am particularly interested in asking the Minister in the chair, Scott Simpson, is what kind of ramifications there would be in the current-day, modern, 21st century electronic system—for instance, the balance between social media and electronic commerce law. Can a videoconference or FaceTime, made available through smartphones, be used to assist with identification verification for the purpose under this bill? Another matter that some conveyancers and lawyers may report would include something like—for instance, in China, its notary public system is different from that in New Zealand. For instance, if we do have a certain piece of form or instrument that needs to be certified, under the notary public system there they simply cannot verify that sort of ID system—

The CHAIRPERSON (Lindsay Tisch): Keep on what is in the bill, on Part 1.

—thank you, Mr Chair—by getting the necessary signature presented in the form, rather than in a separate attachment. So this is something quite relevant to Part 1, which is, as I said, the first time we do give a legal definition as to what constitutes “fraud”. I would also like to take this opportunity to thank the officials, because the departmental report is probably the very source of information, and it addressed those kinds of issues.

Back to the submissions made by the New Zealand Law Society and Auckland District Law Society. All the above submitters agreed that the provisions, if retained, would benefit from amendments to clarify that mortgagees can rely on the existing level of identity verification/authorisation, including records retention, carried out by their lawyer or conveyancer.

Tēnā koe, Mr Chair. Thank you very much for this opportunity. I stand in support of the Land Transfer Bill, and I echo some of the sentiments made by my colleague Mr Raymond Huo over many of the technical aspects within this bill.

I want to focus on a couple of things here in the preliminary provisions in Part 1. Under clause 5, “Interpretation”, it says here: “ ‘land’ includes”—and you always look for the part that has got the underline. Having replaced “plants and trees on land”, it says there, “plants, trees, and timber on or under land”—“on or under land”. I wonder whether this is aimed specifically at the types of industry I see growing particularly in the Far North around swamp kauri. Large holes in the ground up north suggest that many people have now gone in and raided the swamp kauri. They have finally seen the asset and the value in swamp kauri, and I wonder, just from the Minister, whether there can be any more clarification of exactly—when it suggests there “plants, trees, and timber on or under land”, is that specifically hoping to capture swamp kauri, and if there are any other types of descriptions of “timber … under land”, I would be interested to know what those are, just for the purposes of this bill.

The reason I say that is that while we support this bill, it talks in this bill about fraud and the value of land, and the ability to have compensation and how it has to be comparable in so far as people will be able, in compensation, to purchase another land block to the same value. In this particular part, just in the interpretation—“plants, trees, and timber on or under land”. The value of swamp kauri is huge. I have seen the market grow over the years from my time in the Far North. Once upon a time, swamp kauri meant nothing, and now, all of a sudden, people are actually approaching farmers and landowners to try to harvest the swamp kauri, and, sadly, a lot of the anecdotal evidence, anyway, comes back that there are significant issues in that particular industry. But I digress. I am just trying to seek a little bit more clarification on exactly what that means and what some of the other timbers under land are that we might expect will be covered by this particular bill.

Also, I take the point made by my colleague around the departmental disclosure statement, and say just how particularly good I thought the disclosure statement was. This was the result of a lot of great work done by many people, and it says there, in particular—and I think it is worth mentioning—George Tanner and Warren Moyes, who I see, sadly, passed during the progress of this bill. I think it is important to place that on the record in the House.

As we go through more parts of this particular bill—we have looked at Part 1, around these preliminary provisions. That looks pretty straightforward to me, other than just that particular part under clause 5, “Interpretation”, which says “ ‘land’ includes—’, and paragraph (d), as given there. So I will leave that there, and I hope that some of my colleagues on this side of the Chamber will understand—[Interruption] Oh, look, I have no doubt that as we get into the more meaty parts of this bill—it has already been mentioned that it is rather technical—we will debate the merits of “mortgagee” and, of course, the definition of “fraud” a little bit later on. But I am very specific with my speech about asking exactly what “timber … under land” means, so I will take my seat now. Kia ora.

I am very pleased to take this opportunity to speak on this section, being clauses 3 to 8 in Part 1 of the Land Transfer Bill. As was reflected on by my colleague Raymond Huo, this is a substantial and important piece of legislation. I know that when we look at Part 3, the members opposite, who are very engaged in this debate through their comments, are going to be exceptionally pleased to know that we are continuing to maintain the Torrens system of land title in New Zealand—

💬 Paul Foster-Bell: Hear, hear!

—and we hear that from them now. I make a bit of a joke of that, but it is important because, you know, what is the Torrens system, for example? When we look at the purpose of the bill—and the purpose of the bill is part of the debate in this section—we need to get this absolutely right. The Torrens system, for what it is worth, is the fundamental system that we have whereby the State retains a register of land. When you actually think about the kind of way in which our economy operates and the absolute importance of people having certainty over who owns which bit of land and what happens when you have a transaction—

The CHAIRPERSON (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to leave the Chair for the dinner break.

Sitting suspended from 6 p.m. to 7.30 p.m.

It is a real pleasure to resume my call on this bill. As I was saying before we left the Chamber, this is a bill that is quite technical in detail—

💬 Hon Christopher Finlayson: We’ll get down to the detail.

I know that will bring quivers of delight to some members who are in the Chamber this evening.

But it is actually an extremely important bill, and it goes to some really core things at the heart of our society and economy. Everyone who owns a property or plans to transact in a property wants to know that there is certainty of ownership before and after that transaction. One of the things that this bill deals with in that respect and tries to affirm is the Torrens system, which is perhaps relatively unknown but is an extremely important legal principle that we have in respect of property ownership and land transfer in our country and also most other Westminster systems. It is referenced in clause 3 in Part 1 of the bill that, of course, we are talking about at the moment.

What the Torrens system ensures is that people can have that certainty. It means we have a legally enforceable State-run register of land and you can take it to the bank. You know that if on that register it says that such and such a person owns this bit of land in this place, that is the way it is. If you think that if we did not have that certainty, think about the problems that we would get into. So it is incredibly important.

One of the really important words that we use when we describe the Torrens system, and it is used, I am pretty sure, at points in this legislation, is the word “indefeasibility”; it guarantees indefeasible title. It is an extremely high legal test. It basically means it is undefeatable. There is no question about it; that is it. One of the questions I want to get on to in respect of this debate is how we deal with the fact that this bill intends to, and of course we support this, retain the Torrens system—and, again, it is mentioned here in clause 3(a) that we want to continue and maintain the Torrens system of land title in New Zealand, and then in subclause (b) retain “the fundamental principles of that system,”.

At the same time, further on in the bill—and we will have debates on this, I suspect, in Part 2—we are actually intending to create some extremely limited grounds for defeating that principle of indefeasibility. So in cases where there might be manifest injustice, we are saying that that indefeasibility might not apply, it would have to involve the High Court, there are extremely limited grounds for going down that track, and we think that they are probably justifiable.

But it raises an interesting question in respect of clause 3 in Part 1, where we start by saying that we want to continue and maintain the Torrens system but at the same time, later on in the bill, we are injecting a set of new principles that do, bluntly, somewhat undermine the core indefeasibility at the heart of the Torrens system.

One of the questions I have for the Minister in the chair is in respect of clause 3, where the Government Administration Committee has made an alteration to the bill. They have added in the wording “(d) by all of the above means, maintains the integrity of title to estates and interests in land.” In the accompanying text, the select committee has said that “For clarity and certainty, we recommend adding subclause 3(d)”—as I have just described—“to insert the principle of ‘maintaining integrity of title to estates and interests in land’. We consider that this inclusion is necessary to safeguard this principle.”

The question I have for the Minister in the chair is, is the issue that I have just described the reason that we have felt the need to put in that additional wording to safeguard the principle of the Torrens system? Do we need that additional wording there because we think that changes later on in the bill could potentially create the risk that we are undermining the Torrens system, and does that have unforeseen or foreseen circumstances that we are concerned about? So it would be really good to hear from the Minister in the chair exactly why that wording has been inserted, and if it is about addressing that particular issue.

Just in my remaining time, briefly—[Bell rung] Thank you, Mr Chair. The clock was—OK; I will carry on. I will probably take a brief call on this part.

In terms of some of the other changes that we see from the select committee in this part, I think my colleague Peeni Henare expounded admirably on clause 5(1)(d), the addition of “plants, trees, and timber on or under land”, and I think he posed some questions to the Minister in the chair that it would be good to hear about as well. I have got a good definition of “paper instrument”, which I am sure will put many minds to ease as well.

As I say, our core concern at this point of the debate is that at this very first stage we do tackle this question of the purpose, because if we get the purpose wrong, if we undermine the principles of the Act, we create problems for ourselves a little bit later on.

One thing I did note in clause 3(d), which I referred to as well, is that the wording does have a shadow of some very important wording in the Tax Administration Act, where at the beginning of the Act we say that one of the things we have to do is maintain the integrity of the system. Within the context of the Tax Administration Act, that, effectively, gives scope to Inland Revenue, as an agency, to undertake a fairly wide range of actions and have wide freedom of movement to ensure that things are kind of done as we think they should be done. So it gives a latitude of operation. Perhaps, again, the Minister in the chair might be able to assist in answering whether that is also part of the intention of the inserted clause 3(d) here. Does it mean that we might see Land Information use this as a bit of a roving tool to ensure that the system does maintain its integrity, perhaps in ways it does not currently as well? So it would be good to hear what is envisaged with that part.

I think with that, those are probably the key points I would like to raise in respect of this part, but I look forward to taking further calls on later parts. Thank you.

I thank the honourable member Michael Wood for his excellent contribution. I will take a call, even though I am simply holding the fort, because this is actually a very important piece of legislation. The member may be interested to know, or maybe not, that I was in Adelaide last week—

💬 Michael Wood: Try me.

Probably not. Adelaide, or South Australia, was where the Torrens system was actually invented. There is a Torrens Terrace in Adelaide. The Torrens system was based on a shipping model, actually, and then it went from South Australia to New Zealand and other parts around the globe. I think it is fair to say it is probably the best system of land registration in the world, and we have been very lucky to have it developed over the years here. I think it was a reflection of the fact that when colonisation was taking place, the old English system of exchanging deeds just would not work in a country like ours, so that is why it was introduced. It is obviously, as I said, a real world-beater.

I was interested by the inclusion of clause 3(d) in Part 1. I think it is really nothing more than a belt and braces approach to examining the purpose. I think that is born out in what the Government Administration Committee said in its commentary. It said it recommended the additional clause to insert the principle to safeguard that fundamental principle of the Torrens system.

Of course, Mr Wood did mention the issue of manifest injustice, which is referred to in some detail in clauses 56 and 57. As he knows, the term is not defined. Manifest injustice is referred to in a number of statutes—I can think of the Copyright Act 1994 or the Sentencing Act 2002—but it is one of those terms, I guess, where you know it when you see it. I think the point of not defining it is to avoid placing unnecessary restrictions on the court to look at something in the particular circumstances and say: “That could well be a manifest injustice.” I am sure that we are going to cover this in greater detail, but the bill’s provisions have been looked at very closely by the select committee, which I think has done a really good job. It has clarified matters to make it clear that fraud does not of itself constitute manifest injustice. The threshold for manifest injustice is very high indeed, and an order that would overturn registration, bearing in mind the principles of the Torrens system, could only be made in exceptional circumstances when compensation would not properly address the injustice.

The member raises a number of very good points, and I hope that I have addressed them, as well as interested the Committee on the origins of the Torrens system.

The CHAIRPERSON (Hon Chester Borrows): And your trip to Adelaide.

And my trip to Adelaide.

I would like to take a short call to bring to a conclusion the point raised by the New Zealand Law Society in its submission, which I could not get addressed in my earlier contribution before the dinner break. Basically, the point raised by the New Zealand Law Society is that it wishes to have amendments to clarify that where a mortgage is executed under a power of attorney, it is the identity of the attorney and not the mortgagor that must be verified. To do otherwise would defeat the purpose of the donor mortgagor giving power of attorney to someone else in the first place. This is a valid point.

What I can say from a lawyer’s point of view or from a bank’s point of view is that any lawyers or conveyancers would have implemented a rather robust system in verifying the identity either of the attorney or of the donor mortgagor. If the power of attorney had been prepared or executed by that lawyer who is acting for the particular client on the conveyancing matter, or prepared by some other lawyers, they must have taken the necessary steps in verifying the identity of their respective clients. Likewise, mortgagees—namely, banks, lenders, etc.—are best placed to know their customers, to take reasonable steps to verify the identity of the mortgagor; namely, the borrower.

The New Zealand Law Society in its submission has raised a very valid point—that it is the identity of the attorney, not the donor mortgagor, that must be verified. Thank you.

Tēnā koe, Mr Chair. Thank you very much for allowing me to make a short contribution to Part 1 of the Land Transfer Bill. Can I just acknowledge the Hon Minister Finlayson and his explanation of the Torrens system in Part 1, clause 3. I want to acknowledge that he gave us the historic beginning of where the Torrens system came from, and I do believe—and I could be wrong—that he explained that it is a world-class land system. Of course, it is a registration system.

My question, in terms of Part 1, is actually when you look to clause 4 and talk about the “Land subject to this Act”. Clause 4(d) states: “land that is, after the commencement of this section, vested in a person for a freehold estate under any other Act, including any Act relating to Māori land.” Now, it is probably fortuitous, or very opportunist, that we have not only the Attorney-General in the chair but the Minister for Treaty of Waitangi Negotiations, because, as I understand from his sharing to the Committee about the Torrens system, it is a registration system of landownership, it is world class, but in so far as Māori land is concerned in this country—and the Minister is very familiar with this—there is the communal nature of that land.

So the question to the Minister in the chair is whether we believe that the Torrens system, given that we have got perhaps two types of land tenure in this country, is fit for purpose in terms of that land that is held in Māori communal ownership. I say that again referring only to clause 4(d), where this bill, this particular bill we are debating tonight—the Land Transfer Bill—actually includes and encompasses Māori land. There, for me, is a bit of a dichotomy in terms of Māori land: multiple ownership, the registration of it, will have not just one person but multiple persons. It also allows the registration of future owners who have not succeeded to land, so, for me, Māori land tenure or ownership is regarded in that—it is not, once you have filed you are the owner and that is it, but this evolution of owners who either pass on and then leave the interest, or through genealogy, whakapapa, then their next of kin assume their rights of interest in the land.

So this is really going to be the angle on which I am going to make my contribution in the debate on this bill, I say to the Minister in the chair. So, really, the question for me is assuring that he is comfortable that the Torrens system of land title in New Zealand is fit for New Zealand in 2017 and going forward, given the nature of Māori land and general title land. I just want some assurances, because, like I said, the Minister is also a very hard-working Minister in terms of Treaty negotiations and ensuring that how Māori classify land and the special relationship with that land is not put at risk by passing this law.

But, really, what I am curious to know is just the Torrens system of land tenure and its appropriateness to Māori land ownership in this country. This is a short contribution but something that is very important to this side of the House, to ensure that this bill encompasses—and is allowed and is flexible enough to ensure that Māori rights, in terms of the communal part, are not undermined by clause 4(d) in this particular Part 1 of this bill. I am looking forward to perhaps the Minister’s response. Kia ora.

This is a non-political bill. It is one that I am sure all parties would wish to support. New Zealand First certainly does support it. It has been a long time in development, and I think it will be a great advantage for New Zealand to have it passed, so we will be voting for it.

💬 Phil Twyford: Denis, I was wrong; this is Part 1 we’re on.

Sorry, I thought this was Part 2. So I think I will sit down and reserve my comments for Part 2.

Oh, you have been put wrong by Mr Twyford.

Tēnā koe, Mr Chair. Thank you very much for the opportunity to contribute to the Committee stage debate on the Land Transfer Bill. It is quite timely for me, because I am going to pick up on where my colleague Meka Whaitiri left off. In doing so I would just firstly like to acknowledge the Law Commission’s 2010 report A New Land Transfer Act, which is 342 pages long. It completed this review of the Land Transfer Act 1952 and the two subsequent amendment Acts, the Land Transfer Amendment Act 1963 and the Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act 2002. Contained within that particular Law Commission report was recommendation 21, which, in fact, was that there should be an in-depth review into the registration of Māori land. So what my colleague Meka Whaitiri has brought up is actually germane and pertinent to Part 1.

I am very interested in the comment by the Minister in the chair, Chris Finlayson, about a document that I have just got. It is Land Information New Zealand’s addendum to its main departmental report on the Land Transfer Bill. Actually, the Government did respond to the Law Commission recommendation, and, in fact, it asked for Te Pūni Kōkiri, Land Information New Zealand, and the Ministry of Justice to investigate the issues and report back to Ministers on what, if any, aspects of Māori land registration should be subject to the review. The recommendation of that process, however, was that a review of the relationship between the two Acts was not deemed to be needed or appropriate. So I am really interested to know whether the Minister agrees with that or how they came to that conclusion, because I think it is important that we address such issues.

I have been trying to find an alternative to the Torrens system, actually, because it seems we have got one type of registration process. In fact, it was created in 1858 by Sir Robert Richard Torrens, who was the third Premier of South Australia. The reason the system was created in South Australia was that in the context of the early 1800s, that state was a booming land speculation environment, and so at that time it granted lands. Apparently, there were 40,000 lands that were granted, and, over a period of time, 75 percent of those lands were lost, so no one actually knew who owned them.

So I can understand why this system was created, but it seems it has not evolved, and there do not seem to be any alternatives. I have googled, and Strata seems to be a system that is used, but that is about multiple ownership of single dwellings. But I just wonder whether there is anywhere else in the world—or whether the Minister in the chair knows of any other systems—because the whole intention of this legislation, as was highlighted in the Law Commission’s report, is that we want the legislation to be clear, effective, and fair.

I just want to commend the Law Commission for its work, because I think creating a bill like this, which seems to have general support of the House—it is an incredibly technical bill, which is what we have been briefed on in making contributions to the debate in the Committee tonight. But just from my perspective, I am really interested to know whether there are any other registration systems, because, basically, the purpose of this bill is to simplify land transactions and to certify the ownership of an absolute title to property. That is all that this bill is wanting to do, but just from my curious perspective, I am wondering whether there are other systems that are used in other jurisdictions. But I am also very, very interested in the Minister’s agreement, or otherwise, about the relationship between Te Ture Whenua Māori Act and the registration of Māori land and this Land Transfer Bill, as my colleague Meka Whaitiri has highlighted. Kia ora.

I am interested in the points that Mr Huo made, but I think I should deal with those when we look at Part 2, because we are dealing with this part by part. I think the honourable member is referring to clauses 54 and 55, so I will deal with them then.

In answer to the questions that have been raised about clause 4(d), that simply deals with the interrelationship between the two pieces of legislation, and maybe we will get on to that Homeric epic, Te Ture Whenua Māori Bill, later in the evening. Clause 4(d) simply deals with that class of land that is “vested in a person for a freehold estate under any other Act,” which will include Te Ture Whenua. There may or may not be many in that class, but the purpose of clause 4 is to set out in some detail those categories of land in our country that will be subject to the Act. As I say, paragraph (d) deals with that class of freehold estate, which is defined in clause 5, relating to Māori land. I do not think it is any more important or less important than that.

Part 1 agreed to.

Part 2 Land title and registration