LEGAL SERVICES COMMISSION (CHARGES ON LAND) AMENDMENT BILL

Introduction and First Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice, Minister for Urban Development, Planning and the City of Adelaide, Minister for Tourism, Minister for Food Marketing) (15:35): Obtained leave and introduced a bill for an act to amend the Legal Services Commission Act 1977. Read a first time.

Second Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice, Minister for Urban Development, Planning and the City of Adelaide, Minister for Tourism, Minister for Food Marketing) (15:36): I move:

That this bill be now read a second time.

This bill amends section 18A of the Legal Services Commission Act 1977. To confirm the status of the Legal Services Commission's statutory charge over land under the Real Property Act 1886 and so remove potential impediments to the recovery of legal aid costs secured by such charges. Case-related funds are an important source of funding for legal aid. Legal aid costs to the current value of $4.7 million are secured by charge under section 18A and the amount is increasing.

Section 18A creates a statutory charge that the commission may take over land to secure the payment of a legally-aided person's contribution towards legal aid. It allows the commission to notify the Registrar-General of a charge over land so that it is noted on the title. The Registrar-General registers that notice by entering a memorandum of charge in the register book or register of crown leases. The intended effect is to make the title of every registered proprietor of the land subject to the charge, and to give notice of the commission's interest to anyone considering acquiring an interest in the land.

Section 18A also provides that if there is a default in payment of the contribution, the commission has the same powers of sale over the charged land as a mortgagee would have under the Real Property Act 1886 in respect of a mortgage when there has been a default in payment of the principal. The commission's practice is to let the charge remain over the title indefinitely until the property is re-financed, further mortgaged, transferred or sold, or until the owner dies. Until then, payments towards legal aid costs are not usually required.

However, uncertainty about the status of the charge may impede the commission's ability to recover the costs secured by the charge when it is sold by the holder of another interest registered on the title. The purpose of this bill is to remove that uncertainty.

I seek leave to have the remainder of the second reading explanation inserted in Hansard without my reading it.

Leave granted.

The doubt arises from the fact that despite the purpose of s18A—that the charge be treated as an interest registered under the Real Property Act 1886—the recording of the memorandum of charge by the Registrar-General does not, of itself, amount to registration of the charge under the Real Property Act 1886. This has resulted, on occasion, in disputes over the Commission's entitlement, under the Real Property Act, to a share in the proceeds of the sale of the charge land by a prior registered mortgagee or encumbrance. Continuing uncertainty may diminish the effectiveness of the charge.

One way of dealing with the problem would be to legislate to permit the Commission to secure legal assistance costs by registering an encumbrance over the land under the Real Property Act, rather by imposing a statutory charge under the Act. This would be administratively burdensome for the Commission and the additional fees and costs would increase the amount owed by the legally-aided client.

Another solution would be to make the Commission's charge a first charge, giving it priority over all other registered interests regardless of the date of registration. But there are no compelling public policy reasons for giving this particular charge, as opposed to charges created under other legislation, that priority.

The solution taken by this Bill will clarify the intention of Parliament that the statutory charge be taken to be a registered interest on the title and as such to have a priority with respect to other interests that is consistent with the scheme of registration in the Real Property Act. The amendments will ensure that:

the statutory charge, once noted on the title, has the priority of an instrument registered on the title under the Real Property Act;

when there is a default in payment of the contribution secured by the charge, the Commission has the powers of sale of a mortgagee under the Real Property Act and in selling the charged land is governed by provisions in that Act relating to mortgagee sales; and

the statutory charge is to be treated as an encumbrance registered under the Real Property Act for the purposes of the allocation of the proceeds of sale when the charged land is sold by someone other than the Commission.

The amendments will have retrospective effect. They will apply to the charged land whether the charge was created before or after the commencement of the Bill. Without such a transition provision, there would be an inconsistency in the priority rules for mortgages registered after a statutory charge, depending on whether they are registered before or after the commencement of the amending legislation, and that this might cause confusion in years to come.

The legal effect of the charge will be apparent on the register. In addition, the Commission will ensure that its written notification of a charge to prior registered mortgagees or encumbrancees will refer to the legal effect of the charge, and the Registrar-General will advise Lands Titles Registration Office clients about the legal effect of the Commission's charge by issuing a 'Notice to Lodging Parties'.

In summary, these amendments will remove impediments to the recovery of contributions towards legal-aid costs that are owed to the Commission and are secured by a charge over land. There will no longer be any doubt that:

(a) the holder of an interest registered before the noting of the charge on the register who sells the charged land will be legally obliged to pay the Commission, from the proceeds of sale, the amount secured by the charge in the priority of distribution set by s135 of the Real Property Act as if the charge were an encumbrance under that Act, and deal with any surplus remaining after paying amounts currently due under the charge in the manner described by s135A of that Act; and

(b) when a later registered mortgagee or encumbrancee sells the land, the transferee will take it subject to the Commission's charge, unless that interest has been discharged by payment from the proceeds of sale.

The Commission estimates that the enactment of these amendments will result in an annual 5 per cent increase in the average amount of legal-aid costs secured by charge that it recovers.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Legal Services Commission Act 1977

4—Amendment of section 18A—Legal assistance costs may be secured by charge on land

Section 18A of the Act provides for legal assistance costs to be secured by a charge on land. This clause amends the section—

to provide that the charge will be taken to have been presented for registration at the time the notice of the charge was lodged with the Registrar-General (thereby ensuring that the charge can be given an order of priority as against other registered interests);

to ensure that the provisions of the Real Property Act 1886 relating to a sale by a mortgagee would apply to a sale of the charged land by the Commission; and

to ensure that sections 135 and 135A of that Act will work properly in relation to the charge if the charged property is sold by some other party who is the holder of a mortgage or encumbrance over the land.

Schedule 1—Transitional provision

The proposed amendments are to apply in relation to charged land whether the charge was created before or after commencement of the amendment.

Debate adjourned on motion of Mr Venning.