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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2011-09-15 Daily Xml
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LEGAL SERVICES COMMISSION (CHARGES ON LAND) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 13 September 2011.)

The Hon. S.G. WADE (17:51): I rise to speak on the Legal Services Commission (Charges on Land) Amendment Bill 2011, which was introduced in the House of Assembly by the Attorney-General on 8 June 2011.

The 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. As a matter of convenience, I will now refer to the Legal Services Commission as 'the commission'.

The bill amends section 18A of the Legal Services Commission Act 1977 because of concerns that have been raised about the impact of that provision. Currently, the commission notifies the Registrar-General of a charge over land so that it is noted on the title, and the Registrar-General registers that notice by entering a memorandum of charge in the register book or the register of crown leases.

If there is a default in the 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 where there has been a default in payment of the principle. 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.

The doubt arises from the fact that, despite the purpose of section 18A (that is, 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 share in the proceeds of the sale of the charged land by a prior registered mortgagee or encumbrance. Continuing uncertainty may diminish the effectiveness of the charge.

While the government claims that there have been disputes, in briefings we had from the government, the government was not able to advise of us of whether it was aware of any lost revenue or any court cases resulting from the uncertainty. Be that as it may, we do not oppose the legislation on the grounds of no justifiable need. We are happy to consider it as whether or not it improves the law. However, on the basis of these facts, there seems to be no basis for the commission's estimate that the enactment of these amendments would result in an annual 5 per cent increase in the average amount of legal aid costs secured by the charge that it recovers.

If honourable members were inclined to be persuaded on the basis of a revenue increase to the government, I would ask them to reflect on the fact that that revenue may be spurious because, as I said, the government was not aware of any lost revenue or even a court case. You would think that at least a court case that was then won might well have highlighted a risk but, no, we were not even offered one of those. The solution taken by this bill is to clarify that the statutory charge be taken to be a registered interest on the title and, as such, to have priority with respect to other interests that is consistent with the scheme of registration and the Real Property Act.

The amendments will have retrospective effect. The government argues that that is to avoid confusion arising from 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 legislation. Isn't that cute? The best way to justify retrospective legislation is to say, 'Well, wouldn't it be confusing for people to be charged under one set of laws today and another set of laws yesterday?' In that comment, the government fails to recognise the fundamental principles in relation to retrospectivity and the law.

In that context, I know honourable members are asking, 'Well, what is wrong with retrospectivity?' I would remind those honourable members that retrospectivity is a longstanding offensive aspect of legislation. As Helen Irving so accurately described in the Macquarie Law Journal:

Amongst other things, the rule of law requires that laws should regulate conduct prospectively. Persons must be able to shape their future conduct with knowledge of, and in anticipation of, its conformity to the law. Retrospective laws militate against this. They render the character of the law both uncertain and possibly arbitrary.

It does not take long to think about the impact a failure to observe retrospectivity could have on the daily lives of South Australians. If South Australians were not merely assumed to the know the laws on the statute book but had to actually anticipate what the South Australian parliament might legislate in the future for fear that they might fall foul of a future law with retrospective effect, the inhibiting effect on the lives of South Australians to go about their lawful business would be acute. That is why English, Australian and other common law jurisdictions around the world have upheld the sanctity of avoiding retrospectivity wherever possible.

It is not surprising in the context of these principles and of this legislation that the Law Society took the opportunity to raise the issue of retrospectivity. In a letter dated 20 June 2011, the Law Society raised its concerns in the following terms:

In the Society's view, such retrospectivity would be unfair to mortgagees or encumbrancees who have existing registered interests that are subsequent to the Commission charges. The amendments made by this Bill will have the effect of entitling the Commission to a distribution of sale proceeds under section 135 of the Real Property Act in priority to subsequent mortgagees and encumbrancees. That entitlement does not exist at present. Existing mortgagees and encumbrancees should be entitled to rely on the legal position as it was at the time they registered their mortgages or encumbrances. They may have advanced loans or incurred other detriment on the basis that their entitlement to sale proceeds would not be postponed to a prior Commission charge, as is the current position.

That is a practical application of the mischief of retrospectivity highlighted in relation to this bill, and I thank the society, as always, for its learned advice. The society went on to note the statement of the Attorney-General in his second reading explanation in the other place in relation this bill, where he said:

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 this might cause confusion in years to come.

The Law Society suggests that any such confusion could readily be avoided if new commission charges, following the commencement of the amendments, are endorsed on titles by the Registrar-General in a manner that differs from endorsements of such charges under the former legislation.

For example, the new charges could be described as 'charge in the nature of mortgage'. This would make the status of such a charge perfectly clear and would distinguish it from ones registered under the previous legislation. I regard that as a polite response to the Attorney-General; a more blunt response might be that I think South Australians would rather suffer with some element of confusion than have their legal rights changed midstream, to have their decisions made on the basis of one set of facts impugned because the government chose to move the goalposts mid-process.

We as an opposition certainly are concerned to support a certainty of the law because it is a fundamental principle of the rule of law. Unless there is a significant reason to move from the principle against retrospectivity, we will resist doing so. As the member for Bragg mentioned in the other place, we have sought information, we have given the government the opportunity to justify retrospectivity. We do accept that, from time to time, it is necessary. However, no such justification has been provided to date in relation to this bill so accordingly we will be moving an amendment to remove retrospectivity.

I also want to take the opportunity to question the treatment of the statutory charge as an encumbrance under this bill. This issue was highlighted to the opposition again by the Law Society, so it seems apt to quote from the society's letter:

Section 135 of the Real Property Act deals with the appropriation of the proceeds of a sale of land by a mortgagee and, for that purpose, makes no distinction between subsequent mortgagees or encumbrancees in the way those proceeds are to be distributed.

On the other hand, s 135A applies only to encumbrances and contemplates situations in which long-term obligations to pay annuities or rent-charges may exist under an encumbrance. Such obligations might not be satisfied by one-off payment, as would be possible with a debt secured by a mortgage. To meet such circumstances, s 135A sets up a procedure whereby surplus sale proceeds are to be paid to the Public Trustee upon trust to satisfy the accruing payments of the annuity, rent-charge or other sum secured by the encumbrance.

I draw attention to the society's query as to the relevance of the encumbrance-related provisions of section 135A to charges lodged by the commissioner as security for payment of legal aid costs. In its view, liability for payment of legal aid costs is surely more akin to a debt secured by a mortgage than to the kinds of ongoing obligations that are secured by encumbrances, such as payment of annuities and rent-charges.

So I ask the minister: why does the bill treat the statutory charge as an encumbrance rather than a mortgage? The opposition would be appreciative if the government could provide an answer to this question before the second reading of the bill so that we can consider the response before we proceed to committee. With those remarks, I indicate that the Liberal Party looks forward to the committee stage and looks forward to a bill that is fair to all passing in this place.

Debate adjourned on motion of Hon. J.M. Gazzola.

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