Legal Framework Development

In January 2009 Clayton Utz was engaged to determine the purpose and performance objectives of a single national legal framework for NECS based on the National Business Model and to scope and describe the components of a suitable framework.

The work involved extensive stakeholder consultation and detailed analysis of a number of critical issues concerning liability and compensation.  The final report received in February 2010 is available in two volumes. 

• Volume 1 containing the analysis and recommendations is available here. 

• Volume 2 containing a review of existing industry arrangements and the challenges faced by an electronic conveyancing environment is available here.  

Notes: 1. The original publication of the Report on 5 February 2010 has been replaced with amended versions of both volumes from 16 February 2010 incorporating corrections brought to attention by the Australian Institute of Conveyancers. 

         2.  Following publication of the Report some issues were raised by Land Registry legal officers through the State Project Team and clarification advice sought from Clayton Utz and received on 4 August 2010 is available here. 

The recommendations are for a legal framework made up of the following principal components:

• nationally consistent legislation in each State and Territory validating digital registry instruments and allowing the Land Registry in each jurisdiction to authorise an Electronic Lodgment Network Operator (ELNO) to lodge registry instruments electronically provided the ELNO satisfies requirements imposed by the Land Registry (NECS will be a national ELNO but it will be possible for other parties to provide similar services in one or more jurisdictions provided they satisfy the Land Registry’s requirements)

National consistency in the legislation is to be secured under an Inter-Governmental Agreement by having template legislation developed co-operatively by a Jurisdiction Officers Group made up of representatives of each States and Territory, approved by a Ministerial Council, enacted in the parliament of one jurisdiction and adopted by the parliaments of each other jurisdiction.

• model operating requirements the Land Registries will require each ELNO to comply with before being authorised to lodge registry instruments electronically, including eligibility requirements and use of the model participation agreement and rules

The model operating requirements are to be developed, approved and controlled by the Jurisdiction Officers Group established by Inter-Governmental Agreement.

• model participation agreement each ELNO will use to sign-up Subscribers and Certifiers to its service and establish the basis on which liability is allocated and compensation provided

The model participation agreement is to establish a bilateral contract between an ELNO and each of its Subscribers and Certifiers with some additional obligations on Subscribers and Certifiers to the other Subscribers and Certifiers and their Clients participating in the same transaction.  The agreement will contain model participation rules that each Subscriber and Certifier must comply with in using the ELNO to complete conveyancing transactions.  Key aspects of the participation rules will be requirements for verifying the identity of transacting parties, for using the Client Authorisation Agreement and for Instrument Certification , and attribution of responsibility for the digital signing of documentation necessary to complete transactions using the ELNO.

The model participation rules are to be developed collaboratively among industry and government stakeholders and approved and controlled by the Jurisdiction Officers Group.

• supply contracts between an ELNO and its service providers such as Gatekeeper-accredited Certification Authorities providing verification of digital signature certificates issued to Subscribers and Certifiers and a Financial Settlement Manager providing financial settlement services to the ELNO.

The supply contracts are to be established by each ELNO on terms not inconsistent with the operating requirements of the Land Registries and the participation agreements they enter into with their Subscribers and Certifiers.

This framework implements the risk management regime previously recommended whereby risks are allocated to the least cost avoider and the least cost avoider is obligated to mitigate those risks and to insure for any residual liabilities.  The risk assessment is available here. 

If you have any comments on these recommendations or on anything in the Legal Framework Report, you can provide them here. 

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