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Cite as: [2001] EWLC 271(11)
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PART XI SPECIAL CASES
INTRODUCTION
11.1 Part 7 of the Bill is concerned with a number of special cases. Some of these are addressed elsewhere in the Report.[1] Our main concern is with the Crown and with bankruptcy, but we also mention settlements briefly.
THE CROWN
Acknowledgements
11.2 Due to the complex and arcane nature of the law that governs the land holding of the Crown and the Royal Duchies of Cornwall and Lancaster, the preparation of the relevant provisions of the Bill proved to be particularly difficult. However, we received considerable assistance in this task from those who were much more familiar with these mysteries than ourselves. We are very grateful to all involved. We would in particular wish to record our thanks to Mr Henry Boyd-Carpenter, CVO, and Mr Christopher Jessel,[2] both of Farrer & Co, Sir Anthony Hammond, KCB, QC, the then Treasury Solicitor, and Mr David Harris, Solicitor and Legal Advisor to the Crown Estate Commissioners.
Crown land
11.3 The main categories of Crown land are as follows—
(1) Land belonging to Government Departments. Much of this land is "in the name of" the Minister of the Crown, such as the Ministry of Defence, but there may be some properties (such as ancient defence installations in particular) which are "in the name of" the Queen. There may also be other "semi-Government property", such as old lighthouses, some of which date back to the sixteenth century. Much of such property is governed by specific legislation, such as the Defence Act 1842 (and later legislation dealing with land acquired for the purposes of defence). Where there is no such legislation, it is thought that the Crown Lands Act 1702 applies.
(2) Land under the management of the Crown Estate Commissioners, which is known as the Crown Estate. This comprises land held by the monarch in right of the Crown in her political capacity.[3]
(3) The Crown's Private Estate, which comprises land which is owned by the monarch in her private capacity.[4] These lands are subject to the Crown Private Estates Acts 1800, 1862 and 1873. The best known of the estates is the Sandringham Estate.
(4) The two Royal Duchies of Cornwall and Lancaster.[5]
(5) A residual category of land which is subject to the Crown Lands Act 1702.[6] This category includes the royal palaces and parks,[7] together with any other Crown land not falling under any other arrangement. These lands are inalienable, and the maximum length of lease that may granted of them is 31 years.[8] These categories of Crown land are not discrete. Thus surplus Government land may sometimes come under the management of the Crown Estate. Furthermore, it is provided by statute that land may pass between categories (5) and (2).[9]
The issues addressed by the Bill
11.4 The Bill addresses the following issues in relation to Crown land-
(1) registration of title to Crown land that is held by the monarch in demesne;
(2) escheat of registered land;
(3) representation in relation to Crown and Duchy land; and
(4) the disapplication of certain requirements relating to Duchy land.
There are certain matters that are addressed in the Land Registration Act 1925 which have no equivalent in the Bill and we explain why this is so.
Registration of land held in demesne
The present law
11.5 Most land in England and Wales is held by a landowner for a legal estate in fee simple. The only exception is the land held by the Crown in demesne, for "no subject in England can hold lands allodially".[10] Demesne lands are those held by the Crown as sovereign or lord paramount.[11] The Crown has the power to grant an estate in fee simple by infeudation out of land held in demesne. Indeed it is the only way in which it can create such a freehold estate.[12] No other landowner has a power to subinfeudate,[13] as it is prohibited by Statute Quia Emptores 1290.[14] A landowner who has an estate in fee simple can only transfer title to it by making a substitutionary grant.[15] There is a strong presumption that a freeholder holds directly of the Crown and not of some mesne lord.[16] As a result, when a fee simple determines, as it does in certain circumstances that we explain below,[17] the land "escheats" to the Crown, and the Crown as paramount lord becomes entitled to the land in demesne.[18]
11.6 The essentials of land held in demesne are that the Crown -
(1) has dominion over that land as lord paramount; and
(2) has no estate in that land.
11.7 The demesne lands of the Crown are very substantial and include—
(1) the foreshore around England and Wales except where it has been granted away or is in some other way vested in a private owner;
(2) land which has escheated to the Crown; and
(3) the ancient lands of the Crown which it has never granted away in fee.
11.8 As the law stands, the Crown cannot register the title to land held in demesne under the Land Registration Act 1925. That Act provides that "estates capable of subsisting as legal estates shall be the only interests in land in respect of which a proprietor can be registered".[19] As the Crown has no estate in its demesne land it cannot register the title. This has been described as "a major, but unremarked, lacuna in the system of land registration in England and Wales".[20]
11.9 We have explained above the strong presumption that the owner of a fee simple holds it directly of the Crown and not of some mesne lord.[21] However, the theoretical possibility of the existence of a mesne lord may explain why the Crown can own a freehold estate in land as well as having its paramount lordship. The freehold does not merge in the Crown's higher right.[22] However, it is very questionable whether the Crown could make an infeudatory grant to itself in fee simple out of its paramount lordship. We cannot see how the Crown, one and indivisible as it is, can hold land of itself as tenant-in-chief.[23]
11.10 The fact that the Crown cannot register the title to land that it holds in demesne is unsatisfactory, particularly given the substantial extent of those lands.[24] It is a significant barrier to the goal of total registration that we have explained in Part II of this Report.[25] Furthermore, the Crown Estate wishes to be able to register such lands, particularly the foreshore.[26]
Voluntary registration under the Bill
11.11 The Bill addresses the problem explained above. It provides that Her Majesty may grant an estate in fee simple absolute in possession out of demesne land to Herself.[27] That grant will, however, be treated as not having been made, unless an application for the voluntary first registration under Clause 3[28] is made within 2 months of the grant.[29] That period may be extended by the registrar to such later period as he may specify on application by Her Majesty, if he is satisfied that there is a good reason for doing so.[30] If the registrar makes an order extending the period after the 2 month period has elapsed, the grant will not be treated as having been invalidated by the failure to register it within the 2 month period.[31] These provisions may at first sight seem odd in the context of voluntary registration, as they resemble the sanctions that apply in relation to dispositions that are subject to compulsory first registration.[32] However, the thinking behind them is to ensure that the power to grant a fee simple can only be employed to secure the registration of the title to the land. This ensures that the Crown does not inadvertently create a fee simple in its own favour if, for some reason, the grant is made but no registration then takes place.[33]
11.12 Demesne land is defined as land belonging to Her Majesty in right of the Crown which is not held for an estate in fee simple absolute in possession.[34] That does no more than state the position at common law. However, as we explain below, for the purposes of the Bill, that definition is qualified in cases where a freehold estate has determined.[35]
Compulsory registration under the Bill
11.13 Under the present law, the provisions on compulsory first registration apply to an infeudatory grant by the Crown of a freehold estate for valuable or other consideration, by way of gift or pursuant to a court order. This is because such a grant is a "qualifying conveyance" for the purpose of section 123 of the Land Registration Act 1925,[36] which specifies the dispositions that are subject to the requirement of compulsory registration. However, the compulsory registration provisions of the Bill are couched in terms of a "transfer of a qualifying estate".[37] Plainly an infeudatory grant of a freehold is not a "transfer" which can only apply to a substitutionary disposition. The Bill therefore makes specific provision to bring such grants within the ambit of its provisions on compulsory first registration.
11.14 The compulsory registration provisions of the Bill, found in Clauses 4 and 6-8, that have been explained in Part III of this Report,[38] are applied by Clause 80 to the following grants by Her Majesty out of demesne land-
(1) the grant of an estate in fee simple absolute in possession, other than a voluntary grant to Herself, under the power explained above in paragraph 11.11;
(2) the grant of a term of years absolute of more than seven years from the date of the grant that is made for valuable or other consideration, by way of gift[39] or in pursuance of an order of the court.[40]
11.15 These provisions do not apply to the grant of mines and minerals held apart from the surface for reasons that have been explained in Part III.[41] There is a power for the Lord Chancellor, by order, to add to the events relating to demesne land that trigger compulsory registration.[42]
11.16 As the requirement of compulsory registration applies, any grant must be registered within two months of its being made or such longer period as the registrar may have provided.[43] If the grant is not registered within that period, it takes effect as a contract made for valuable consideration to grant the legal estate concerned.[44]
Cautions against the first registration of demesne land
11.17 The provisions of the Bill concerning cautions against first registration have been explained in Part III of this Report.[45] Those provisions, which allow for such a caution to be lodged in relation to an unregistered legal estate,[46] cannot apply to land held in demesne, because the Crown has no estate in land.[47] However, the Bill provides for their application as if demesne land were held by Her Majesty for an unregistered estate in fee simple absolute in possession.[48] They take effect subject to such modifications as rules may provide.[49]
11.18 In one respect the provisions on cautions against the first registration of demesne land differ from those applicable to cautions against the first registration of an estate. We have explained in Part III of this Report that, two years after the Bill is brought into force, it will cease to be possible for a person who owns either a freehold estate or leasehold estate that is capable of being registered with its own title, to lodge a caution against the first registration of that title.[50] This is because the lodging of a caution against first registration of a legal estate is not intended to be a substitute for its registration.[51] In relation to the Crown, it is necessary to make special provision in this regard. As we have explained above,[52] the Crown cannot at present register land which it holds in demesne, though the Bill makes provision for it to do so. It will plainly take some considerable time for the Crown to register all of the land that it holds in demesne, which, as we have explained, is extensive.[53] In the interim it may wish to protect that land by lodging a caution against first registration to alert it to any unauthorised application by a third party. The Bill therefore permits the Crown to lodge cautions against the first registration of any demesne land for 10 years after it comes into force, or such longer period as rules may provide.[54] It is almost certain that the 10-year period will in fact be extended by rules, given the magnitude of the task of registering all demesne land. The purpose of stipulating a period is to ensure that the process of registration is kept under review, having regard to the goal of total registration that is explained in Part II of this Report.[55] Once the time needed for registration has become clearer, the period within which the Crown can lodge and retain cautions against first registration in the register of cautions can be adjusted accordingly.[56]
11.19 It should be noted that persons other than the Crown may wish to lodge cautions against the first registration of demesne land and the Bill permits this. As we explain below, when a freehold estate escheats either to the Crown or to one of the Royal Duchies, that does not extinguish any incumbrances to which that estate is subject.[57] A person having the benefit of any such an incumbrance may wish to ensure that, as and when either the Crown grants, or the Duchy transfers, such land to some person, the incumbrance is appropriately protected on the register.[58]
Escheat
The nature of escheat
11.20 Escheat occurs where a freehold estate determines. The effect is that the lord of whom that estate was held becomes entitled to the land by his or her own right.[59] If the land was held of a mesne lord (such as one of the Royal Duchies), this will be by virtue of that lord's own estate in fee simple. If, as will usually be the case, the land is held directly of the Crown, it will be because the Crown is entitled to the land in demesne. In either eventuality, the lord takes the land subject to any charges or other incumbrances created by the tenant.[60] Although it is "difficult to understand how a subordinate interest, created out of a freehold, can survive the termination of the freehold interest, any more than a sublease can survive the determination of a head lease",[61] it is, nevertheless, well-established by authority that it does.[62]
11.21 The manner in which escheat operates is not altogether straightforward. Although it occurs automatically on the determination of an estate,[63] escheat is only completed when the lord to whom the land reverts takes possession or control of it or takes proceedings for its recovery.[64] At one time it was necessary for there to be an inquisition before an escheat could take place.[65] Such inquisitions have long been obsolete[66] and were formally abolished in 1961.[67] The need for some step to complete the escheat means that although the lord's seignory "is no longer encumbered by the freehold estate",[68] he does not automatically become subject to the liabilities that affect the land, such as the burden of a landlord's covenants where the land is subject to a subsisting tenancy. As we explain below this is a matter of some practical importance.[69]
11.22 At first sight, escheat might seem to be a quaint feudal relic of little if any relevance to an overhaul of the legislation on the registration of title. However, as we have indicated in Part II of this Report, something like 500 freehold estates escheat every year.[70] When a registered estate escheats, the title has to be removed from the register because the estate no longer exists. If, as usual, the land passes to the Crown, it will be held in demesne and (as the law stands) cannot be registered.[71] If it passes to one of the Royal Duchies, that Duchy will hold the land by virtue of its own unregistered fee simple as mesne lord. While it could, in theory, choose to register the title to the land voluntarily, it is very unlikely in practice that it will do so, for reasons that are explained below.[72] Given the goal of total registration,[73] our concern has been to try to find a way by which, where title to land has once been registered, it does not have to be removed from the register due to escheat. We explain below how the Bill achieves this objective.[74] However, it is necessary first to outline the principal circumstances in which an escheat may occur.
The circumstances in which escheat occurs
11.23 As we have indicated above,[75] escheat occurs whenever an estate in fee simple determines. The circumstances in which this can happen are now much more limited than was formerly the case.[76] Whilst it is not possible to set out all the situations in which a fee simple might determine, they include the following-
(1) where the freehold is disclaimed in cases that normally involve insolvency: this is the usual case and it is more fully explained below;[77]
(2) where the Crown makes an infeudatory grant subject to restrictions on the user of the land that is enforceable by a right of entry, and that right is exercised;[78] and
(3) where a settlement is created which includes an entail, the right of reverter is in the Crown, and the entailed interest determines.[79]
11.24 As we have indicated above, by far the commonest circumstance in which escheat occurs is where a freehold estate is disclaimed.[80] There are three situations in which this may happen-
(1) First, a trustee in bankruptcy may disclaim onerous property under section 315 of the Insolvency Act 1986. Onerous property is defined as "any unprofitable contract" and "any other property comprised in the bankrupt's estate which is unsaleable or not readily saleable, or is such that it may give rise to a liability to pay money or perform any other onerous act".[81] A freehold might be onerous if (for example) it were subject to charges or other liabilities that exceeded its value.[82]
(2) Secondly, there is an analogous provision in section 178 of the Insolvency Act 1986, by which a liquidator of a company that is being wound up may disclaim onerous property.[83] Onerous property is defined in the same way as in (1).[84]
(3) Thirdly, under section 654 of the Companies Act 1985, when a company is dissolved, all its property vests either in the Crown or in one of the Royal Duchies as bona vacantia. However, section 656 of that Act permits the Crown, by means of a notice issued by the Treasury Solicitor (or relevant Duchy official) within 12 months of the date on which the company's property vested in it, to disclaim any such property. In practice, if the property is onerous (as it commonly is), the Treasury Solicitor disclaims for reasons that we explain below.[85] The effect of this is that, in the case of freehold land, the estate determines and therefore escheats to the Crown or one of the Duchies. It follows that, what the Crown disclaims as bona vacantia, it receives in a different capacity by way of escheat.
11.25 It is this third case that accounts for the great majority of escheats and the reasons for it require some explanation.[86] Sections 654 and 656 of the Companies Act 1985 are not new. The former was first introduced by the Companies Act 1928,[87] the latter by the Companies Act 1948.[88] These provisions have puzzled both academic commentators[89] and the judiciary.[90] We have examined their legislative history[91] and it is clear that there are in fact very good reasons for them. It was appreciated shortly after the enactment of the Companies Act 1929 that the Crown was potentially at risk in relation to real property that passed to it as bona vacantia. The legal estate in such property vests in the Crown and there was a fear that the Crown might find itself subject to the liabilities attaching to the property if it was of an onerous character.[92] The Companies Act 1948 introduced a number of provisions to protect the Crown from this risk,[93] of which what is now section 654 of the Companies Act 1985 is just one.[94] It cannot be regarded as finally settled whether the Crown does in fact become subject to the liabilities affecting property which it receives by way of bona vacantia. Although it was conceded that it was in one decision,[95] there are powerful arguments against this view.[96] However, if the Treasury Solicitor disclaims a freehold and the land thereby escheats to the Crown Estate, it is well settled that the Crown can protect itself against liability. As we have explained above, although escheat occurs automatically, it requires some act to complete it.[97] If, therefore, the Crown does not take possession or perform any acts of management in relation to such land, it will not become subject to the liabilities of the freeholder.[98] What in practice happens is that the Crown Estate takes no action in relation to onerous land disclaimed by the Treasury Solicitor until such time as some interested person agrees to acquire the property and assume such liabilities as may still affect it.[99] The land can then be granted to that person.[100]
The treatment of escheat in the Bill
11.26 It scarcely needs to be said after this account that the present law is indefensible. It also has unfortunate practical implications. Bona vacantia is administered by the Treasury Solicitor, whereas escheated property is a matter for the Crown Estate.[101] Those who have an interest in such property and wish to take steps in relation to it, are often bewildered because they do not know with which organ of state they have to deal.
11.28 What the Bill does, therefore, is to provide what can only be a stop-gap solution to the specific problem of how to prevent a registered estate that has escheated from having to be removed from the register. What we wish to achieve, is that where a registered freehold estate escheats, its title should not be closed. Instead, it is anticipated that either the Treasury Solicitor (if he or she disclaims) or the Crown Estate[102] (in other cases) will apply for the entry of a restriction in the register.[103] This is likely to provide that no disposition is to be made of the estate except by order of the court or by or on the direction of the Crown Estate.[104] When such a disposition is eventually made, it will necessarily create a new fee simple and it will be registered with a new title number. The old title will then be closed. Any encumbrances to which the former title was subject and which still subsist in relation to the new estate will be entered in the register of the new title. In this context, it should be noted that, for the purposes of the Bill, land in which a freehold estate has determined is not regarded as "demesne land" unless there has been some act of entry or management by the Crown.[105] In other words, where an escheat has occurred but has not been completed,[106] the land in question is not treated as demesne land under the Bill. This reflects the rule, explained above,[107] that the Crown incurs no responsibility for land that has escheated unless and until it takes possession of the land or undertakes some act of management in relation to it.[108]
11.29 Clause 82 contains a series of rule-making powers to enable the objectives set out in paragraph 11.28 to be achieved. Rules[109] may make provision about-
(1) the determination of a registered freehold estate in land; and
(2) the registration of an unregistered freehold legal estate in land in respect of land to which a former registered freehold estate in land related.[110]
11.30 Clause 82(2) gives specific guidance as to some of the rules that may be made under this power. Rules may make provision for the effect of the determination of a registered estate to be dependent on compliance with specified registration requirements. In this way, it will be possible to require (for example) that appropriate restrictions are entered in the register when a disclaimer occurs. Rules may provide for entries relating to an estate to continue notwithstanding that it has determined for such period as may be specified. This ensures that the register records the encumbrances to which the determined estate was subject and to which the land therefore remains subject.[111] Provision may be made as to the entries that may be made in the register of the former registered estate. It is likely to be necessary to have some entry on the register that will indicate that escheat has taken place. This will ensure that when a new estate is eventually granted, the old title can be closed and the entries of any subsisting encumbrances carried across to the new title.[112] Rules may also impose requirements that have to be met in connection with an application for the registration of any new estate granted out of the land in relation to which the escheat had occurred. It might be necessary (for example) to refer to the number of the former title in the application.
Crown and Duchy land: representation
11.31 Clause 83 of the Bill performs the same function that section 96 of the Land Registration Act 1925 does under the present law, and little needs to be said about it. In relation to a Crown or Duchy interest,[113] it explains-
(1) who may represent the owner of that interest for all purposes of the Bill;
(2) who is entitled to receive such notice as the owner of that interest is entitled to receive under the Bill; and (3) who may make such applications and do such other acts that the owner of that interest is entitled to make or do under the Bill.[114]
11.32 Thus, for example, in relation to an interest belonging to Her Majesty that forms part of the Crown Estate, the appropriate authority for the three purposes listed above is the Crown Estate Commissioners.[115]
The disapplication of certain requirements in relation to Duchy land
Introduction
11.33 There are no special requirements applicable to the manner in which the Crown Estate Commissioners make dispositions of Crown land.[116] They may be made in the same way as if the Commissioners were acting on behalf of a subject and are similarly registrable.[117] Although the Commissioners must act in accordance with the directions of the Chancellor of the Exchequer and the Secretary of State, this is not a matter that need concern any disponee.[118] In relation to dispositions by the two Royal Duchies of Cornwall and Lancaster, there are no equivalent provisions. The legal position in relation to both Duchies is in fact arcane and complex.
The present law
THE DUCHY OF CORNWALL
11.34 The Duchy of Cornwall's powers in relation to the sale and acquisition of land are governed by the Duchy of Cornwall Management Acts 1863 to 1982,[119] of which the 1863 Act is the principal Act. The relevant provisions of the 1863 Act may be summarised as follows[120]—
(1) where the Duchy makes a sale or disposal within its powers,[121] any capital money arising has to be paid into the Bank of England (or other authorised institution) and a receipt given by one of the cashiers;[122]
(2) the "grant or assurance" by which the sale or other disposal is made must be made by deed under the seal of the Duchy and a memorandum must be endorsed on the deed, signed by the auditor of the Duchy acknowledging that the amount has been paid into the Bank of England or other authorised institution in the manner directed by the Act, and specifying the date of payment;[123]
(3) every deed or instrument by which any land is acquired, sold or disposed of by the Duchy is required to be enrolled in the Duchy office within 6 months after it is made;[124]
(4) a deed or instrument enrolled in the Duchy Office has the same force and effect as if it had been enrolled or registered at the High Court;[125]
(5) once enrolled, the deed or instrument is valid and effectual against the Duke of Cornwall;[126] and
(6) no person claiming under any deed, instrument or assurance that is made or purports to be made under the powers given by the Act is bound to enquire whether the provisions of the Act have been complied with, or that the transaction was in fact authorised.[127]
11.35 The provisions on enrolment reflect the uncertainties of conveyancing in the mid-19th century and were intended to provide some degree of certainty in transactions that is now much more effectively achieved by registration of title under the Land Registration Act 1925. Indeed, it is not at first easy to see how the provisions of the 1863 Act on enrolment can be reconciled with the fundamental principle of registered conveyancing by which it is registration that confers legal title on the proprietor, though in practice a mechanism exists by which both elements are satisfied.[128] In addition to this general point, our attention has been drawn to a number of practical difficulties that apply in relation to these provisions.[129]
THE DUCHY OF LANCASTER
11.36 The position of the Duchy of Lancaster is similar to but not the same as the Duchy of Cornwall. The Chancellor and Council of the Duchy of Lancaster have powers both to sell and convey land forming part of the possessions of the Duchy[130] and to lease it on such terms as they think fit.[131] There are also elaborate provisions for the exchange of Duchy land for other land and for the payment of any money necessary for equality of exchange.[132] The Chancellor and Council of the Duchy are also empowered to purchase land. Such land is conveyed to and assured to the use of Her Majesty in right of the Duchy.[133] There are similar enrolment provisions applicable to such dispositions as those which apply in relation to the Duchy of Cornwall.[134]
The provisions of the Bill
11.37 It will be obvious from the account of the law given above, that the law which governs dispositions of land to or by the Royal Duchies is hopelessly out of date, difficult to operate, and badly in need of a fundamental review. The scope of the Bill necessarily limits what can be done to cut through this legislative thicket in relation to dispositions of registered land to or by the Duchies. The Bill does, however, provide that nothing in any enactment relating to the Duchy of Lancaster or the Duchy of Cornwall shall have effect to impose any requirement with respect to formalities or enrolment in relation to a disposition by a registered proprietor.[135] The effect of this provision is, therefore, that a disposition of a registered estate or charge by or to either the Duchy of Cornwall or the Duchy of Lancaster can be made in the usual way, regardless of the requirements that would otherwise apply under the legislation governing the Duchies.
Matters for which the Bill makes no provision
11.38 There are at least two matters presently found in the Land Registration Act 1925 relating to the Crown that are not replicated in the Bill. First, there is no provision directly equivalent to section 80 of the 1925 Act saving the right of Her Majesty in relation to bona vacantia.[136] No provision is needed because there is nothing in the Bill that would affect its operation. However, the Bill does contain a power to make rules making provision about how the passing of a registered estate or charge is to be dealt with for the purposes of the Bill.[137] Secondly, the Land Registration Act 1925 requires the registrar to notify the Crown Estate Commissioners or the relevant Royal Duchy if there is an application to register land that includes foreshore.[138] He may not register the estate until one month after giving such notice. The Bill does not replicate this provision because it belongs more properly in the rules that will govern applications for first registration.[139]
BANKRUPTCY
Introduction
11.39 Clause 86 of the Bill makes special provision for the effect of bankruptcy. This is necessary to reflect the provisions of the Insolvency Act 1986. The provisions in the Bill differ somewhat from those found in the Land Registration Act 1925[140] because of the prospective abolition of inhibitions that has been explained in Part VI of the Report.[141]
Procedure in relation to bankruptcy petitions
11.40 When a petition in bankruptcy is filed against a debtor, the relevant court official[142] must apply to register the petition as a land charge in the register of pending actions.[143] Where the debtor is the registered proprietor of any land or charge, this can have no direct effect, because registration of a land charge does not affect registered land.[144] However, this registration serves to trigger a procedure for ensuring that an appropriate entry is made on the register of title. The Chief Land Registrar maintains both the land charges register and the register of title. Using the index of proprietor's names,[145] he will attempt to ascertain whether the debtor is the registered proprietor of any land or charge on the register. If he thinks that he is, he must then register a creditor's notice against the title of any land or charge that appears to him to be affected.[146] Clause 86(2) of the Bill replicates this procedure. The registrar must enter a notice of the pending action.[147] That entry must remain in the register until either a restriction is entered in the manner explained below in paragraph 11.41, or the trustee in bankruptcy is registered as proprietor.[148]
Procedure in relation to bankruptcy orders
11.41 A similar procedure applies when a person is adjudicated bankrupt and a bankruptcy order is made against him or her. The order is registered by the relevant court official[149] as a land charge under the Land Charges Act 1972.[150] At present, the Chief Land Registrar is then required to enter a bankruptcy inhibition.[151] Under the Bill, because inhibitions are prospectively abolished,[152] the registrar is required to protect a bankruptcy order by the entry of a restriction.[153] That restriction must reflect the limitation under section 284 of the Insolvency Act 1986, by which a disposition by a bankrupt is void, except to the extent that it is either made with the consent of the court or is subsequently ratified by the court.[154]
Protection for disponees in good faith
11.42 As we have explained in Part V of this Report-
(1) neither a petition in bankruptcy nor a bankruptcy order is, for the purposes of the Bill, an interest affecting an estate or charge;[155] and
(2) the Bill makes express provision for the protection of disponees in relation to such petitions and orders.[156]
In this, we follow the model of both the Land Registration Act 1925[157] and the Insolvency Act 1986.[158]
11.43 Clause 86(5) provides that, where the proprietor of a registered estate or charge is adjudged bankrupt, the title of his or her trustee in bankruptcy is void against a disponee to whom a registrable disposition has been made and where the registration requirements have been met, provided certain conditions are satisfied.[159] Those conditions are as follows[160]-
(1) the disposition was made for valuable consideration;
(2) the disponee acted in good faith;
(3) at the time of the disposition-
(a) there was no notice or restriction entered under Clause 86;[161] and(b) the disponee had no notice of the bankruptcy petition or the adjudication.
11.44 As we have explained in Part V of this Report, questions of notice are almost always irrelevant to issues of priority under the Bill.[162] However, in relation to bankruptcy petitions and orders, we have felt obliged to follow the approach adopted in the Insolvency Act 1986 which protects a bona fide purchaser for value without notice.
SETTLEMENTS
11.45 The Land Registration Act 1925 contains detailed provisions about its application to settlements under the Settled Land Act 1925.[163] The Bill does not replicate these. It provides instead that rules may make provision for its purposes in relation to the application to registered land[164] of those various enactments[165] relating to settlements under the Settled Land Act 1925.[166] We believe that it is now more appropriate to deal with settled land in rules. It ceased to be possible to create new settlements under the Settled Land Act 1925 after 1996.[167] Settlements were not very common even before 1997, and they will, in time, disappear. It would be unfortunate to encumber the Bill with provisions that would rapidly become obsolete.
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Note 1 For pending land actions, etc (Cl 87), see above, paras 6.59, 8.14, 8.54. For PPP leases (Cl 90), see above, paras 3.13, 3.30, 4.22, 6.16, 8.11-8.13, 8.48(1). [Back] Note 2 Mr Jessel is the author of the section on Crown Property in Halsbury’s Laws of England (4th ed), vol 12(1). For other accounts of the law governing Crown land that we have consulted, see Joseph Chitty, A Treatise on the Law of the Prerogatives of the Crown (1820), 226-236; C Sweet, Challis’s Law of Real Property (3rd ed 1911), Chapters 1, 2 and 6; T Cyprian Williams, “The Fundamental Principles of the Present Law of Ownership of Land” (1931) 75 SJ 843. [Back] Note 3 See Halsbury’s Laws of England (4th ed), vol 12(1), para 278. [Back] Note 4 See Halsbury’s Laws of England (4th ed), vol 12(1), paras 354 and following. [Back] Note 5 References in this Part to “Duchy land” are to the land that is vested in the Crown in right of the Duchy of Lancaster and the land belonging to the Duchy of Cornwall. [Back] Note 6 See Halsbury’s Laws of England (4th ed), vol 12(1), paras 364 and following. [Back] Note 7 These may also be subject to the provisions of the Crown Lands Act 1851: see s 22 of that Act. [Back] Note 8 Crown Lands Act 1702, s 5. See Halsbury’s Laws of England (4th ed), vol 12(1), para 205. [Back] Note 9 See Crown Lands Act 1927, s 13; Crown Estate Act 1961, s 5(5). [Back] Note 10 J Burke, Jowitt’s Dictionary of English Law (2nd ed 1977), p 89. See to like effect, Coke on Littleton, 65a. [Back] Note 11 CfCoke on Littleton, 65a. [Back] Note 12 Such grants are made in socage tenure by virtue of the Tenures Abolition Act 1660, s 4. [Back] Note 13 The Crown as paramount feudal lord “infeudates”. Prior to Statute Quia Emptores 1290, mesne (or intermediate) lords holding of the Crown could “subinfeudate” by making a feudal grant out of their land. We have had some discussions with those representing the Crown as to whether the Royal Duchies can subinfeudate. Whatever the answer to this question may be in theory, the Duchies in practice make substitutionary grants. We have examined a number of conveyances in relation to the Poundbury Estate in Dorset that were granted by HRH the Duke of Cornwall, which confirm this. [Back] Note 14 Section 1. The Statute only applies to land held in fee simple (ibid, s 3), and is inapplicable to the Crown, as indeed it has to be. Were it otherwise, the Crown would be unable to make any grant of land which it held in demesne. It could hardly transfer its position as lord paramount. [Back] Note 15 Statute Quia Emptores 1290, s 1. [Back] Note 16 See Re Lowe’s WT [1973] 1 WLR 882, 886 (“the theoretical possibility of escheat to some mesne lord... is one that is so remote that it may be wholly ignored”: per Russell LJ). See too Re Holliday [1922] 2 Ch 698, 713. This has long been the case: see Real Property Commissioners, Third Report on Real Property (1832), p 3. We note that one respondent to the Consultative Document had rather different views. [Back] Note 17 See para 11.23. [Back] Note 18 If the land is in either the Duchy of Cornwall or the Duchy of Lancaster, the land escheats to the respective duchy. This is escheat to a mesne freehold and not to the Crown as paramount lord. What actually happens is that the landowner’s fee simple is destroyed, but that of the mesne lord is not. The escheated land therefore remains freehold land, albeit that it is a different freehold that subsists. This should be contrasted with cases where land passes to the Crown as bona vacantia, where the fee simple is not destroyed but is transferred to the Crown: see Halsbury’s Laws of England (4th ed), vol 12(1), para 236. [Back] Note 19 Land Registration Act 1925, s 2(1). [Back] Note 20 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, 798, per Stanley Burnton QC (sitting as a Deputy High Court Judge). See above, para 2.33. [Back] Note 22 At least not normally. We have been told of instances where such merger has been assumed, and we have had some interesting correspondence as to whether Buckingham Palace is held by the Crown in demesne or (as we think) in fee simple. [Back] Note 23 Cf Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, 801H. [Back] Note 24 See above, para 11.7. [Back] Note 25 See above, para 2.9. [Back] Note 26 This would bring with it a greater protection from encroachment than presently exists because of the provisions of the Bill on adverse possession: see below Part XIV. [Back] Note 28 See above, para 3.6. [Back] Note 32 See Cl 6; above, paras 3.38-3.41. [Back] Note 33 This could be important if the Crown subsequently wished to make an infeudatory grant of the land to some person. The Crown could be confident that it was making a grant out of the demesne. [Back] Note 35 See Cl 129(2); below, para 11.28. [Back] Note 36 As substituted by Land Registration Act 1997, s 1. [Back] Note 37 Cl 4(1)(a), (2)(a); above, paras 3.24 and following. [Back] Note 38 See above, paras 3.22 and following. [Back] Note 39 A grant by way of gift includes a grant for the purpose of constituting a trust under which Her Majesty does not retain the whole of the beneficial interest: Cl 80(2). Cf above, para 3.27(1). [Back] Note 41 Cl 80(3); cf above, para 3.23. [Back] Note 42 Cl 80(4). He may also make such consequential amendments as he thinks fit:ibid. The power is exercisable by statutory instrument that is subject to annulment in pursuance of the resolution of either House of Parliament: Cl 125(2), (4). Cf Cl 5; above, para 3.37. [Back] Note 43 Cf Cl 6(4), (5); above, para 3.39. [Back] Note 44 Cl 80(5). Cf above, para 3.40. [Back] Note 45 See above, paras 3.56 and following. [Back] Note 46 Cl 15; above, para 3.56. [Back] Note 47 There is arguably a doubt about whether the present provisions on cautions against first registration apply to demesne land. Land Registration Act 1925, s 53 permits a person claiming “an interest in land” to lodge a caution. Land is defined as “land of any tenure”:ibid, s 3(ix). Although we think that land held in demesne is “land of any tenure”, the matter is not completely beyond doubt. The registrar has in practice been willing to accept the lodgement of “Crown cautions” against the first registration of demesne land. [Back] Note 49 Cl 81(2). The rules will be land registration rules and will be required to be laid before Parliament only. See Cls 125, 129(1). [Back] Note 50 Cl 15(3); Schedule 12, para 14(1); above, para 3.58. [Back] Note 51 See above, para 3.58. [Back] Note 53 See above, para 11.7. [Back] Note 54 Schedule 12, para 15(1). The rules will be land registration rules and will be required to be laid before Parliament only. See Cls 125, 129(1). [Back] Note 55 See above, paras 2.9, 2.13. [Back] Note 56 Once the 10-year or extended period has come to an end, any caution will be spent, except where an application to register the title to the land affected has been made before the end of the period: Schedule 12, para 15(2). [Back] Note 57 See para 11.20. [Back] Note 58 The grant or transfer will trigger compulsory registration. [Back] Note 59 As Earl of Selborne explained in Attorney-General of Ontario v Mercer (1883) 8 App Cas 767, 772, “when there is no longer any tenant, the land returns, by reason of tenure, to the lord by whom, or by whose predecessors in title, the tenure was created”. [Back] Note 60 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, 806-808 (where the authorities are reviewed). [Back] Note 61 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd, above, at p 806, per Burnton QC. [Back] Note 62 See, eg, Attorney-General of Ontario v Mercer (1883) 8 App Cas 767, 772, where Earl of Selborne commented that “[t]he tenant’s estate (subject to any charges upon it which he may have created) has come to an end, and the lord is in by his own right”. There is, perhaps, an analogy with a squatter who acquires title to land by adverse possession under the Limitation Act 1980, ss 15, 17. Even though he or she extinguishes the estate of the paper owner, the squatter takes subject to the incumbrances on the estate that are not barred by his or her adverse possession: see Re Nisbet & Potts' Contract [1906] 1 Ch 386. [Back] Note 63 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, 802-806. [Back] Note 64 SeeBlackstone’s Commentaries, Vol 2, p 245. [Back] Note 65 Indeed the Crown employed an “escheator” in every county to enforce its rights. For the development of the office of escheator, see J M W Bean, The Decline of English Feudalism 1215 – 1540 (1968), pp 17et seq. [Back] Note 66 Procedure was rationalised by the Escheat (Procedure) Act 1887, but it was apparently inoperative even then. [Back] Note 67 See Crown Estate Act 1961, s 8(3). [Back] Note 68 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, 804, per Burnton QC. [Back] Note 69 See para 11.25. [Back] Note 70 See above, para 2.35. [Back] Note 71 See above, para 11.8. Although, as we have explained above, at para 11.11, the Bill confers a power for Her Majesty to grant Herself a fee simple out of demesne land for the purpose of registering it, it is unlikely that this power would be used in relation to land that had escheated. In most cases of escheat, the Crown does not wish to become responsible for the land that has escheated because of its invariably onerous nature: see below, para 11.24. [Back] Note 72 See para 11.25. [Back] Note 73 See above, paras 2.9, 2.13. [Back] Note 74 See para 11.28. [Back] Note 75 See para 11.20. [Back] Note 76 Escheat for the commission of a felony (other than treason) was abolished by the Forfeiture Act 1870. Escheat on intestacy was abolished by Administration of Estates Act 1925, s 45(1)(d). When treason was committed, the land did not escheat to the traitor’s immediate feudal lord but was forfeited to the Crown. Forfeiture for treason was also abolished by the Forfeiture Act 1870. [Back] Note 77 See para 11.24. [Back] Note 78 See Crown Estate Act 1961, s 3(8), which permits such grants. The right of entry is exercisable in perpetuity under that subsection (“…the restrictions may, notwithstanding any enactment or rule of law relating to perpetuities, be made enforceable by a right of entry exercisable on behalf of Her Majesty on a breach of the restrictions occurring at any distance of time”). We were given sight of such a grant made in 1870. [Back] Note 79 See Settled Land Act 1925, ss 1(5), 20(1). [Back] Note 80 When a lease is disclaimed, it terminates, and no question of escheat therefore arises. For the effects of disclaimer in relation to a lease, see Megarry & Wade’s Law of Real Property (6th ed 2000), 14-182-14-185. [Back] Note 81 Section 315(2). [Back] Note 82 Cf Hackney London Borough Council v Crown Estate Commissioners (1995) 72 P & CR 233. [Back] Note 83 The leading modern authority on escheat, Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, arose out of a disclaimer by a liquidator under Insolvency Act 1986, s 178. [Back] Note 84 Section 178(3). [Back] Note 85 See para 11.25. [Back] Note 86 There is an irony in this. For nearly 500 years, on the basis of a passage inCoke on Littleton, 23b, it was thought that the doctrine of escheat did not apply to a corporation. If a corporation was dissolved, any lands which it held reverted to the grantor: “the law doth annex a condition to every such grant, that if the corporation be dissolved, the grantor shall have the lands again, because the cause of the grant faileth”:Blackstone’s Commentaries, Vol 1, p 472. This view must have been based on the sort of charitable and eleemosynary corporations that Coke would have known in the early seventeenth century, because it seems oddly inappropriate in relation to joint stock companies. It was finally rejected by the Court of Appeal in a bona vacantia case, Re Wells [1933] Ch 29. [Back] Note 87 Section 71. Cf Re C W Dixon Ltd [1947] Ch 251. [Back] Note 89 See D W Elliott, “Land Without an Owner” (1954) 70 LQR 25. [Back] Note 90 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, 805, where Burnton QC remarked that “it was difficult to see the object of these provisions in so far as they concern freeholds”. [Back] Note 91 From the correspondence files at the Office of Parliamentary Counsel. [Back] Note 92 As, for example, where it was a reversion on a lease and the landlord was subject to substantial liabilities under the repairing covenants in the lease. [Back] Note 93 See Companies Act 1948, ss 352-355. [Back] Note 94 See too Insolvency Act 1986, ss 178-180 (replacing provisions that were formerly in Companies Act 1985). Correspondence in the Office of Parliamentary Counsel from 1947 shows that there was close co-ordination between those instructing upon and drafting the Companies Bill and the draftsman of the Crown Proceedings Bill. [Back] Note 95 Toff v McDowell (1993) 69 P & CR 535; where it was assumed without argument that, where a freehold reversion on a lease vested in the Crown as bona vacantia, the Crown became subject to the burden of the covenants of that lease. [Back] Note 96 It would provide a ready means for a person to escape his or her liabilities for onerous property which he or she owned by transferring it to a company set up for the purpose and then arranging for its dissolution. Compare the comments of Earl Jowitt in Attorney- General v Parsons [1956] AC 421, 435, in the analogous context of the now-repealed mortmain legislation. [Back] Note 97 See above, para 11.21. [Back] Note 98 See Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793, 804, 805, where the authorities are reviewed. Cf Crown Proceedings Act 1947, s 40(4), which protects the Crown from tort claims in relation to land which vests in the Crown “by virtue of any rule of law which operates independently of the acts or the intentions of the Crown” unless and until the Crown takes possession or control of such property, or enters into occupation of it. The Crown was not liable to tort claims prior to the 1947 Act. [Back] Note 99 For an interesting illustrative decision, see Hackney London Borough Council v Crown Estate Commissioners (1995) 72 P & CR 233. [Back] Note 100 It is because the Crown is at risk in relation to escheated land that it is most unlikely that it would exercise its power under the Bill, explained above at para 11.11, to grant itself a fee simple in the land in order to register it. Cf above, para 11.22. [Back] Note 101 Except where the property escheats to one of the Royal Duchies. [Back] Note 102 Or, where relevant, Royal Duchy. [Back] Note 103 For restrictions under the Bill, see above, paras 6.33 and following. [Back] Note 104 Or, where relevant, Royal Duchy. [Back] Note 105 Cl 129(2). For the definition of “demesne land” that otherwise applies, see Cl 129(1); above, para 11.12. [Back] Note 106 See above, para 11.21. [Back] Note 107 See para 11.25. [Back] Note 108 See Halsbury’s Laws of England (4th ed), vol 12(1), para 234. [Back] Note 109 These rules will be land registration rules and will be required to be laid before Parliament only. See Cls 125, 129(1). [Back] Note 111 See above, para 11.20. [Back] Note 112 Some entries may be cleared from the title by court order, or they may have become unenforceable. [Back] Note 113 A Crown interest is an estate, interest or charge in or over land and any right or claim in relation to land belonging to Her Majesty in right of the Crown, or belonging to a government department, or held in trust for Her Majesty for the purposes of a government department: Cl 83(2). A Duchy interest means an estate, interest or charge in or over land and any right or claim in relation to land belonging to Her Majesty in right of the Duchy of Lancaster, or belonging to the Duchy of Cornwall:ibid. [Back] Note 116 For the Crown Estate Commissioners, see Crown Estate Act 1961, s 1(1). [Back] Note 118 Ibid, s 1(4), (5). [Back] Note 119 See Halsbury’s Laws of England (4th ed), vol 12(1), para 319. [Back] Note 120 See Halsbury’s Laws of England (4th ed), vol 12(1), paras 342 and following. [Back] Note 121 Duchy of Cornwall Management Act 1863, s 3 (as amended). [Back] Note 124 Ibid, s 30. The Keeper of the Records is directed to make the enrolment:ibid, s 31. There are provisions by which an enrolment may be made out of time:ibid, s 33. [Back] Note 125 Ibid, s 32. For enrolment in the High Court, see Supreme Court Act 1981, s 133; CPR PD5, 6.1. [Back] Note 126 Duchy of Cornwall Management Act 1863, s 19. [Back] Note 128 See Land Registration Act 1925, s 69(1). The transaction is not binding on the Duke of Cornwall until it is enrolled. That takes place within 6 months of the transaction or some extended period. What happens at present is, we are informed, as follows. Following completion of a sale or lease, the transfer or lease is not immediately returned to the transferee or grantee but is retained by the Duchy for enrolment. In practice this is done within the 30 days which are allowed for stamping the instrument and usually within the priority period allowed for by the Land Registration (Official Searches) Rules 1993. The latter is not regarded as important because it is extremely unlikely that the Duchy would enter into any other transaction in relation to the same land. There is, however, the risk that some third party might, say, enter a caution. [Back] Note 129 In particular, the giving of receipts on a sale of Duchy land where the consideration is paid in instalments and the title is registered. [Back] Note 130 Duchy of Lancaster Lands Act 1855, s 1. [Back] Note 131 Duchy of Lancaster Act 1988, s 1. [Back] Note 132 See Duchy of Lancaster Act 1808, ss 28, 29. [Back] Note 133 Duchy of Lancaster Lands Act 1855, s 3. [Back] Note 134 This is brought about by a very circuitous legislative route. See Duchy of Lancaster Lands Act 1855, s 1; Duchy of Cornwall Act 1844 (7 & 8 Vict, c 65, not c 105), ss 30, 31; Assessionable Manors Award Act 1848, s 14; and Halsbury’s Laws of England (4th ed), vol 12(1), para 316. [Back] Note 136 Cf Land Registration Act 1925, s 80. [Back] Note 138 Land Registration Act 1925, s 97(1). The section does not apply to the registration of an estate with a possessory or good leasehold title:ibid, s 97(2). [Back] Note 139 See Cl 14; above, para 3.53. [Back] Note 141 See above, para 6.32. [Back] Note 142 A registrar in bankruptcy of the High Court or the registrar of the county court. [Back] Note 143 Under Land Charges Act 1972, s 5(1)(b). The obligation to apply for registration is imposed by the Insolvency Rules 1986: see Ruoff & Roper, Registered Conveyancing, 28-07. [Back] Note 144 Under Cl 86(7), a person to whom a registrable disposition is made is not required to make a search under Land Charges Act 1972. Cf Land Registration Act 1925, s 61(6), which is to like effect under the present law. [Back] Note 145 For this index, see Land Registration Rules 1925, r 9. [Back] Note 146 Land Registration Act 1925, s 61(1). With a common name, there can be considerable difficulties in identifying the land in question: see Ruoff & Roper, Registered Conveyancing, 28-08. [Back] Note 147 For notices in relation to pending land actions, see Cl 87; above, paras 6.59-6.61. [Back] Note 148 Cl 86(3). Cf Land Registration Act 1925, s 61(1). [Back] Note 149 See above, para 11.40. [Back] Note 150 Section 6(1)(c). [Back] Note 151 Land Registration Act 1925, s 61(3). [Back] Note 152 See above, para 6.32. [Back] Note 156 See Cl 86(5) above, para 5.20. [Back] Note 157 Section 61(6). [Back] Note 158 Section 284(4). [Back] Note 159 Cl 86(5), (6). For the registration requirements, see Cl 27(4); Schedule 2; above, paras 4.16 and following. [Back] Note 161 See above, paras 11.40 (notice of pending action) and 11.41 (bankruptcy restriction). [Back] Note 162 See above, para 5.16. [Back] Note 163 See Land Registration Act 1925, ss 86-92. [Back] Note 164 Which, for these purposes, means an interest the title to which is, or is required to be, registered: Cl 89(3). [Back] Note 165 Which include, eg, Trustee Act 1925 and Administration of Estates Act 1925. [Back] Note 166 Cl 89(1). These rules will be land registration rules and will be required to be laid before Parliament only. See Cls 125, 129(1). They may include provision modifying any of the enactments referred to in Cl 89(1) in its application to registered land: Cl 89(2). [Back] Note 167 Trusts of Land and Appointment of Trustees Act 1996, s 2. [Back]
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