OPINION OF LORD HAMILTON in the cause M.R.S. HAMILTON LIMITED, Pursuer; against THE KEEPER OF THE REGISTERS OF SCOTLAND, Defender:
________________ |
18 June 1998
In 1838 the then heritable proprietor of the Blackwood Estate in the County of Lanark granted to John McCrae a lease of a piece of ground comprised within that estate. The duration of the lease was 999 years from the date of entry which was declared to be Whitsunday 1836. Tack duty in the sum of £1-14/- yearly was payable. To the south of the piece of ground ran the Glasgow and Carlisle Turnpike Road; to the north lay other land belonging to that proprietor. No plan was attached to the lease. The lease was ultimately recorded in the Division of the Register of Sasines for the County of Lanark on 27 January 1882.
The Blackwood Estate subsequently passed through a number of hands. Between 1972 and 1991 the heritable proprietor was the West European Building Corporation Limited ("WEBCO") which in the latter year conveyed it to a Mr Douglas, a director of that company. In 1994 Mr Douglas conveyed it to the pursuer.
From some time in the 1970s the subjects of lease were used as garage premises by a series of persons who successively were in right to the lessee's interest under the lease. In January 1986 one of those persons, the firm A.W. & M.A. Purves, assigned that leasehold interest to the firm Zamarra Services (Blackwood). That assignation was the first which had occurred in respect of that interest since the County of Lanark had become an operational area under the Land Registration (Scotland) Act 1979. With effect from 4 February 1986 the subjects (by then known as 231 Carlisle Road, Kirkmuirhill) were, following an application to him by Zamarra Services (Blackwood), registered by the defender under the title number LAN 18886. In about November 1987 the defender issued to the applicant a relative land certificate. Following subsequent transactions involving addition and consolidation the subjects are now registered under title number LAN 34915.
The title sheet of the interest registered under title number LAN 18886 included, as required by section 6(1) of the 1979 Act, a description of the land based on the Ordnance Map. The subjects so described were, as it has subsequently appeared, more extensive than those let by the lease of 1838. They included an area (referred to for convenience as the "back land") lying to the north of the ground so let and being immediately prior to that registration ground forming part of Blackwood Estate not subject to any express lease. The back land had, however, for some years prior to 1986 been possessed by the lessee or lessees under the lease; there is an as yet unresolved issue whether that possession was for a period sufficient and on a title habile to instruct positive prescription. The defender contends and the pursuer disputes that prior to first registration the lessee under the lease had by positive prescription acquired an unchallengeable title to the back land.
The defender did not on registering the interest exclude under section 12(2) of the 1979 Act any right to indemnity in respect of the description of that interest. The persons in right to the interest so registered have not consented to the rectification of the register in respect of that description. By letter dated 8 December 1994 the defender, in response to an application for rectification submitted by the pursuer, intimated that, the title having been registered without exclusion of indemnity and the current registered proprietors in possession being unwilling to consent to rectification, he was not empowered under section 9 of the 1979 Act to rectify the title. On the assumption that by inclusion of the back land the title as registered contained an inaccuracy the defender's letter of 8 December 1994 constitutes in effect a refusal under section 12(1)(b) of the 1979 Act to make a rectification of that inaccuracy.
In this action the pursuer sues the defender for payment on the contention that it has suffered loss as a result of that refusal and is accordingly entitled, under section 12(1) of the 1979 Act, to be indemnified by the defender in respect of that loss. In support of that contention the pursuer avers inter alia:
"When WEBCO conveyed what then remained of Blackwood Estate to Mr Douglas the directors were unaware that the said land" (i.e. the back land) "was comprised in the estate and not let under a long lease. They were not aware of the error made by the defender. The consideration given by Mr Douglas to WEBCO was accordingly not affected by the occurrence of the error. When Mr Douglas disponed parts of Blackwood Estate to the pursuers he was not aware that the said land was comprised in the estate and not let under a long lease. He was not aware of the error made by the defender. The consideration given by the pursuers to Mr Douglas was accordingly not affected by the error...".
These averments are designed (by excluding the two immediately preceding proprietors of the Blackwood Estate as persons suffering loss by reason of the assumed error) to support the pursuer's claim that it has suffered loss directly. The pursuer has an alternative claim (discussed later) that it is entitled, as assignee ultimately of WEBCO, to be indemnified by the defender in respect of loss sustained by WEBCO, the proprietor of the Blackwood Estate at the time of first registration of the leasehold interest.
For the purposes of this action certain matters are agreed between the parties. These include the accuracy of certain documents, including a Minute of Agreement dated 5 June 1994 entered into between Mr Douglas and the pursuer. Paragraph 1 of that Minute provided:
"[Mr Douglas] will immediately following the signing of this agreement dispone to [the pursuer] the subjects conveyed by the West European Building Corporation Limited and recorded in the General Register of Sasines for the County of Lanark 24th October 1991."
That Minute of Agreement, which constituted a binding agreement for the sale and purchase of the Blackwood Estate (under certain exceptions), was subsequently amended by agreement; but the particular terms of that amendment are unimportant for present purposes.
The Primary Issue
The primary issue discussed at debate was whether the pursuer had relevantly averred that it had itself suffered loss as a result of the defender's refusal on 8 December 1994 to rectify the register. The submission presented on this aspect of the case by Mr Bevan and developed by Mr Campbell, each on behalf of the defender, may be summarised as follows. There were two essential elements to a relevant claim under section 12(1)(b), namely, (1) that loss had been sustained by the claimant and (2) that that loss had been caused by a refusal to rectify the register. It was plain, it was argued, from the pursuer's averments and the agreed documents (which included the terms on which the pursuer had purchased from Mr Douglas) that the pursuer had never been entitled to vacant possession of the back land and had not contracted to purchase on the basis of any such entitlement. The legal effect of first registration of the leasehold interest in 1986 had been to vest in the person so registered a real right, as lessee under a long lease, in subjects which included the back land and thus immediately to exclude the proprietor of Blackwood Estate from any right to vacant possession of that back land. Thus, the subjects which had been conveyed in 1991 by WEBCO to Mr Douglas were under exclusion of any right to vacant possession of the back land. It was subjects under that exclusion which the pursuer had agreed to buy and which it had in fact received. The pursuer had obtained all that Mr Douglas had ever had. The defender's refusal to rectify the register had not caused any loss to the pursuer. There had been no diminution of its assets; the pursuer had not incurred any wasted expenditure; it had not been deprived of any benefit to which it was entitled. No detriment had been caused to the pursuer which required it to be compensated. While rectification, if granted, would have made a difference to the pursuer, that difference would have been the receipt of a gain; its refusal was not the suffering of a loss. The situation might usefully be contrasted with what would have been the position had WEBCO, while still proprietor of the Blackwood Estate, discovered what had occurred and applied for and been refused rectification; it, subject to proof of value, would have suffered a loss because it had had prior to that registration the right of vacant possession of the back land, had been deprived of it by the registration and had been refused rectification. The scheme of the statute was to indemnify persons who had actually suffered loss, not to oblige the Keeper in all circumstances to pay the value of some "lost heritable right". On the pursuer's averments neither WEBCO nor Mr Douglas had been aware of the status of the back land. The price which each had received on the respective sales had not in either case been adversely affected by the consequences of any error at first registration. Any "black hole" in respect of lost value had been created simply by WEBCO's ignorance of the factual circumstances. In the result none of the three last proprietors of the Blackwood Estate had suffered loss and no claim was accordingly maintainable. The pursuer's averments were irrelevant to instruct any claim and the action should be dismissed.
Mr Tyre for the pursuer submitted that the pursuer's claim that it had suffered loss as a result of the defender's refusal to rectify was relevant for inquiry. It was accepted that the pursuer's entitlement under its contract with Mr Douglas was to get what Mr Douglas had acquired from WEBCO in 1991 and that what Mr Douglas had then acquired was, inter alia, the back land subject to a lease. It was, however, indisputable that someone had sustained a real loss. Land which had been free from the encumbrance of a lease had, by reason of the first registration, become subject to a lease with more than 800 years to run. The owner's interest in that land had been rendered virtually worthless. The scope of the leased subjects had been extended without even an increase in the rent. No question of fault or blame arose but there had in effect been expropriation. A state guaranteed system of land holding was designed to deal by indemnification with the effects of errors in registration. The defender's contention, amounting as it did to the proposition that a real loss had disappeared into a black hole without the prospect of recovery, was unattractive and should be rejected. The proper way to test whether loss had been suffered was to compare what had in fact occurred against the hypothetical situation that on first registration indemnity had been excluded by the defender. On that hypothesis and assuming that there was unawareness by WEBCO and Mr Douglas as the pursuer averred, the pursuer on acquiring Blackwood Estate and discovering the error would have been able to present a case for rectification which the defender would have had power to grant. On such rectification the pursuer would have been able to secure possession of the back land. Its deprivation of the benefit of being able to secure such possession constituted a real loss. Deprivation of benefit, including loss of opportunity to exploit property in the future, could properly be categorised as a loss. It was appropriate to adopt a realistic approach. The Lands Tribunal had, in M.R.S. Hamilton Limited v The Keeper of the Registers of Scotland (19 May 1998, unreported), adopted a practical approach to loss in relation to a similar issue between the same parties. Such an approach should be adopted here.
Section 12(1) of the 1979 Act provides:
"Subject to the provisions of this section, a person who suffers loss as a result of -
(a) a rectification of the register made under section 9 of this Act;
(b) the refusal or omission of the Keeper to make such a rectification;
(c) the loss or destruction of any document while lodged with the Keeper;
(d) an error or omission in any land or charge certificate or in any information given by the Keeper in writing or in such other manner as may be prescribed by rules made under section 27 of this Act,
shall be entitled to be indemnified by the Keeper in respect of that loss."
Mr Campbell, in the course of his submission, acknowledged that the refusal by the defender to rectify the register made a practical difference to the pursuer. As a result of that refusal the pursuer was unable to secure vacant possession of the back land. In these circumstances no serious issue, in my view, arises regarding a causal link between that state of affairs and the defender's refusal to rectify. The sole issue on this aspect of the case is, accordingly , whether the pursuer's inability to secure such vacant possession constituted a "loss" to it within the meaning of section 12(1). In my view, it did.
It is of importance to bear in mind the nature of the change to security of title which the 1979 Act brought about. In place of a system largely dependent on examination of deeds recorded in the Sasine Register, the Act introduced a state guaranteed system of registration of title. Persons became entitled to rely on the contents of the relative title sheet (as reflected in a land certificate or authenticated copy title sheet) as the measure of real rights in respect of interests in land. The possibility of inaccuracy in the registration process was recognised. Among other consequences of inaccuracy valuable "true" rights might be lost. Against the prospect of loss (including loss as a result of an unrectified inaccuracy) a system of state indemnity was provided unless in a particular case expressly excluded under section 12(2) by the Keeper on registration. Under the Sasine system a proprietor of land who discovered that possession had without agreement or permission been taken by another of that land or part of it was, unless a real right had been obtained by the possessor through positive prescription, entitled to take proceedings to remove the possessor. The entitlement to do so was vested in the proprietor for the time being, notwithstanding that possession had first been taken during the proprietorship of his immediate or a remoter predecessor in title. Had the Sasine system continued in operation in Lanarkshire, the pursuer would have been entitled to secure such possession of the back land. As events have occurred, it is unable to do so. That is because the defender has refused to rectify the register so as to reflect the "true" position, that refusal being the inevitable consequence where, as here, (1) indemnity was not excluded and (2) the affected person (viz the possessor or its successor in title) has not consented to rectification. In my view the disadvantage which the pursuer has suffered as a result of the events which have happened can properly be described as a "loss" and is, at least prima facie, apt for indemnification under section 12. It is, in my view, an unduly narrow approach to the concept of loss for the purposes of that section to concentrate on the circumstance that the pursuer at no time during its ownership had a real right which included the right to vacant possession of the back land. That is to fail to recognise the genesis of the chain of events which led to the inability of the pursuer to secure such possession. Where it can be demonstrated (as the pursuer here offers to demonstrate) that no other person having had proprietorial rights in respect of the Blackwood Estate has been compensated for the diminution in the scope of those rights, the pursuer as the proprietor who first became aware of such diminution and has been refused rectification may properly be regarded as a person who, at least prima facie, has suffered loss as a result of that refusal. No doubt if it were to be demonstrated that financial account had already been taken of the prospect of such refusal (by adjustment of the purchase price paid by the pursuer or otherwise) its prima facie loss might be reduced or extinguished; but no such demonstration is offered here.
In M.R.S. Hamilton Limited v The Keeper the Lands Tribunal (Lord McGhie sitting alone) considered a similar issue. The context was an appeal to it under section 25(1) of the 1979 Act against a refusal by the Keeper to indemnify the appellant following failure by the Keeper to rectify the register in respect of omission from the title sheets of five residential household properties in Kirkmuirhill (also part of the Blackwood Estate) of casualties appearing in the relative leases. A number of issues were discussed and decided by the Tribunal including a preliminary issue concerned with title and interest to sue. The Tribunal interpreted the submission made on behalf of the Keeper as properly being a challenge to interest. In rejecting the Keeper's submission that the appellant had no interest, the Tribunal said at page 15:
"However it is important to look at the nature of the loss contemplated by the Act. In the first place it is plain that no provision is made for loss arising simply from omission or error in the title sheet as such. There is nothing in section 12 dealing with loss on first registration. On the contrary, title to claim indemnity appears to be given to the party faced with the consequences of any of the events there set out. With the possible exception of section 12(1)(c) the subsection deals with events which would only occur sometime after first registration. The legislators must have been aware of the possibility of changes in title during such a period. It is loss to the party faced with one or other of the events specified which appears to be contemplated by the Act. Secondly, we have regard to the purpose to be served by the indemnity. The scheme for indemnity was necessary because the public benefit of certainty of the Register meant that parties had to lose the benefit of the right they had under the former Sasine system to go behind the recorded title. Under that system, if a party had better evidence to establish his rights, the adverse Sasine title would not necessarily prevail. Although the bases of loss set out under section 12(1) are varied, it seems clear that the right provided by section 12(1)(b), to indemnity based on refusal to rectify is due to recognition that the claimants have lost their ability to rely on the rights they would have had under the rules of the Sasine system. The underlying basis of the present appellants' claim is that they have lost the rights that they would otherwise have been able to rely on. This fits the scheme of the Act."
I agree with those observations which are equally applicable to the present circumstances. I also agree with the Tribunal that the contention for the Keeper (which would in the circumstances deny the validity of a claim not only by the present proprietor but also by WEBCO or Mr Douglas) runs the risk of consigning all loss into what Lord Stewart in G.U.S. Property Management Limited v Littlewoods Mail Order Stores Limited 1982 S.C. (H.L.) 157 at p.166 strikingly described as "some legal black hole". No doubt black holes may exist in the law as they do in space; but their creation is not readily to be supposed to have been intended by Parliament.
In the whole circumstances I am satisfied that the pursuer's averments that it has itself suffered loss as a result of the defender's refusal to rectify the register are relevant for inquiry.
Issues in the alternative
In the alternative the pursuer claims as assignee to be entitled to be indemnified by the defender against loss. By a document styled "General Conveyance" dated 8 December 1995 but in part implement of a Minute of Agreement dated 31 March 1990 WEBCO transferred certain assets to Mr Douglas. By Assignation dated 23 August and 10 September 1996 Mr Douglas assigned certain rights to the pursuer. The pursuer's claim as assignee proceeds on the basis of those documents. It accordingly sues for loss allegedly sustained by WEBCO, the proprietor of the Blackwood Estate in 1986 when the assignation of the lease in favour of Zamarra Services (Blackwood) was registered.
A number of issues arise on this branch of the case, namely, (1) whether the pursuer has relevantly averred any loss suffered by WEBCO, (2) if so, whether that loss is "loss as a result of... an error or omission in any land... certificate" within the meaning of section 12(1)(d) of the 1979 Act, (3) whether any relevant claim vested in WEBCO was transmissible, (4) if so, whether it was effectually transmitted to the pursuer, the issue being whether the General Conveyance in favour of Mr Douglas was apt to carry that claim, and (5) whether any relevant obligation has been extinguished by the operation of section 6 and paragraph 1(d) of Schedule 1 to the Prescription and Limitation (Scotland) Act 1973.
I am reluctant to express concluded views on some of those issues at this stage. That reluctance stems to some extent from the circumstance that, if the pursuer proves its averments in support of its direct claim and my view as to the relevancy of that claim is well founded, those issues on the alternative basis of claim do not arise. It stems also from the circumstance that it is not possible to be confident at this stage of the precise factual basis on which after proof some of those issues will require to be addressed, if they require to be addressed at all. However, as those issues were fully argued, I express the following views on them.
Issue (1)
The pursuer's averments do not set out an alternative narrative of fact in support of its alternative claim. It contents itself with the proposition
"Alternatively esto (which is denied) the loss and damage has been sustained either by WEBCO or by Mr Douglas, the pursuers are entitled as assignees of WEBCO and Mr Douglas to be indemnified for the said loss and damage",
with a reference to the General Conveyance and to the Assignation and with the averment "The value of the land has not changed materially since October 1991" (the time of conveyance by WEBCO to Mr Douglas). Those averments do not exclude the possibility that Mr Douglas may somehow have been the person who sustained damage directly, though a more likely candidate is WEBCO as proprietor of the Blackwood Estate in 1986. The loss in the latter case would be the exclusion of WEBCO from its right to vacant possession of the back land as a result of the real right to such possession accruing to Zamarra Services (Blackwood) on registration of the assignation in its favour that year.
The argument for the defender was that in the events which, according to the pursuer's averments, had occurred, namely, the subsequent sale to Mr Douglas without any diminution in the sale price by reason of any loss in 1986, no actual loss had been sustained by WEBCO. That argument would appear sound on the assumption that the pursuer's averments about lack of awareness by WEBCO and Mr Douglas are in the event proved. It does not deal with the situation where they are not proved. In the particular circumstances of this case I would not be disposed to exclude the pursuer's alternative claim on the ground that there are no relevant averments of loss by the cedent. The pursuer's primary claim excludes such loss but, if the whole factual basis for that primary claim is not established, the proven facts may yet found an alternative claim. Mr Tyre acknowledged that, if the pursuer's averments were only proved to some extent, the court might be in some difficulty in deciding which of three candidates, namely, WEBCO, Mr Douglas and the pursuer, had suffered loss in the first instance; but, as these were the only three candidates and, if the pursuer's other contentions were well founded, the pursuer was now in right to all three claims, such difficulty was, it was submitted, technical rather than real. I accept that submission. In these circumstances, this ground of challenge by the defender cannot be upheld at this stage.
Issue (2)
Neither WEBCO nor Mr Douglas applied to the Keeper for rectification and accordingly neither was refused that remedy. It was acknowledged by Mr Tyre that any claim by the pursuer as assignee must accordingly be under section 12(1)(d) of the 1979 Act. The contention was that on the alternative submission a loss was suffered by WEBCO as a result of an error in the land certificate issued to Zamarra Services (Blackwood).
Mr Campbell submitted that section 12(1)(d) did not provide a relevant basis for any claim by a cedent of the pursuer. That sub-paragraph, in so far as it related to any error or omission in any land or charge certificate, was, the argument ran, concerned with errors in the certification process i.e. errors in transcription from the title sheet to the issued certificate. It was not concerned with any error or omission in the title sheet itself. Reference was made to section 5(2) and (4) of the Act. The remainder of section 12(1)(d) was concerned with information in writing, such as reports of searches on title, given by the Keeper in the course of his management of the register.
The issue of the scope of section 12(1)(d) was touched on by the Lands Tribunal in M.R.S. Hamilton Limited v The Keeper. At pps.19-20 the Lands Tribunal said:
"It may be that section 12(1)(d), like section 12(1)(c), was inserted to cover the risk of clerical or administrative error, and that the risk of an inaccurate copy was, indeed, in mind, but we cannot accept that the provision as enacted is restricted to deficiencies in copying. It covers errors or omissions in information given by the Keeper in writing and that must be error or omission assessed by reference to the true facts. A Land Certificate which does not include a burden which should have appeared on it, can be said to contain an omission even if the explanation for the omission is that it was missed from the title sheet."
I am inclined to concur in those observations. The language of the sub-paragraph is not confined to errors of transcription and I see no good reason for giving
to it a restricted interpretation. If, for example, it were demonstrated that a past proprietor had, as a result of an error in a land certificate issued to a neighbouring proprietor, in fact suffered loss by diminution of the price obtained on sale (because of restriction of or uncertainty as to the scope of the subjects to be conveyed) a claim under section 12(1)(d) might be the appropriate vehicle for indemnification; a question might also arise as to whether a person no longer having an interest in affected land could validly apply for rectification of the register, particularly if for any reason the current proprietor in possession did not consent to such rectification.
Issue (3)
Mr Bevan submitted that a claim for indemnity under section 12 was not of its nature assignable. He referred to section 12(1), (3)(a) and (3)(n) and to section 13(4). There was in the statutory language a close equiparation of the claimant to the person who had actually suffered loss. It would cause practical difficulties, for example in relation to identification or investigation under section 12(3)(n), if a fraudulent or careless act or omission of "the claimant" included that of a person other than the person actually making the claim. It was recognised that in general the law of Scotland allowed incorporeal moveables to be assigned (Libertas-Kommerz GmbH, Appellants 1978 S.L.T. 222, per Lord Kincraig at p.224). That case was, however, distinguishable in respect (1) that it was concerned with a statutory form of assignation, (2) the amendment effected to the relevant legislation by the Companies (Floating Charges and Receivers) (Scotland) Act 1972 had provided a remedy and (3) assignation of commercial debts was very different from assignation of a claim to indemnity from the Keeper. It was not the intention of Parliament to allow an assignation of a claim under section 12(1). The decision of the Lands Tribunal on the same issue in M.R.S. Hamilton v The Keeper at pps.38-9 was wrong and not binding on this court. Mr Campbell adopted those submissions.
Mr Tyre submitted that, with very limited exceptions, incorporeal personal rights were transmissible. He referred to Traill & Sons v Actieselskabat Dalbeattie Limited (1901) 6F. 798, per Lord Kinnear at p.806, Libertas-Kommerz GmbH, Appellants and McBryde on Contract, para.17-35. There was nothing in the 1979 Act nor in any relevant public policy to exclude assignability of claims under section 12(1). The Keeper suffered no prejudice by a change in the identity of the person entitled to payment. He was in no worse a situation in relation to careless acts or omissions where these were of a cedent than where they were those of the immediate claimant. The Land Tribunal's reasoning was adopted. In some statutory provisions (e.g. under the Social Security Acts) assignation was expressly excluded; there was no such exclusion here. It would be odd, where express provision was made under section 13(3) for assignation of rights to the Keeper, that rights against the Keeper should be non-assignable.
In my view the pursuer's submissions on this aspect of the case are to be preferred. There is no express exclusion of assignation of claims under section 12(1) of the 1979 Act and nothing in the words or scheme of the statute which by implication points to that result. The implication from the terms of the statute and from the common law background is, in my view, to the contrary. It would also be remarkable if claims did not pass by involuntary assignation (e.g. to a trustee in bankruptcy or to an executor-dative); I see no justification for excluding claims passing by voluntary assignation.
Issue (4)
This issue turns on interpretation of the General Conveyance granted by WEBCO to Mr Douglas, it not being disputed that, if a claim was vested in Mr Douglas, the Assignation by him was apt to carry it to the pursuer.
The General Conveyance provides, in so far as material, as follows:
"WE, West European Building Corporation Limited... CONSIDERING that the Company is about to be removed from the Register of Companies at our request and that any residuary assets should be conveyed to DUNCAN SCOTT DOUGLAS... Therefore we, in part implement of the said Minute of Agreement" (which was annexed and signed as relative thereto) "and, without prejudice to the foregoing generality of Clause 9 thereof in particular, hereby DISPONE and CONVEY to and in favour of the said Duncan Scott Douglas and his Executors and Assignees whomsoever the whole remaining assets, heritable and moveable, real and personal belonging to us, together with all books of accounts, records, documents and titles presently in the hand of us the Company and hereafter accruing or accrescing to us notwithstanding the date hereof; And we assign all rents, feuduties, ground annuals, casualties, and debts due or to become due to the Company including arrears thereof whether demanded or not and whether heritable or moveable to the said Duncan Scott Douglas and his foresaids...".
Clause 9 of the annexed Minute of Agreement provided:
"Therefore we the Company have agreed to dispose of the whole assets of the Company, real, personal, moveable or heritable to the said Duncan Scott Douglas at a price which is not less than £220,000...".
Mr Bevan submitted that the only part of the General Conveyance which was potentially relevant to any transmission of the claim for indemnity was the clause of assignation, the earlier clause of disposition and conveyance being apt to carrying only corporeal property. On a sound construction of the assignation clause it did not carry the claim to indemnity. A useful comparison could be made with the detailed and specific Assignation by Mr Douglas to the pursuer. Mr Tyre in response did not seek to rely on the assignation clause but on the preceding clause which he submitted was apt to carry the claim for indemnity. The deed read as a whole bore to be an exhaustive transfer of the whole remaining assets of a company about to be removed from the Register of Companies. Reference to clause 9 of the Minute of Agreement confirmed this. On the assumption that WEBCO had a claim for indemnity, that claim was one of its remaining assets. Reference was made to Skarpaas v Skarpaas 1993 S.L.T 343 at p.344D (where a claim for damages was described as an asset). There was no magic in the words "DISPONE and CONVEY" which were not restricted to the transfer of corporeal rights. It was accepted that on this construction the assignation clause was surplusage. Reliance was placed on the decision of the Lands Tribunal in M.R.S. Hamilton Limited v The Keeper at pps.39-40. Mr Campbell in response emphasised that the words "DISPONE and CONVEY" were apt to transmit corporeal property, that the following sentence was introduced by "And" (indicative of an additional transfer) and that a clause should not readily be supposed to be otiose. Clause 9 of the Minute of Agreement did not advance the pursuer's argument.
In my view, on the assumption that immediately prior to 8 December 1995 WEBCO had a valid claim against the defender under section 12(1)(d) of the 1979 Act, the right to pursue that claim was by the General Conveyance of that date effectually transmitted by it to Mr Douglas. It is plain that the context of the deed was the imminent removal of WEBCO from the Register of Companies and that it was the intention that any residuary assets should prior thereto and in furtherance of the Minute of Agreement be transferred to Mr Douglas. On the assumption stated above any claim under section 12 was plainly an asset of WEBCO. The only question is whether the language employed in the dispositive parts of the deed was effectual to transmit it. In the opening narrative the word "conveyed" is used with reference to assets which would naturally include non-corporeal assets. In clause 9 of the Minute of Agreement (to which reference can, in my view, legitimately be made to resolve any ambiguity) the expression "dispose of" is used in a similar context; that expression is apt to cover non-corporeal as well as corporeal property. In these circumstances the words "DISPONE and CONVEY" in the dispositive clause are, in my view, apt when used with reference to "the whole remaining assets" to cover assets which technically are transmissible by assignation. The following clause may be surplusage but I am not satisfied that its existence is sufficient to negative the preceding clause having effect as an exhaustive transmission of the whole remaining assets of WEBCO including any claim under section 12(1).
Issue (5)
The defender contends that any obligation of the Keeper under section 12(1)(d) of the 1979 Act, in so far as owed to WEBCO or Mr Douglas and upon which the pursuer sues as assignee, has been extinguished by the short negative prescription; it is not contended that the direct claim by the pursuer (under section 12(1)(b)) has so prescribed.
It is unnecessary to set out the terms of section 6 of the Prescription and Limitation (Scotland) Act 1973 which are familiar. The sole issue was whether any obligation under section 12(1)(d) had prescribed as being an obligation to which section 6 applied as falling within paragraph 1(d) of Schedule 1 to the 1973 Act. That paragraph reads:
"to any obligation arising from liability (whether arising from any enactment or from any rule of law) to make reparation."
Mr Bevan submitted that any obligation of the defender owed to WEBCO (or Mr Douglas) was an obligation arising from liability to make reparation, liability in this case arising from the 1979 Act. There had, on the pursuer's averments, been a wrong in 1986 when an error had been made in making up the title sheet. Although that error may not of itself have given rise to any immediate obligation on the Keeper, it was fundamental to the situation from which any obligation to indemnify under section 12 arose. Miller v City of Glasgow District Council 1988 S.C. 440 was distinguishable. It turned largely on the remedy sought by the pursuer, namely, of reinstatement of the property. Holt v City of Dundee District Council 1990 S.L.T. (L.T.) 30 (which turned on the specialities of planning legislation) was distinguishable. The decision of the Lands Tribunal in M.R.S. Hamilton Limited v The Keeper at pps.28-31 rejecting the Keeper's argument on prescription was wrong and should not be followed.
Mr Tyre submitted that the pursuer's claim as assignee for indemnity did not fall within paragraph 1(d) of Schedule 1. The key elements under that paragraph were (1) damages and (2) redress for a wrong. A remedy of indemnification was distinct from a remedy of damages. Moreover, no question arose under section 12 of there being redress for a wrong. The claimant did not require to prove that the Keeper had been blameworthy or at fault. The Keeper could not be said to be committing a wrong by refusing to rectify the register in circumstances where he was disabled from doing so. Even if one had regard to the earlier event of registration, the making of an erroneous entry in the title sheet did not necessarily point to blameworthy conduct. Such error could be made quite innocently without any fault on the part of the Keeper. Reference was made to the circumstances in Short's Tr. v Keeper of the Registers of Scotland 1994 S.C. 122 and 1996 SC (HL) 14. Neither Miller nor Holt was distinguishable. The present case was very similar to compensation for compulsory purchase. The views expressed by the Lands Tribunal in M.R.S. Hamilton Limited v The Keeper were adopted. In any event this plea could not be disposed of in the defender's favour at this stage given the pursuer's invocation of the extension provision in section 11(3) of the 1973 Act.
Mr Campbell in development of Mr Bevan's submission referred to paragraph 31.1 in Gloag and Henderson - Introduction to the Law of Scotland (10th Ed.) where it is said:
"A legal wrong may be defined as an invasion of the legal rights of another without lawful justification or excuse."
"Reparation" was a wide concept. It was not restricted to circumstances where there was culpa. Reference was made to edictal liability of innkeepers, to liability for animals (now under the Animals (Scotland) Act 1987), liability for interference with the natural flow of water and liability under the Factories Acts. At the root of the pursuer's claim as assignee was a claim that its predecessor's property rights had without lawful justification or authority been interfered with, the 1979 Act not authorising erroneous land registration. It was inherently unlikely that Parliament should have intended that a claim under section 12(1) of the 1979 Act should remain live until the expiry of the long negative prescriptive period of 20 years.
In my view an obligation on the Keeper correlative to an entitlement of a person to be indemnified under section 12(1) of the 1979 Act is not an obligation of the kind referred to in Schedule 1(d) to the 1973 Act. That sub-paragraph was the subject of interpretation in Miller where Lord Grieve in delivering the Opinion of the Court said at p.444:
"The first matter to consider is the generally accepted meaning of the word 'reparation' in the law of Scotland. From the authorities to which we were referred it is apparent that the word is used in the sense of 'reparatio injuriarum' and is a pecuniary remedy which the law of Scotland affords for a loss caused by a wrong."
His Lordship then distinguished liability to make reparation from liability arising from breach of contract. He then stated that the meaning to be given to "reparation" in paragraph 1(d) was not wider or different than it would normally receive in the law of Scotland.
The reference to "a pecuniary remedy" in the passage quoted above arose because of a specialty of that case in which what was sought was a remedy ad factum praestandum. That specialty does not detract from the conclusion that reparation is "reparatio injuriarum" i.e. redress for legal wrongs. Any obligation on the Keeper to indemnify under the 1979 Act is an obligation arising under section 12(1) of that Act and it is to that section that regard must be had in classifying the obligation. Moreover, there is no justification, in my view, for discriminating for the purposes of such classification among the different events referred to in sub-paragraphs (a) to (d) of section 12(1). In my view an obligation to indemnify a person who has suffered as a result of any of the events there mentioned is not an obligation to make reparation. The concept of wrongdoing is not referred to in the sub-section nor is such a concept either necessary or appropriate to it. Statutory provision for state indemnity does not import that an event giving rise to indemnity is wrongful. It imports that, having regard to the general benefit which it is conceived the scheme as a whole will bring, it is right that financial compensation be provided for individuals who are adversely affected by its operation. It is immaterial, in my view, that in some circumstances an earlier event, such as one occurring in the making up of a title sheet, has involved a mistake and that that mistake has resulted in interference with the rights of others. The Keeper does not, in my view, commit a legal wrong against a person with a relevant interest in land by making an erroneous entry in a title sheet, albeit the making of such an entry may in some circumstances result in the Keeper coming under an obligation to indemnify such a person. The indemnification provisions in the 1979 Act are no more concerned with liability for legal wrongs than are the compensation provisions on compulsory purchase discussed in Holt. They are not concerned with redress for breach of a statutory or other duty. If Parliament in enacting the 1979 Act had intended that claims for indemnification under section 12(1) should be subject to the short negative prescription, it would, in my view, have made an appropriate amendment to the 1973 Act (as it did by section 10 in relation to positive prescription). It did not do so. In my view the defence in so far as based on the short negative prescription is irrelevant and can properly be repelled at this stage.
Remaining Issues
The defender has pleas-in-law to the effect that, if indemnity would otherwise be payable to the pursuer, it falls to be excluded under section 12(3)(n), which failing reduced under section 13(4).
Section 12(3) provides:
"There shall be no entitlement to indemnity under this section in respect of loss where -
...
(n) the claimant has by his fraudulent or careless act or omission caused the loss."
Section 13(4) provides:
"If a claimant to indemnity has by his fraudulent or careless act or omission contributed to the loss in respect of which he claims indemnity, the amount of the indemnity to which he would have been entitled had he not so contributed to his loss shall be reduced proportionately to the extent to which he has so contributed."
No question of fraudulent act or omission is raised nor of any careless act by the pursuer personally. The only basis on which those statutory provisions are invoked on averment is in respect of alleged careless omissions by the pursuer's predecessors in title. The material averments (in Answer 4) are:
"In any event, WEBCO became infeft in the Blackwood Estate on 11 January 1972. Mr Douglas was a Director of WEBCO from at least that date and remained a Director after first registration of the Leasehold interest of 231 Carlisle Road on 4 February 1986. WEBCO was a property company. The terms of the recorded lease of 231 Carlisle Road were either known or ought to have been known to WEBCO and Mr Douglas. WEBCO and Mr Douglas countenanced and acquiesced in the possession by the tenants from time to time of an area of greater square measure than was mentioned in the lease... The pursuers' authors have caused their own loss by their careless omissions. They have countenanced and acquiesced in the possession by the tenants from time to time of an area of greater square measure than was mentioned in the lease. The pursuers are accordingly not entitled to indemnity from the defender.... Further and in any event, if the pursuers have a valid claim for indemnity, which is denied, the amount thereof should be significantly reduced because of the contribution of WEBCO and Mr Douglas to any loss suffered."
The defender later (in Answer 5) avers:
"In any event, esto an error was made by the defender, which is denied, Mr Douglas or his agents were aware, or ought to have been aware, on the examination of title prior to his acquisition of Blackwood Estate in 1991 of the terms of the said lease and of the Title Plan to the Land Register. He accordingly was aware or ought to have been aware of any discrepancy between the subjects as described in the lease and as shown on the said Title Plan."
Mr Tyre submitted that these averments were irrelevant on three grounds - (1) it was not careless not to challenge the possession taken by a tenant of a larger area than that referred to in the lease; ownership of land did not stand in need of assertion (reference was made inter alia to Cowan etc. v Lord Kinnaird (1865) 4 Macph. 236 and to Earl of Kintore v Pirie & Sons Limited (1903) 5F. 818); moreover this was a large estate in which relatively small encroachments might readily pass unnoticed; there was no obligation on a proprietor in an operational area to check whether his neighbour had assumed possession beyond his true boundaries nor to check his neighbour's title as registered from time to time; (2) there was in any event no averment by the defender that the pursuer's authors were aware that they were entitled to the back land; how, Mr Tyre asked rhetorically, could there be carelessness or acquiescence without such awareness?; (3) there was no averment of any causal link between any carelessness or acquiescence and the loss caused by registration; there was nothing to suggest that any failure by the pursuer's authors had caused or contributed to the terms in which the defender had effected registration; there was nothing to suggest that the defender carried out any check in relation to possession before registering, without exclusion of indemnity, an extended area in the description of the leased ground.
Mr Campbell submitted that these averments were relevant for inquiry. Unauthorised possession over a period of years by another of land owned by the pursuer's authors showed, in the absence of any explanation, a lack of attention. It had increased the risk of error by the defender when faced with the task of registration in 1986 in circumstances where the whole back land was and had for some time been occupied by the tenant. The applicant had supplied with its application a plan purportedly descriptive of the extent of the leased area. There had been nothing physically on the ground to suggest that there was any difficulty or error in that material. It was asking too much to demand a positive averment by the defender of awareness by the pursuer's authors that the back land was land over which they had the right of possession. If those authors were in fact ignorant, that ignorance itself pointed to carelessness. Moreover, such carelessness might impinge on the pursuer's direct claim.
It is in general true that at common law silence and non objection by a proprietor of land to operations by his neighbour affecting it does not, unless the circumstances give rise to positive prescription or to waiver (the latter amounting to implied consent), gave rise to a loss of proprietorial rights or of the right to assert them. I am not, however, persuaded that the same considerations necessarily apply to "careless omission" for the purposes of exclusion or reduction of indemnity under sections 12(3)(n) and 13(4) of the 1979 Act. If in an operational area a proprietor so neglects his interests that substantial encroachment or other intrusion followed by protracted peaceable possession is effected by his neighbour, a situation may well be created on the ground which causes or contributes to an inaccuracy entering the register. In such circumstances that proprietor's failure to act may, in my view, constitute a careless omission for the purposes of the 1979 Act. Much will depend on the particular circumstances.
In the present case there are apparently two elements to the defender's contention - (1) a suggestion that the pursuer's authors knew or ought to have known of "the terms of the recorded lease of 231 Carlisle Road" and in that knowledge or imputed knowledge countenanced and acquiesced in the tenant's extended possession and (2) a contention that irrespective of any such knowledge the pursuer's authors caused their own loss by countenancing and acquiescing in the possession by a series of tenants of a greater area than that mentioned in the lease. The first element appears in a passage which as drafted proceeded thereafter to advance a contention based on mora. That contention was departed from in the course of the debate. The surviving averments appear to advance a proposition that the pursuer's authors had a responsibility to monitor the terms in which the tenant obtained registration or to examine those terms prior to their own acquisition. Mr Campbell acknowledged that he was not in a position to lead any evidence of conveyancing practice to support such a proposition. Moreover, as there is no suggestion that the pursuer's authors could have had access to the terms of registration or proposed registration before registration in fact occurred, there is no relevant averment of a causal link between any negligent omission based on such knowledge or imputed knowledge and an inaccurate registration rectifiable without the consent of the lessee. Those averments (both in Answer 4 and in Answer 5) are accordingly irrelevant and I shall exclude them from probation.
With some hesitation I am prepared to allow probation of the remainder of the quoted averments on this aspect of the case. These are somewhat lacking in particularisation but whether they have substance or not will depend on consideration after proof of circumstances which are referred to in general terms in the pleadings and the agreed documents. Those include the period of extended possession by successive tenants (said to have been from January 1974), the nature and physical extent of the encroachment or other intrusion (the documents suggest that about 4,000 square metres were occupied whereas the "true" leased area was about 2,000 square metres), the nature of the Blackwood Estate (including the obviousness or otherwise to its proprietors of the fact of encroachment or other intrusion), the knowledge or ignorance in fact of the proprietors of such encroachment or other intrusion and any explanation as to how it occurred without objection. Some reference was also made in the course of argument as to how procedurally the mapped entry in the title sheet came to be made. A letter dated 27 July 1994 giving some history of the matter was also produced. In these circumstances it would, in my view, be premature wholly to exclude at this stage the defender's contentions based on sections 12(3)(n) and 13(4).
The defender also has the following averments:
"Further and in any event, the pursuers or their agents were aware or ought to have been aware of any discrepancy between the subjects as described in the said lease and as shown on the Title Plan. They accepted the position disclosed..."
and later:
"The pursuers, as averred in the preceding Answer, were, or ought to have been similarly aware [of the Title Plan]".
Those averments appear to direct against the pursuer a similar contention in relation to examination of the lessee's title sheet as is directed elsewhere against the pursuer's authors. It is not clear how those averments (which as drafted were part of a contention on waiver) fit into the defender's case; but they are, in my view, in any event irrelevant. As I have held above, no relevant basis is laid for a responsibility on the proprietor (or a purchaser) to examine the title sheets of neighbouring subjects. I shall accordingly exclude those averments from probation.
The defender also has averments directed to the time at which the pursuer became aware of a discrepancy between the area leased and the area in respect of which a registered title had been obtained by the tenant. The pursuer agreed to purchase the Blackwood Estate (under certain exceptions) from Mr Douglas by the Minute of Agreement dated 5 June 1994. It was conceded in the course of argument that that Minute constituted an enforceable contract of sale. That bargain was subsequently varied, in respect of matters unrelated to 231 Carlisle Road, by missives passing in the latter part of August 1994. Mr Douglas conveyed the subjects of sale to the pursuer by disposition dated 12 and recorded in the General Register of Sasines on 20 September 1994, entry being given as at 12 September 1994. On or abut 20 July 1994 the defender received an undated letter from an individual writing on behalf of the pursuer. That letter drew attention to, among other things, the apparent discrepancy between the leased area and that appearing on the relative land certificate issued to the tenant. The writer described the pursuer as "purchasers under missives of the Blackwood Estate". The defender avers:
"Further and in any event, the pursuers were aware prior to their purchase of Blackwood Estate of the terms of the said lease and of the title plan in the Land Register."
Reference is then made to certain documentation. The averments continue:
"The pursuers knew by, at the latest, 20 July 1994 that there was a discrepancy between the area leased and the area to which the assignee had registered a title at 231 Carlisle Road... Thereafter in terms of the said formal missives, which are dated 16 August 1994 and subsequent dates, certain variations were made to the terms of said Minute of Agreement. No reference is made in said missives to the discrepancy. Indeed, rather than offer to reduce the price payable, to take account of the said discrepancy, the pursuers offered to increase same from £25,000 to £30,000. These actions are inconsistent with the pursuers' claim to have suffered loss as a result of said discrepancy. In these circumstances the pursuers proceeded with the purchase of the Blackwood Estate in the full knowledge of said discrepancy...".
Mr Tyre submitted that these averments were irrelevant and should be excluded from probation. Once it was conceded that a binding contract to purchase had been entered into on 5 June 1994, it followed that the letter received on 20 July had been sent only after the pursuer was contractually committed. The fact that there were subsequently mutual variations of the bargain in respect of unrelated matters was irrelevant. Mr Campbell submitted that, notwithstanding the concession that a binding contract was entered into in June, these averments remain relevant for inquiry. In the context of a commercial transaction between Mr Douglas and the pursuer the stage at which the pursuer became aware of the discrepancy had a potential bearing on whether the pursuer had in fact suffered a loss.
I am prepared with some hesitation to allow those averments to proceed to probation. If it be that the pursuer became aware of the discrepancy only on an examination of deeds after it had committed itself to the purchase, it may be difficult, if the pursuer's averments in relation to lack of awareness by its authors are proved, for the defender successfully to refute the contention that the pursuer suffered loss. The circumstance that there were mutual variations in August and that a disposition was not granted until September may be immaterial. However, as the state of awareness or otherwise of the pursuer's authors is to be remitted to probation, there is advantage in exploring in the same context when and in what circumstances the pursuer first became aware of the discrepancy and what opportunities, if any, it had to bring that knowledge into account prior to completion of its bargain with Mr Douglas.
There remains one further issue for determination at this stage. The pursuer avers -
"Separatim by letters dated 17 February 1995 the defender invited the pursuers to agree the extent of the lease and, consequently, the extent of the 'back land', i.e. land depicted in the Title Plan which was not within the lease. By letter dated 20 February 1995 the pursuers' agents confirmed their agreement. It was not suggested by the defender that the description in the lease was habile to include the whole area depicted in the Title Plan. The pursuers have acted upon said agreement to their prejudice. They have proceeded on the basis of said agreement to negotiate settlement of their claim against the defender. They have instructed surveyors to value the 'back land'. In these circumstances the defender is barred from now asserting that the 'back land' was within the area described in the lease."
The pursuer also has a plea in the following terms:
"6 Separatim the defender being personally barred from asserting that the said land has been possessed by tenants for the prescriptive period on a title habile to include it, the defender's eighth plea-in-law should be repelled."
The defender's eighth plea-in-law relates to the contention that the tenant had acquired right to the back land by the operation of positive prescription.
The first of the letters of 17 February 1995 referred to in those averments was addressed on behalf of the defender to an individual who had made certain enquiries on behalf of the pursuer. That letter included the following passage:
"I note your calculation of the area leased less that taken for road widening is 2,051.8 square metres. I calculate it to be 2,057.1 square metres, so we are pretty much in agreement...".
A marked up extract from the Ordnance Survey Map and a relative trace were enclosed depicting the registered and the leased areas respectively. The second of those letters was addressed to the pursuer's solicitors. It enclosed copies of the first letter, of the extract from the Ordnance Survey Map and of the trace and continued:
"Once your client confirms his agreement to our calculation of the extent of the back land, we will then be in a position to proceed with the valuation thereof."
By letter dated 20 February 1995 the pursuer's solicitors acknowledged the letter of 17 February and stated that their clients agreed that the difference between themselves and the Keeper over the amount of area leased was so small as to be of no significance. After a reference to another minor difference in calculation, again regarded as of no significance, the letter continued:
"It would appear that yourselves and our clients are in sufficient agreement now and that the valuation can take place."
On this aspect of the case Mr Bevan initially advanced a contention that this correspondence was inadmissible as having passed in the course of negotiations for settlement. That contention was departed from in the course of the debate. The issue resolved itself into one of relevancy. Mr Bevan submitted that, while the defender had agreed the relative areas as a matter of measurement, he had made no admission which would now bar him from contending that the tenant had acquired by positive prescription prior to 1986 a good title to the extended ground. Mr Tyre submitted that the defender's letters and in particular the quoted passage from that addressed to the pursuer's solicitors, when read with the first letter, gave rise to personal bar by representation. On a fair construction that passage amounted to a representation that the "back land" was not immediately prior to registration in 1986 subject to the lease. The statement by the defender proceeded on the basis, common to both parties at that time, that the back land had been appropriated by the act of registration. Inquiry should be allowed of those averments. Mr Campbell responded that this correspondence had not addressed any matter of prescription, only the matter whether the area depicted in the land certificate was more extensive than the area referred to in the lease. There was no reference in the correspondence to positive prescription. The defender had not made any representation which had induced the pursuer to act in any way in which it would not otherwise have acted nor which barred the defender from maintaining its contention on positive prescription.
In my view the pursuer's averments when read with the relative documents are irrelevant to instruct its plea that the defender is personally barred from contending that the land certificate issued to the tenant accurately reflected the "true" position as a result of the operation of positive prescription. The correspondence concerns only the measurement of areas. While it is implicit in it that there was "back land", no representation or concession was made by the defender that the proprietor of Blackwood Estate would, but for registration, have had in 1986 an indisputable right to vacant possession of it. The issue of positive prescription was simply not addressed. In my view those averments fall to be excluded from probation and the pursuer's sixth plea-in-law repelled.
In the course of the debate Mr Campbell conceded that certain pleas stated by the defender should be repelled. These were plea 1 (no title to sue), plea 5 (mora) and plea 9 (waiver). He also conceded that certain of the defender's averments in Answer 4 should be excluded from probation. To give effect to those concessions and also to my views above expressed in relation to the irrelevance of certain other averments, I shall sustain the pursuer's fourth and fifth pleas-in-law to the extent of repelling the defender's first, fifth and ninth pleas-in-law and of excluding from probation the following of the defender's averments - in Answer 4, (i) the third and fourth sentences, (ii) at pages 2-3 "The terms of the recorded lease of 231 Carlisle Road... proprietors of Blackwood Estate which is denied", (iii) at pages 4-5 "Further and in any event the pursuers or their agents... seeking indemnity from the defender" and (iv) at page 5 the last sentence of Answer 4, in Answer 5 "In any event... to have been similarly aware" and in Answer 6 the second and third sentences. I shall also sustain the defender's second plea-in-law to the extent of excluding from probation the pursuer's averments in Article 3 from "Separatim by letters dated 17 February 1995..." to the end of that Article and of repelling the pursuer's sixth plea-in-law. Quoad ultra I shall allow a proof before answer. The case will be put out By Order to discuss further procedure.
OPINION OF LORD HAMILTON in the cause M.R.S. HAMILTON LIMITED, Pursuer; against THE KEEPER OF THE REGISTERS OF SCOTLAND, Defender:
________________
Act: Tyre Murray Beith Murray, W.S.
Alt: C.M. Campbell, Q.C., Bevan R Brodie
18 June 1998
|