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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Dougbar Properties Ltd v Registers Of Scotland Keeper [1999] ScotCS 43 (9 February 1999)
URL: http://www.bailii.org/scot/cases/ScotCS/1999/43.html
Cite as: [1999] ScotCS 43, 1999 SCLR 458
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CA63/98 |
OPINION OF LORD MACFADYEN in the cause DOUGBAR PROPERTIES LIMITED Pursuers; against THE KEEPER OF THE REGISTERS OF SCOTLAND Defender:
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9 February 1999
Introduction
In this action the pursuers make a claim against the defender ("the Keeper") for indemnity under section 12 of the Land Registration (Scotland) Act 1979 ("the Act" or "the 1979 Act"). In their pleadings they found their claim both upon subsection (1)(d) - loss as a result of an error or omission in a land certificate, and upon subsection (1)(a) - loss as a result of a rectification of the register made under section 9 of the Act. At an early stage in the debate, however, Mr Haddow, senior counsel for the pursuer, intimated that he sought to maintain only the claim under section 12(1)(a). The debate therefore proceeded on that basis.
History of the Title
The pursuers are the proprietors of an interest in land registered in the Land Register of Scotland ("the land register" or "the register") under title number GLA99802. The interest in land of which the pursuers are proprietors is the tenant's interest in a long lease of subjects at 1, 2 and 3 Gorstan Path, Summerston, Glasgow. The lease under which that interest was constituted was granted on 14 February and 7 March 1984 by the then heritable proprietors of those subjects, the City of Glasgow District Council ("GDC") in favour of Ellison Harte (Summerston) Limited, and was recorded in the General Register of Sasines on 21 August 1984. That lease is referred to in the pleadings as "the Ellison Harte Lease".
In order to understand the circumstances which have given rise to the present action, it is necessary to make reference to an earlier long lease relating to adjoining property. On 21 January and 1 February 1979 GDC granted in favour of Associated Dairies Limited ("Asda") a lease of certain subjects at Summerston, Glasgow, therein described. That lease is referred to in the pleadings as "the Asda Lease". The subjects of the Asda Lease included an area of ground for use as a car park. That part of the subjects of the Asda Lease has been referred to in the pleadings, in recorded deeds and in the land register as "the Asda Car Park". In the Asda Lease GDC did not reserve to themselves any rights over the Asda Car Park, but conferred an unqualified right to occupy it upon Asda. The Asda Lease was recorded in the General Register of Sasines on 28 February 1979.
Thus, as at the date of the Ellison Harte Lease, the Asda Car Park had been let in unqualified terms to Asda. Despite that, in the Ellison Harte Lease GDC bore to let the subjects which later came to be referred to as 1, 2 and 3 Gorstan Path:
"TOGETHER WITH ... (THREE) ... the right of use for all purposes of parking of the car park identified on [a plan] as "Asda Car Park" with access and egress thereto and therefrom as required".
The conflict between the terms of the Asda Lease and the Ellison Harte Lease was recognised, and steps were taken to regulate it. A Minute of Agreement dated 21 May and 5 and 13 June 1985 was entered into by Asda, Monk Developments Limited (formerly Ellison Harte (Summerston) Limited, and referred to herein as "Monk") and GDC, and was recorded in the General Register of Sasines on 25 July 1985. The way in which the Minute of Agreement dealt with the conflict between the leases was to set out the following narrative:
"WHEREAS [Asda] are the Tenants of the area of ground shown within boundaries coloured red and partly hatched red on the plan annexed and executed as relative hereto ... by virtue of [the Asda Lease]
AND WHEREAS Monk are the Tenants of the area shown within boundaries coloured blue on the said plan by virtue of [the Ellison Harte Lease]
AND WHEREAS the area of ground shown within boundaries coloured brown on the said plan is in the ownership of [GDC] and is used as a carpark for the benefit of the public in general, (hereinafter referred to as 'the Community Car Park')
AND WHEREAS [GDC] have granted a right of use for all purposes of parking of the [Asda Car Park] to Monk in terms of [the Ellison Harte Lease]
AND WHEREAS [Asda] have the sole right of possession of the Asda Car Park in terms of [the Asda Lease]
AND WHEREAS [Asda] and Monk have agreed to enter into these presents in order to regulate matters"
and thereafter the following operative provisions:
"(One) Monk shall have a right of access ... across the Asda Car Park to the Community Car Park for pedestrian and normal light motor traffic and that along such route or routes as [Asda] may at their sole discretion specify from time to time ...
(Two) In consideration of the grant of the foregoing rights of access Monk shall contribute towards the cost of maintenance of the Asda Car Park on the following basis:- [There then followed provision for an index-linked annual payment of £3000.]
(Three) The whole successors and assignees of both [Asda] and Monk shall be entitled to the benefit of and shall be bound by these presents."
Although criticism might in my view legitimately be made of the clarity of the Minute of Agreement, it was not, as I understood it, disputed in the present action that its effect was to secure that, once it had been recorded, it was evident on the face of the Register of Sasines (i) that Asda alone were entitled to occupy the Asda Car Park for the purpose of parking, and (ii) that the only right of the tenants under the Ellison Harte Lease over the Asda Car Park was the right of passage created by Clause (One) of the Minute of Agreement.
The tenant's interest under the Asda Lease was first registered in the land register on 3 December 1986 on the occasion of its extension to additional subjects. The title number was GLA18023.
Although sub-leases of 2 and 3 Gorstan Path were granted by Monk, and the sub-tenants' interests thereunder were registered in February and April 1987, the tenant's interest under the Ellison Harte lease itself was first registered in the land register on 12 July 1993, following an assignation of it by Monk in favour of Davy Monk Developments Limited ("Davy Monk") executed in April and May 1990. The land certificate issued at that time under title number GLA99802 (No. 6/1 of process) contained in the Property Section the following description of the subjects:
"Subjects 1, 2 and 3 GORSTAN PATH, SUMMERSTON, GLASGOW edged red on the Title Plan; together with ... (Two) the right of use for all purposes of the carpark tinted yellow on the Title Plan with access and egress thereto and therefrom as required".
There then followed short particulars of the lease, and the Ellison Harte Lease was referred to in the Burdens Section and a copy of it formed part of the land certificate. The car park tinted yellow on the title plan was the Asda Car Park. Although the words following "(Two)" in the description in the Property Section do not precisely reflect the language of the Ellison Harte Lease (the words "of parking" are omitted), that discrepancy is of no moment since, the lease itself being part of the land certificate, reference to it is legitimate in construing the land certificate. In the Burdens Section, reference was also made to the Minute of Agreement, and clauses (One), (Two) and (Three) were set out in full, but the narrative part of the Minute of Agreement was not set out, and the Minute of Agreement was not itself annexed to the land certificate so as to make it part of it. The land certificate thus did not contain reference to the narrative statement in the Minute of Agreement that Asda had the sole right of possession of the Asda Car Park. There was no exclusion of indemnity.
On 24 November 1994 the pursuers executed an assignation by Davy Monk in their favour of the tenant's interest in the Ellison Harte Lease. On the same day, they also executed an assignation by Davy Monk in their favour of the relevant interest in the Minute of Agreement. Nevertheless the missives under which the pursuers acquired the tenant's interest in the lease from Davy Monk were not concluded until 12 December 1994, with entry at 29 December 1994. After taking entry the pursuers submitted to the Keeper an Application for Registration of a Dealing in respect of the assignation of the Ellison Harte Lease in their favour, and on 6 January 1995 the title sheet was amended to show the pursuers as proprietors, and a new land certificate (No. 6/2 of process) was issued. Apart from the amendment of the Proprietorship Section to show the pursuers as proprietors, the new land certificate was in the same terms as the one issued in 1993.
On the view that there was an error in the land certificate in respect that the description of the subjects in the Property Section (when read with the annexed lease) included reference to the right to use the Asda Car Park for all purposes of parking, the pursuers intimated to the Keeper a claim for indemnity under section 12(1)(d) of the Act. I have difficulty in understanding in what respect the pursuers conceived that they had suffered loss as a result of that error, since at first sight the land certificate had given them too much rather than too little, but that matter was not explored in the debate because, as I have mentioned, Mr Haddow abandoned the claim based on section 12(1)(d). That claim remains of historical significance, however, because the Keeper's response to it was to exercise his discretionary power of rectification under section 9(1) of the Act. That was done in about April 1998.
In the Property Section of the rectified land certificate (No. 7/7 of process) the description of the subjects is as follows:
"Subjects 1, 2 AND 3, GORSTAN PATH, GLASGOW edged red on the Title Plan; Together with the rights contained in the Lease in Entry 1 of the Burdens Section in conjunction with the rights contained in the Minute of Agreement in Entry 2 of the Burdens Section."
Entry 1 in the Burdens Section contains reference to the Ellison Harte Lease, a copy of which is contained in the certificate. Entry 2 contains reference to the Minute of Agreement, and in that reference Asda are mentioned as having:
"sole right of possession as tenants of the Asda Car Park".
It seems to me that the crucial point that the pursuers do not have the right to use the Asda Car Park for the purpose of parking, and only have the right of passage through it created by Clause (One) of the Minute of Agreement, could have been much more clearly expressed. In particular, the reference in the description to the "rights contained in the Lease" strikes me as open to misconstruction, since those rights include the erroneous right of use for the purposes of parking. In the debate, however, it was accepted by both parties that the combined effect of the changes made in the rectified land certificate (namely the removal from the description of the quotation of the right to use for parking, the qualification that the rights contained in the lease were to be read in conjunction with the rights contained in the Minute of Agreement, and the description of Asda in the Burdens Section as having sole right of possession of the car park) was that the pursuers do not now have a real right to use the Asda Car Park for parking.
In that state of affairs, the sole claim now made by the pursuers is that they have suffered loss as a result of the rectification made by the Keeper under section 9 of the Act. Their claim for indemnification therefore proceeds under section 12(1)(a). Their averment is that their interest as it now stands under the rectified land certificate is worth £1,390,000 less than it was worth when there was attached to it the right to use the Asda Car Park for parking, as described in the pre-rectification land certificate.
The Legislation
Before turning to the parties' submissions it is convenient to note the terms of the material parts of the legislation. Section 1 of the Act provides for the existence of a public register of interests in land, to be known as the Land Register of Scotland, under the management and control of the Keeper. Section 2 provides for the circumstances in which an unregistered interest in land shall become registrable. These include the grant or transfer of the lessee's interest under a long lease. Section 3(1) provides:
"Registration shall have the effect of -
- vesting in the person registered as entitled to the registered interest in land a real right in and to the interest and in or to any right, pertinent or servitude, express or implied, forming part of the interest, subject only to the effect of any matter entered in the title sheet of that interest under section 6 of this Act so far as adverse to the interest or that person's entitlement to it and to any overriding interest whether noted under that section or not;
- making any registered right or obligation relating to the registered interest in land a real right or obligation;
- affecting any registered real right or obligation relating to the registered interest in land,
insofar as the right or obligation is capable, under any enactment or rule of law, of being vested as a real right, of being made real or, as the case may be, of being affected as a real right."
Section 3(2) provides that registration shall supersede the recording of a deed in the Register of Sasines. Section 3(3) provides that inter alios a lessee under a long lease:
"shall obtain a real right in and to his interest as such only by registration; and registration shall be the only means of making rights or obligations relating to the registered interest in land of such a person real rights or obligations or of affecting such real rights or obligations."
Section 4 provides that, subject to subsection (2) which specifies circumstances in which an application for registration shall not be accepted by the Keeper, such an application shall be accepted by the Keeper if it is accompanied by such documents and other evidence as he may require. Section 5(1)(a) provides for the completion of registration, in respect of interests in land other than heritable securities and liferent or incorporeal heritable rights:
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"(i) |
if the interest has not previously been registered, by making up a title sheet for it in the register in accordance with section 6 ..., or |
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(ii) |
if the interest has previously been registered, by making such amendment as is necessary to the title sheet of the interest, |
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and in each case by making such consequential amendments in the register as are necessary." |
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Section 6 prescribes the manner in which a title sheet is to be maintained, and subsection (2) provides:
"The Keeper shall enter a real right or real burden or condition in the title sheet by entering its terms or a summary of its terms therein; and such a summary shall, unless it contains a reference to a further entry in the title sheet wherein the terms of the real right, burden or condition are set out in full be presumed to be a correct statement of the terms of the right, burden or condition."
Rectification of the Land Register is regulated by section 9 of the Act. Subsection (1) provides that subject to subsection (3):
"the Keeper may, whether on being so requested or not, and shall, on being so ordered by the court or the Lands Tribunal for Scotland, rectify any inaccuracy in the register by inserting, amending or cancelling anything therein."
Subsection (3) provides inter alia that:
"If rectification under subsection (1) above would prejudice a proprietor in possession-
(a) the Keeper may exercise his power to rectify only where -
(i) the purpose of the rectification is to note an overriding interest or
to correct any information in the register relating to an overriding interest;
(ii) all persons whose interests in land are likely to be affected by the
rectification have been informed by the Keeper of his intention to rectify and have consented in writing;
(iii) the inaccuracy has been caused wholly or substantially by the
fraud or carelessness of the proprietor in possession; or
(iv) the rectification relates to a matter in respect of which indemnity
has been excluded under section 12(2) of this Act."
Section 12 provides that in certain circumstances persons who suffer loss as a result of the operation of the system of land registration shall be entitled to be indemnified by the Keeper. The primary provision is in subsection (1) which is in the following terms:
"Subject to the provisions of this section, a person who suffers loss as a result
of -
- a rectification of the register made under section 9 of this Act;
- the refusal or omission of the Keeper to make such a registration;
- the loss or destruction of any document while lodged with the Keeper;
- any error or omission in any land or charge certificate or 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."
Subsection (2) enables the Keeper to limit his exposure under subsection (1) by providing that:
"Subject to section 14 of this Act, the Keeper may on registration in respect of an interest in land exclude, in whole or in part, any right to indemnity under this section in respect of anything appearing in, or omitted from, the title sheet of that interest."
Subsection (3) provides inter alia that:
"There shall be no entitlement to indemnity under this section in respect of loss where-
- the claimant has by his fraudulent or careless act or omission caused the loss".
Section 13(4) adds a "contributory negligence" rule in the following terms:
"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."
Background to the Parties' Submissions
Prior to the introduction of the system of land registration under the Act, a person acquiring an interest in heritable property required to satisfy himself as to title. That was done by examination of the deeds recorded in the Register of Sasines. The system of land registration, however, "rests upon entirely different principles" (Short's Trustee v Keeper of the Registers of Scotland 1996 SC (HL) 14, per Lord Keith at 22D). The registered title is guaranteed and becomes the sole source and measure of the proprietor's real rights. Examination of the pre-registration sasine title by the Keeper when registration is first sought constitutes the bridge between the sasine title and the registered title which replaces it. In principle that examination is designed to ensure that the registered title accurately reflects the rights of the proprietor as they stood before registration. The possibility that that process will fail to achieve its purpose is recognised in the provision permitting in certain circumstances the rectification of any "inaccuracy" in the register. A title sheet which does not correctly reflect the title as it stood in the Register of Sasines before registration constitutes an "inaccuracy" in the register within the meaning of section 9(1). Rectification may therefore take place if not prohibited by section 9(3). Unless and until rectification takes place, the existing entry in the register remains, despite the inaccuracy, the measure of the proprietor's rights.
The rights of the proprietor of the tenant's interest in the Ellison Harte Lease, as they stood immediately before that interest was first registered in 1993, did not include a real right to use the Asda Car Park for the purposes of parking. That was clear from the Register of Sasines, in which the Minute of Agreement resolving the conflict between the Asda Lease and the Ellison Harte Lease had been recorded. When the tenant's interest was first registered, the terms of the title sheet bore that the proprietors of that interest did have a real right to use the Asda Car Part for all purposes of parking. So long as the title sheet remained in those terms, the proprietor of the interest had that real right, because the title sheet is the source and measure of the proprietor's rights. When, following the pursuers' acquisition of the tenant's interest, the title sheet was amended to show them as proprietors, it continued to show that real right. In these circumstances there was an "inaccuracy" in the register, within the meaning of section 9(1) of the Act, because the real right shown in the title sheet was one which the pursuers' predecessors in title had not had under the sasine title. Prior to the rectification of the register in April 1998, however, the pursuers had that real right.
It was not disputed that in the circumstances which prevailed after January 1995 the Keeper was entitled to rectify the register to bring the title sheet into accordance with the pre-registration sasine title. The pursuers' simple contention is that before rectification they had a registered title in terms of which they had a real right to use the Asda Car Park for all purposes of parking; after rectification their registered title did not include that right; the rectification therefore caused them loss, which they seek to measure by comparing the value of their interest when it included that real right with its value now that it does not. That loss, they maintain, is one which they have suffered as a result of the rectification, and is therefore one on respect of which they are entitled to indemnity from the Keeper under section 12(1)(a).
To that contention on the pursuers' part the Keeper makes two responses. In the first place he argues that the pursuers have not truly suffered loss as a result of the rectification. In the second place he argues that, if the pursuers have suffered loss, it has been caused, or at least contributed to, by their own careless act or omission, so that the entitlement to indemnity either is elided under section 12(3)(n) or falls to be proportionately reduced under section 13(4).
Both branches of the Keeper's argument depend on the proposition that the pursuers were aware, before they acquired title to the tenant's interest in the Ellison Harte Lease, that there was an inaccuracy in the register in respect that the title sheet bore that the proprietor of that interest had a real right to use the Asda Car Part for all purposes of parking. That they had such knowledge is to be inferred from the fact that, as signatories of the assignation in their favour of the Minute of Agreement, they must be taken to have been aware of the full terms of the Minute of Agreement, and must therefore be taken to have known that the terms of the title sheet as it then stood did not accurately reflect the rights in respect of the Asda Car Park as they stood immediately after the recording of the Minute of Agreement. It is a matter of admission by the pursuers that they:
"were aware, prior to taking entry on 29 December 1994 and prior to registration of their interest on 6 January 1995, of the existence of the Minute of Agreement",
and that they had:
"executed an assignation, by the Pursuers' predecessors in favour of the Pursuers with the consent of Asda, of the relevant rights and obligations under the Minute of Agreement".
The issue is therefore not whether the pursuers knew the full terms of the Minute of Agreement, and were thus in a position to appreciate the inaccuracy of the title sheet, but whether that knowledge is in any way relevant to their claim for indemnity in respect of loss allegedly caused by the rectification.
Submissions
As originally formulated by the defender's junior counsel, Mr Bevan, the proposition was that because the pursuers were aware of the effect of the Minute of Agreement, and hence of the inaccuracy in the register, it was within their power to decline to proceed with the acquisition of the tenant's interest in the lease. They chose, however, to proceed with the acquisition. In doing so they knew that they were acquiring a title which did not accurately reflect the pre-registration sasine title, and which was therefore vulnerable to rectification. They must have appreciated, and must be taken to have accepted, that all that they were "truly" entitled to receive was title to the tenant's interest without the right to use the Asda Car Park for parking purposes. The rectification therefore caused them no loss, because all it did was bring their title into line with the rights which they all along knew were all that they should properly have received. Alternatively, if it was not appropriate to approach the matter in that way and hold that there had been no loss caused by the rectification, the pursuers, having proceeded with the purchase in knowledge of the inaccuracy of the register in relation to the car parking rights, had voluntarily assumed a position in which they knew that their title was vulnerable to rectification, and should therefore be held to have caused their loss by their own careless act or omission within the meaning of section 12(3)(n). The situation in which they ultimately found themselves was their responsibility, not the Keeper's.
In his pleadings the Keeper advanced an alternative basis for the contention that the pursuers' loss was caused by their own careless act or omission. He founded on certain averments in which he criticised as incorrect in various respects the terms of the Application for Registration of a Dealing made on the pursuers' behalf on 29 December 1994. The averments in question come in Answer 8, in the passage beginning "Prior to the said registration of the Pursuer's interest ...", and ending "... he would have issued a Land Certificate in correct terms" (together with the sentence "Their said Application contained incorrect answers and a false certification", which appears twice later in the Answer). Mr Bevan advanced the argument based on those averments, but Mr McNeill, senior counsel for the defender, did not insist on that argument, and accepted that the averments were irrelevant and should, if proof were otherwise to be allowed, be excluded from probation. It is therefore unnecessary to say anything more about that aspect of the matter.
Mr Bevan's motion was therefore that I should sustain the defender's first plea-in-law, either on the basis that there was no relevant averment of loss caused by the rectification, or on the basis that on the face of the pursuers' own pleadings their loss was caused by their own carelessness, and should therefore dismiss the action. Failing that, a proof before answer should be allowed on the whole case.
For the pursuers, Mr Sandison began his submissions by emphasising what he submitted were basic principles of the system of land registration. It represented a complete break from the sasine system, not a development of it. It rested on "entirely different principles" (Short's Trustee per Lord Keith at 22D; Kaur v Singh 1998 SCLR 849 per Lord President Rodger at 850F). Its basic features included (a) that the register was supposed to reflect all real rights and obligations attached to the registered interest in land, (b) that once the interest was registered all pre-existing rights and obligations fell away, a veil was drawn over them, and they were replaced by the rights and obligations which appeared on the face of the register, and (c) the right to indemnity from the Keeper was available if loss was suffered as a result of failure of the register accurately to reflect pre-existing rights. He cited two dicta from Short's Trustee:
"The scheme of the Act is that once the Keeper has given effect to a disposition or other deed by registration without exclusion of indemnity, the real right of the registered proprietor derives by force of statute from the fact of registration in the Land Register"
(per Lord President Hope (1994 SC 122) at 141A), and
"... the whole scheme of the Act ... was directed to giving a real right by the mere force of registration of the relevant interest, without the need for any search of earlier titles or for reliance on the positive prescription"
(per Lord Keith (1996 SC (HL) 14) at 19E). It would, Mr Sandison submitted, be destructive of that scheme if a purchaser of a registered interest had a duty to go behind the register. The Act provided two remedies to deal with the eventuality of inaccuracy in the register, namely the power in certain circumscribed events to rectify the register, and indemnification by the Keeper. These remedies were complementary (Henry Committee Report, Cmnd. 4137, para. 47, Note 1). The pursuers' case was simple. When the tenant's interest in the Ellison Harte Lease was registered in 1993, the terms of the title sheet constituted in favour of the proprietor of that interest a real right to use the Asda Car Park for all purposes of parking. The limited reference in the Burdens Section to the Minute of Agreement was insufficient to prevent that from being so. When the pursuers became proprietors of that interest in 1995, they acquired that real right. The rectification which the Keeper made in 1998 removed that right. The pursuers had averred that the value of the tenant's interest with the parking right was greater than its value without the parking right. That was a relevant averment of loss suffered as a result of the rectification. The pursuers were entitled to the opportunity to prove that averment. Both aspects of the Keeper's defence to that claim depended on the averment that the pursuers had known, when they acquired the tenant's interest, that the register was inaccurate in respect that the real right to use the car park was not justified by the pre-registration sasine title. That averment of knowledge was irrelevant. The scheme of the Act contemplated that the Keeper would have occasion to look behind the register when faced with the question whether there should be rectification of an inaccuracy in the register. But a purchaser of an interest in land was entitled to rely on the register, and did not require to go behind it. Moreover, if he did look behind it and found that it was inaccurate, or if he otherwise happened to be aware that it was inaccurate, that had no effect on the rights he acquired when he became registered proprietor. He was entitled to rely on the register even if he knew that it was inaccurate. The purpose of the introduction of the system of land registration was to replace a system which required repeated examination of the title every time there was a new transaction affecting the property with one in which the title was examined once and for all by the Keeper prior to first registration, and was thereafter guaranteed to be accurate. It would be destructive of that purpose to admit knowledge of an inaccuracy in the once and for all examination as a ground for denial of the benefit of the guarantee.
Mr Sandison went on to submit that English authority showed that under the English system of land registration a person acquiring an interest in registered land was entitled to rely on the register without further inquiry, and was not prejudiced by having actual knowledge of an adverse claim. He cited Williams & Glyn's Bank Ltd v Boland [1981] AC 487 in which Lord Wilberforce said (at 503F):
"The system of land registration, as it exists in England, which long antedates the Land Registration Act 1925, is designed to simplify and to cheapen conveyancing. It is intended to replace the often complicated and voluminous title deeds of property by a single land certificate, on the strength of which land can be dealt with. In place of the lengthy and often technical investigation of title to which a purchaser was committed, all he has to do is consult the register; from any burden not entered on the register, with one exception [i.e. overriding interests], he takes free. Above all, the system is designed to free the purchaser from the hazards of notice - real or constructive - which, in the case of unregistered land, involve him in inquiries, often quite elaborate, failing which he might be bound by equities. ... The only kind of notice recognised is by entry on the register."
From Midland Bank Trust Co Ltd v Green [1981] AC 513, which was concerned with the Land Charges Act 1925 rather than the Land Registration Act 1925, Mr Sandison cited a long passage from the speech of Lord Wilberforce (at 528A - 530E), from which I extract the following:
"The case is plain: the Act is clear and definite. Intended as it was to provide a simple and understandable system for the protection of title to land, it should not be read down or glossed: to do so would destroy the usefulness of the Act. ...
My Lords, the character in the law known as the bona fide (good faith) purchaser for value without notice was the creation of equity. In order to affect a purchaser for value of a legal estate with some equity or equitable interest, equity fastened upon his conscience and the composite expression was used to epitomise the circumstances in which equity would or rather would not do so. I think that it would generally be true to say that the words 'in good faith' related to the existence of notice. Equity, in other words, required not only absence of notice, but genuine and honest absence of notice. ...
But did this requirement, or test, pass into the property legislation of 1925?"
After answering that question in the negative in relation to the aspect of the legislation with which he was dealing, his Lordship continued (at 530A):
"My Lords, I recognise that the inquiring mind may put the question: why should there be an omission of the requirement of good faith in this particular context? I do not think there should be much doubt about the answer. Addition of a requirement that the purchaser should be in good faith would bring with it the necessity of inquiring into the purchaser's motives and state of mind. ... To eliminate the necessity for inquiries of this kind may well have been part of the legislative intention. Certainly there is here no argument for departing - violently - from the wording of the Act."
Mr Sandison identified Peffer v Rigg [1977] 1 WLR 285 as the only English case in which knowledge had been held to affect registered title, and pointed out that that case had been subjected to criticism in Gray's Elements of Land Law at pages 190-193. He also cited De Lusignan v Johnson (1973) 230 EG 499, and Myles v Bull (No. 2) [1969] 3 All ER 1585 per Bridge J at 1590A.
Returning to the Scottish legislation, what required to be considered, Mr Sandison submitted, was the proper scope of sections 12(3)(n) and 13(4). In Short's Trustee Lord Keith suggested (at 20F) that section 12(3)(n) was possibly intended as a catch all provision covering a variety of situations. In M R S Hamilton v Keeper of the Registers of Scotland (Lands Tribunal for Scotland, 19 May 1998, at 17) it was noted that sections 12(3)(n) and 13(4) were not expressly limited to carelessness in relation to first registration, and that there was no reason to treat them as so limited. It was not clear why knowledge should be the sole touchstone of carelessness. It should be borne in mind, in assessing the impact on the scheme of the defender's approach to carelessness, that the concept is also used in section 9(3)(a)(iii) as a ground for removing the protection against rectification otherwise afforded to a proprietor in possession. The defender's approach would make the security of title of a proprietor in possession dependent on an inquiry into his state of knowledge. The defender's submission appeared to be that it was carelessness on the part of a purchaser to proceed with the purchase in knowledge that there was an inaccuracy in the register. But an inaccuracy in the register entails only a potential for rectification. Whether rectification will follow depends in part on the state of possession. Even if competent, it is a matter for the Keeper's discretion (c.f. Norwich Building Society v Steed [1993] Ch 116 per Scott LJ at 132F). Whether the potential for rectification will become actual therefore depends on matters which may be beyond the knowledge of the purchaser who has knowledge of the inaccuracy. It is therefore difficult to characterise acquisition in knowledge of the inaccuracy as a careless act. Although the Lands Tribunal in M R S Hamilton had declined to accept that section 12(3)(n) was confined to carelessness on first registration, in practical terms carelessness at that stage was much easier to envisage than carelessness on registration of a change of proprietorship. No guidance as to what might constitute carelessness was to be obtained from the Reid Committee Report (Cmnd. 2032) or the Henry Committee Report.
Mr Sandison drew my attention to an article by Professor K G C Reid, New Titles for Old, (1984) JLSS 171, in which the hope was expressed (at 175) that failure to go behind the land certificate and uncover a patent defect in the title would not be regarded as carelessness, and to the Keeper's response, in which (at 177) he expressed the view that the suggestion that it might be careless for a purchaser of a registered interest to rely on the seller's fully indemnified Land Certificate and not examine the prior titles was untenable. Neither the article not the response, however, addressed the specific situation which arises in the present case where the inaccuracy is the presence in the title sheet of an unwarranted right, and the loss which is challenged as caused by the proprietor's careless act is the result of the removal of that right by rectification.
Mr Sandison submitted that in approaching the question of carelessness it was essential to bear in mind that a central feature of the system of land registration was the once and for all examination of the title by the Keeper on first registration. The suggestion that the Keeper's function was merely administrative was rejected, and his duty to investigate the title was affirmed, by the Lands Tribunal in Brookfield Developments Ltd v Keeper of the Registers of Scotland 1989 SLT (Lands Tr) 105 at 109J-110A. In the present case when the tenant's interest in the Ellison Harte Lease was first registered the Keeper had before him both the lease and the Minute of Agreement. Responsibility for the accurate expression of the rights attaching to the tenant's interest lay with the Keeper. In the event, the title sheet did not accurately reflect the pre-registration titles exhibited to the Keeper. The title, as formulated in the title sheet, was nevertheless not defective; it was merely susceptible to rectification. Mere knowledge on a subsequent purchaser's part of the inaccuracy, and therefore the susceptibility to rectification, could not lead to the result that that purchaser had carelessly caused or contributed to any loss which he might suffer on subsequent rectification.
In the result, Mr Sandison's submission was that the averments of knowledge of the inaccuracy were irrelevant, and that accordingly the defender's first to fourth pleas-in-law should be repelled, and a proof allowed on quantum of loss.
Mr McNeill submitted that the pursuers were wrong to suggest that the Keeper's approach would be destructive of the scheme and policy of the Act. He accepted that the scheme was that the public should be entitled to act on the faith of the register, and that those who did so were not under a general duty to investigate matters shown in the register. He submitted, however, that the possibility of rectification had implications for those relying on the faith of the register. A purchaser who could take possession was virtually invulnerable to rectification, unless he consented to it or was responsible through his carelessness or fraud for an inaccuracy in the register. A purchaser, however, who could not take possession might find his rights restricted to claiming indemnity. It followed that the register could not be regarded as the sole means by which rights to registered land were to be appraised. Fraud or carelessness were relevant both to rectification and to indemnity. The language of section 9(3)(a)(iii) was similar to that of section 12(3)(n); the same concepts were invoked; but the types of carelessness and the facts which might be relevant would necessarily vary. It was necessary to examine the words of the statutory provisions to see how the remedy of indemnification fitted into the system.
Mr McNeill was at pains to urge caution in drawing any assistance from the English cases cited. Although he did not embark on a detailed comparison of the Scottish and English legislation, he submitted that the approaches were different, and that the English legislation of 1925 was much more detailed. The exceptional complexity of English land law should discourage any attempt to draw analogies from it. It was in broad structure only that the Scottish system of land registration drew upon the English system. The scope for seeking guidance as to the proper operation of the Scottish system from English authorities, while it existed, was limited by those considerations. He devoted some time to identifying the issues which were under discussion in those authorities, and the particular statutory provisions with which they were concerned. In particular, he pointed out that the issues in Williams & Glyn's Bank v Boland concerned the relationship between registered interests on the one hand and equitable "minor interests" and trusts on the other (see pages 503-4 and 508). That case and the Midland Bank Trust Co case did not vouch the proposition that the doctrine of notice in its most general form plays no part in the English law of property. In the Scottish legislation there was no provision expressly referring to good faith. What was in issue in the present case was the reference to carelessness. It was necessary to examine what was meant by that concept.
Mr McNeill submitted that the concept of carelessness in section 12(3)(n) (and in section 9(3)(a)(iii)) was not the same as the concept of reasonable care in the law of delict. Those provisions, however, made it clear that, notwithstanding the general rule that a party was entitled to rely on the register, there were circumstances in which his entitlement to do so would be affected by whether or not he had acted carelessly. What might amount to carelessness was a matter of circumstance, and would for example vary according to whether the issue related to a first registration or an amendment to an existing entry in the register. A party's awareness of something outwith the registered title (such as the terms of a document in the Register of Sasines) might be sufficient to render his position precarious. If he sought to rely on the register when he was aware of particular facts that made it inappropriate to do so, that might be characterised as careless. Carelessness might be founded on his actual knowledge of an inaccuracy, or on constructive knowledge, or on knowledge of circumstances which put him on inquiry, although in the present case there was actual knowledge. For the purpose of the present case, it was enough to regard carelessness as a failure to have due regard to the implications of known circumstances. Where there was knowledge that his position was precarious and where steps might be taken to protect his position, it would be carelessness to fail to take those steps. In relation to the Keeper's response to Professor Reid's article, Mr McNeill pointed out that it was written at a very early stage in the implementation of the system of land registration. He accepted that the system introduced, in the form of the Keeper, an independent person whose duty it was to check the title submitted to him and to identify what it was appropriate to guarantee as the true title. But it did not follow that there were no circumstances in which an applicant for registration should be held to have concurrent responsibility. It was going too far to say, as the Keeper had done (1984 JLSS at 177), that it "would be ridiculous if an applicant for registration could be accused of carelessness because the Keeper disregarded a patent defect in title".
In the present case, Mr McNeill submitted, the knowledge on the pursuers' part on which the case of carelessness against them depended was their knowledge that the pre-registration title did not truly give the tenant under the Ellison Harte Lease any right to use the Asda Car Park for the purpose of car parking, and the careless act was entering into the transaction for acquisition of the tenant's interest as expressed in the title sheet despite their knowledge of its inaccuracy. The title sheet disclosed not only the Ellison Harte Lease, which gave the right to use the Asda Car Park for parking, but also the Minute of Agreement which, in effect, took it away. Although the matter was not completely clear from the part of the Minute of Agreement reflected in the title sheet, the pursuers had taken an assignation of the Minute of Agreement, and in any event were entitled to obtain a copy of it from the Keeper under section 6(5) of the Act. They must therefore be taken to have known the effect of the Minute of Agreement on the Ellison Harte Lease. Given that state of knowledge, and given that the title sheet did not reflect what they knew to be the true position, any loss following the rectification was caused by the pursuers' failure to procure that the title they obtained reflected the true position. The pursuers had it in their power to procure that the amended title sheet issued after their acquisition of the registered interest reflected the true position. That they could have done by drawing to the Keeper's attention the discrepancy between the title sheet and the Minute of Agreement and by inviting him to reconsider the terms of the property section of the title sheet. If they had done so, no question of subsequent rectification would have arisen, and no loss would have been suffered. Their failure to do so was careless and was the proximate cause of their loss.
Mr McNeill then turned to the defender's alternative argument that the rectification had caused the pursuers no loss. In effect that argument was that, if the answer to whether the pursuers had suffered loss as a result of the rectification was to be found by comparing the registered title immediately after the rectification with the registered title immediately before the rectification, the pre-rectification title, properly read, made it clear that the right to use the Asda Car Park for purposes of parking was qualified by the Minute of Agreement. Access to the full terms of the Minute of Agreement could be obtained under section 6(5), and the correct relationship between the Lease and the Minute of Agreement could then be seen, and the rectification caused no loss. Alternatively, the question of whether the pursuers had suffered loss should be answered by comparing the ultimate position with the true pre-registration position of which the pursuers were aware. Since the rectified title accurately reflected the pre-registration position, there was no loss. The pursuers were fully aware of the situation into which they were getting themselves. They acquired a rectifiable title knowing it to be rectifiable, and therefore suffered no loss when the foreseen rectification took place.
Mr Haddow began by emphasising what he called the philosophy of the legislation. It introduced a register-based system of land rights in which the register was the sole measure of rights. It was important not to allow one's approach to the new system to be coloured by looking through "a sasine conveyancer's spectacles". To some extent helpful guidance might be obtained from some of the English cases cited. In particular, Lord Wilberforce's warning in Midland Bank Trust Co Ltd v Green (at 528A) about not glossing the clear terms of the statute, and his explanation (at 530A-E) for the absence of an additional requirement of good faith, were helpful. In the 1979 Act there was no requirement of good faith. The relevant statutory provisions were expressed in terms of fraud or carelessness. Fraud or carelessness might prevent a proprietor in possession from objecting to rectification, or might remove the right to indemnity. But it was "not 'fraud' to rely on legal rights conferred by Act of Parliament" (Midland Bank Trust Co Ltd v Green per Lord Wilberforce at 531A). Nor could it be carelessness to do so.
In examining what might amount to carelessness for the purpose of section 12(3)(n) or section 9(3)(a)(iii), Mr Haddow drew attention to the two situations in which registration might commonly be completed under section 5(1)(a) of the Act, namely (i) by the Keeper making up a title sheet on first registration of the relevant interest in land, and (ii) by the Keeper making an amendment to the title sheet, for example to reflect a change in proprietorship. At the first registration stage fraud or carelessness might lie in providing to the Keeper information on which he would rely for the purpose of carrying out his once and for all examination of the title, if the information was inaccurate or incomplete, and the applicant either knew or ought to have known that that was so. At the stage of a transmission of the interest in land, however, the only amendment which would require to be made to the title sheet would be of the identity of the proprietor. At that stage therefore fraud or carelessness would tend to lie in providing inaccurate or incomplete information about the new proprietor or the means by which the interest in land had been transmitted from the registered proprietor to the new proprietor, in circumstances in which it was or ought to have been known that it was inaccurate or incomplete. The time at which the fraud or carelessness would be committed would be the time at which the application for registration was made. It was not necessarily easy to see how the fraud or carelessness exception was intended to apply as a defence to a claim for indemnity. A person who commits fraud does not usually thereby cause himself loss; rather he obtains an unjustified gain. In Short's Trustee Lord Keith had commented (at 19G) on the obscurity of sections 9 and 12 of the Act, and had expressed the view (at 20F) that section 12(3)(n) might possibly be intended to be a catch all provision covering a variety of situations. That being so, it was not appropriate to strain the language of the provision to give it content.
In the present case when the tenant's interest in the Ellison Harte Lease was first registered, the applicant provided to the Keeper the relevant material to enable the title sheet to be made up. In particular, the Keeper was provided with the Minute of Agreement as well as the Lease. There was thus no failure to provide the materials necessary to enable the Keeper to carry out his once and for all pre-registration examination of the title. It thus could not be said that the applicant's carelessness had caused the inaccuracy in the title sheet. It was not carelessness on the part of the applicant to fail to draw the inaccuracy to the Keeper's attention as soon as he received back from the Keeper the inaccurate land certificate. It was not incumbent on a disponee who happened to have the knowledge which would allow him to recognise the inaccuracy in the land certificate to draw the inaccuracy to the Keeper's attention when applying for registration under section 5(1)(a)(ii). It might be a pure matter of chance whether a subsequent disponee of a registered interest had the knowledge necessary to identify the inaccuracy. To make the disponee's entitlement to rely on the statutory indemnity depend on what he happened to know undermined the certainty which the land register was intended to have. It could not be said that a purchaser who knew that the title sheet contained an inaccuracy in his favour was careless in proceeding with the purchase without raising the matter. The inaccuracy does not render the title defective. There was therefore no basis on which such a purchaser could refuse to proceed with the transaction, and thus no basis on which he could be said to be careless in proceeding with it.
In relation to the argument that the pursuers have suffered no loss, Mr Haddow submitted first that it was unsound to say that there was no material difference between the rectified title sheet and the pre-rectification title sheet. The pre-rectification title sheet contained in the property section a clear statement of the right of parking as originally expressed in the Ellison Harte Lease. It contained only a partial reference to the Minute of Agreement, and in particular did not reflect the narrative that Asda had the sole right of possession of the Asda Car Park. The rectified title sheet altered the position, and brought the registered title into accord with the pre-registration sasine title. It was not open to the Keeper to argue that the rectification made no material difference. His power under section was to rectify an inaccuracy. It would have been ultra vires for him to effect rectification merely to improve the felicity of expression of the title without altering its substance. The argument that there was no loss caused by the rectification therefore could not proceed on the basis that there was no material difference between the rectified title sheet and the pre-rectification title sheet.
Secondly, Mr Haddow submitted that it was equally unsound to say that there was no loss because the rectified title accorded with what the pursuers knew was the true pre-registration position. The present position was properly to be compared with the pursuers' position when they had a registered title which included the right to use the Asda Car Park for parking. They had averred that that comparison disclosed a diminution in value in consequence of the rectification. That was a relevant averment of loss.
Discussion
I propose to consider first whether the defender's submission that the pursuers have made no relevant averments of loss suffered as a result of the rectification of the register is well founded. If that submission is well founded, the pursuers' case is irrelevant and will fall to be dismissed. No question will in that event arise under section 12(3)(n) or section 13(4) of the Act. If, however, the pursuers have made relevant averments of loss, the question which will then require to be considered is whether it is apparent on the face of the pursuers' pleadings that their loss was caused by their own careless act or omission. If that question falls to be answered in the affirmative, section 12(3)(n) will operate to exclude their claim for indemnity, and the action will fall to be dismissed on that ground. If it is not apparent on the face of the pursuers' own pleadings that their loss was caused by their own carelessness, the action will not fall to be dismissed, but the possibility will remain for consideration that the defender has made relevant averments of carelessness on their part, wholly or at least partly causative of their loss, which would make proof necessary on the section 12(3)(n) and section 13(4) questions. If there are such relevant averments on the defender's part, the appropriate course will be to allow a proof before answer on the merits and quantum (albeit excluding from probation those parts of Answer 8 that Mr McNeill conceded should be excluded). If, on the other hand, the pursuers have relevantly averred loss caused by the rectification, but the defender has not relevantly averred that it was caused or contributed to by the pursuers' carelessness, the appropriate course will be to allow a proof before answer on the matter of loss only.
(a) No Relevant Averment of Loss
The statutory provision on which the pursuers' claim is founded, section 12(1)(a) of the 1979 Act, confers an entitlement on a person who suffers loss as a result of a rectification of the register made under section 9 to be indemnified by the Keeper in respect of that loss. It is not in dispute that the defender effected a rectification of the register in relation to the title sheet in respect of the tenant's interest under the Ellison Harte Lease. The effect of the rectification is, in my view, to be ascertained by comparing the title sheet as it now stands after rectification (No. 7/7 of process) with the title sheet as it stood immediately before rectification (No. 6/2 of process). As I have indicated earlier, the rectified title sheet is not as clearly expressed as it might be, but it is not disputed that its effect is that the pursuers, as proprietors of the tenant's interest under the Ellison Harte Lease, have no right to use the Asda Car Park for purposes of parking, but only the limited right of access across it constituted originally by the Minute of Agreement. As matters stood before the rectification, the pursuers had ex facie of the title sheet "the right of use for all purposes of the [Asda Car Park]". The incorporation of the Ellison Harte Lease in the title sheet enabled reference to be made to it, and such reference makes it clear that the right was a right to use "for all purposes of parking". The Burdens Section contained reference to the Minute of Agreement, and the limited right of access conferred by Clause (One) thereof was set out in full. There was, however, in the pre-rectification title sheet nothing to contradict the right to use the Asda Car Park for all purposes of parking which was expressly set out in the description of the interest in the Property Section. In essence, therefore, the pursuers had, before rectification, a title which contained a real right to use the Asda Car Park for all purposes of parking; and the effect of the rectification was to remove that right. That situation, when taken with the pursuers' averments to the effect that the value of the interest with the parking right was greater than the value it now has without it, seems to me to represent prima facie a relevant case that the pursuers have suffered a loss which entitles them to indemnity under section 12(1)(a).
It is not, in my opinion, open to the Keeper to argue that the pursuers have made no relevant averment of loss because the rectification made no real difference to the pursuers' rights. As Mr Haddow pointed out, the Keeper's power to rectify the register arises only in respect of "any inaccuracy in the register" (section 9(1)). It is not within the Keeper's power to rectify the register so as merely to express the title more elegantly or more clearly. Any valid rectification by definition removes from the register an "inaccuracy", and therefore makes a material difference to it. In the present case, it is not in my view possible to argue, as the Keeper sought to do at one stage, that the rectification could not cause any loss because the conflict between the Ellison Harte Lease and the Minute of Agreement was apparent on the face of the pre-rectification title sheet. The car parking right derived from the Lease and the right of access derived from Clause (One) of the Minute of Agreement are not in my view irreconcilable. There is therefore no necessary conflict, although there is some overlap, between them. But even if there were such a conflict, the part of the Minute of Agreement to which reference requires to be made to see that it was intended to take away the car parking right was not included in the title sheet. The extent of the registered title must, in my opinion, be ascertained from the title sheet (including any documents incorporated in it, such as the Lease, but excluding any part of a document referred to in it which is neither quoted or summarised in it nor incorporated in it). It is impossible, in my opinion, to construe the pre-rectification title sheet as not including the car parking right. The rectified title sheet did, however, exclude it. The pursuers offer to prove that that difference affected the value of their interest. That is, in my view, a relevant averment of loss resulting from the rectification.
The defender's second line of argument in support of the proposition that the pursuers have not relevantly averred that they have suffered loss as a result of the rectification involves judging the question of whether there was loss by comparing the rectified title, not with the title as it stood immediately before rectification, but with the title as it stood before it was first registered. The basis for that approach is that the pursuers were aware before they acquired the tenant's interest in the Ellison Harte Lease of the terms of the Minute of Agreement and in particular of the fact that the purpose and effect of the Minute of Agreement was to cancel out the car parking right in respect of the Asda Car Park which the Lease purported to grant. They thus must be taken to have known that the sasine title, as it existed immediately before the tenant's interest in the Ellison Harte Lease was first registered in the land register, did not include a real right to use the Asda Car Park for parking purposes. They must therefore be taken to have known that, although the registered title included that right, it was in that respect inaccurate within the meaning of section 9(1) of the 1979 Act, and was therefore vulnerable to rectification. The fact that the pursuers had that knowledge of the terms of the Minute of Agreement and must therefore be taken to have been aware of its implications is not disputed. What is disputed is the proposition that that knowledge has any effect on the proper approach to answering the question whether the rectification caused the pursuers loss.
There is, no doubt, a sense in which it can be said that, since the pursuers knew that the right to use the Asda Car Park for parking purposes constituted an inaccuracy in the register, the rectification has merely put the pursuers in the position in which they all along knew they ought to have been. It seems to me, however, that to approach the question of loss in that way does, as the pursuers maintain, in some measure undermine the central principle that the register is the sole source and measure of the proprietor's rights. An inaccurate entry in the register is rectifiable (provided the circumstances do not fall within the scope of section 9(3)(a)). But so long as it remains unrectified, the inaccurate entry is nevertheless the measure of the proprietor's rights. It would, in my view be illogical to accept that before rectification the proprietor who has all along been aware of an inaccuracy in his favour does have the inaccurately augmented right, yet to hold that once the rectification has taken place he is not entitled to measure his loss by reference to the effect of the removal of that augmented right. Yet it would, in my opinion, be wrong to hold that before rectification the proprietor does not have the right which the title sheet bears to give him if he knows that the right constitutes an inaccuracy in the register. To adopt either of these approaches would be to derogate from the principle reflected in the dicta from Short's Trustee (per Lord President Hope in 1994 SC at 141A, and Lord Keith in 1996 SC (HL) at 19E) which I have quoted above in recording Mr Sandison's submissions. There is in my view nothing in the Act which justifies the conclusion that a proprietor can only claim to have suffered loss as a result of a rectification if the rectification removes an inaccuracy of which he was unaware when he acquired the interest. To express the substance of the point in different form, there is no justification in the Act for assessing whether a rectification has caused loss, in the case of a proprietor who was aware of the inaccuracy, by reference to a comparison of the post-rectification title with the "true" position rather than with the pre-rectification registered title.
In coming to that view I have placed some cautious reliance on certain of the English authorities which were cited to me. It is necessary to exercise caution because, while it seems to me that the general principles of the English and Scottish systems of land registration are broadly similar, I recognise the force of Mr McNeill's submissions both that the details of the legislation are different, and that the background systems of property law are different. The present case is not concerned with the type of equitable interests with which the English cases were concerned. I do not consider that it would be right to draw from those cases any general principle that the knowledge possessed by the proprietor at the time of acquisition of his interest is always irrelevant. But the extent to which it is relevant is in my opinion to be ascertained from the terms of the legislation. The observation by Lord Wilberforce in Midland Bank Trust Co Ltd v Green (at 528A) that the system of protection of title to land provided by the legislation should not be "read down or glossed" seems to me to be equally applicable in the Scottish context. The 1979 Act does make provision to limit the protection from rectification afforded to the proprietor in possession, and to remove the right to indemnity, in certain defined circumstances. Section 9(3)(a)(iii) and section 12(3)(n) deploy the concepts of fraud and carelessness for those purposes. Both of those concepts may involve consideration of the state of the proprietor's knowledge. But it would be inconsistent with the existence of the specific provision in section 12(3)(n) to hold that, at the prior stage of determining whether a loss has been suffered, the proprietor who knows when he acquires it that the registered title is inaccurate should be deprived of the benefit of the rights which that title bears to confer by denying him the right to rely on the register as the measure of his rights.
I am therefore of opinion that the defender's attack on the relevancy of the pursuers' averments that they have suffered loss as a result of the rectification fails.
(b) Careless Act or Omission
I turn therefore to consider whether the pursuers' case can be held to be irrelevant on the ground that their own pleadings disclose that their loss was caused by their own careless act or omission, and is therefore a loss in respect of which, by virtue of section 12(3)(n), they have no entitlement to indemnity from the Keeper. In order to answer that question it is necessary to examine what is meant in the section by "careless act or omission". I agree with Mr McNeill that it is not necessarily helpful to look to the concept of negligence in the law of delict for guidance as to what is meant here by "careless act or omission". The law of delict is concerned principally with duties of care owed towards others. Section 12(3)(n) is concerned with loss caused to a person himself by his own "careless act or omission". Section 12(3)(n) and section 13(4) therefore seem to me to be more closely analogous to the defences to a delictual claim of sole fault and contributory negligence respectively. What the statutory language makes plain is that (i) there must be an act or omission on the part of the person making the claim for indemnity; (ii) the act or omission must be causative of the loss in respect of which indemnity is claimed; and (iii) the act or omission must be careless. It seems to me that an act or omission may be regarded as careless, within the meaning of section 12(3)(n) (or for that matter section 9(3)(a)(iii) or section 13(4)), if -
- it is one which is reasonably foreseeably likely to result in harm to the interests of the claimant (or in a case under section 9(3)(a)(iii) result in an inaccuracy in the register) in relation to the property which is the subject of the registered title; and
- it is open to the claimant (or proprietor in possession) to take some step which will obviate that risk of harm (or that inaccuracy).
Because there can on my view only be carelessness where there is reasonable foresight of harm (or of inaccuracy in the register), it is necessary to have regard to the state of knowledge of the claimant (or proprietor in possession) at the time of the alleged careless act or omission. It may well be that it would be sufficient that in the circumstances the claimant (or proprietor in possession) ought reasonably to have known of the circumstances which made the harm (or inaccuracy) foreseeable, but it is unnecessary to reach a concluded view on that for the purpose of the present case where it is not in dispute that the pursuers had actual knowledge of the relevant circumstance, namely that the registered title was, at the time of their acquisition of the registered interest, inaccurate. It is, however, in my view clear that, as an element in the allegation of carelessness, the knowledge of the pursuers is a relevant consideration in connection with the case which the defender makes under section 12(3)(n).
While, however, the pursuers' knowledge of the circumstances which made the pre-rectification title sheet inaccurate is relevant to the case made under section 12(3)(n) and section 13(4), that knowledge does not in my opinion per se establish that case. It is necessary to identify the act or omission which, in light of that knowledge, can be characterised as careless. There must be something which the pursuers did or omitted to do which operated as the cause of the loss which they claim to have suffered as a result of the rectification. That act or omission must be one which the pursuers could have avoided, and one the avoidance of which would also have avoided the loss.
It is not in my view surprising that there is no guidance to be found in the legislation as to what may constitute a careless act or omission. The wide variety of circumstances in which a careless act or omission may be relevant makes the absence of further statutory guidance virtually inevitable. The issue may arise in the context of section 9(3)(a)(iii) as ground for depriving the proprietor in possession of his protection against rectification. It may arise in the context of section 12(3)(n) or section 13(4) as a complete or partial defence to a claim for indemnification. It may arise in respect of first registration under section 5(1)(a)(i) or on subsequent amendment of the title sheet under section 5(1)(a)(ii) (M R S Hamilton v Keeper of the Registers of Scotland, Lands Tribunal, at 17). That section 12(3)(n) may operate as a catch all provision covering a variety of situations was recognised by Lord Keith in Short's Trustee at 20F. Mr McNeill was in my opinion right in his submission that what constitutes a careless act or omission is a matter of fact and circumstance. Mr Haddow was also, in my view, right in his submission that it was not appropriate to strain the language of section 12(3)(n) to give it content in particular circumstances.
While the defender's submissions placed great emphasis on the pursuers' knowledge of the circumstances which disclosed that the original title sheet contained an inaccuracy, it seems to me that the issue between the parties in fact turns on the identification of the act or omission. In his pleadings the defender, after quoting section 12(3)(n), avers:
"The pursuers chose to proceed with the acquisition of the subjects, notwithstanding said discrepancy [i.e. between the Property Section and the Burdens Section of the title sheet]. By their own careless act or omission, they caused themselves any such loss."
That is expressed in terms of knowledge of a discrepancy between the Property and Burdens Sections of the title. As I have already indicated, I do no consider that they are properly to be regarded as discrepant, because the right of access derived from the Minute of Agreement which is referred to in the Burdens Section could stand with the parking right derived from the Ellison Harte Lease which is referred to in the Property Section. But for the purpose of testing the relevancy of the pursuers' pleadings, as distinct from the positive case under section 12(3)(n) advanced in averment by the defender, it is in my view appropriate to approach the matter more broadly. What may be taken from the averment which I have quoted is that the defender puts forward the act of proceeding with the acquisition (with the knowledge that the pursuers had) as a careless act. I leave aside, because it was not explored in any detail in the debate, the question whether by the time they acquired their knowledge of the inaccuracy in the registered title the pursuers were already contractually committed to acquiring the tenant's interest in the Ellison Harte Lease. Assuming that refusal to proceed with the acquisition would not have placed them in breach of contract in a question with Davy Monk, the question comes to be whether it was a careless act on the part of the pursuers to proceed with the acquisition in knowledge (a) that by doing so they would acquire a title which would include the erroneous right to use the Asda Car Park for parking purposes, and therefore (b) that the title was vulnerable to rectification which would take away that right. If they avoided the allegedly careless act, and declined to proceed with the transaction, they would no doubt avoid the risk of suffering loss in the event of rectification taking away the parking right, but they would do so only at the expense of giving up a transaction which they presumably wished for other reasons to enter into. In these circumstances I do not consider that it is possible to regard the pursuers' act of entering into the transaction as careless. If there had been one way of entering into the transaction which incurred the risk of loss through rectification and another which avoided that risk, it may be that it would have been careless to adopt the former. In my opinion, however, the pursuers were entitled to acquire the tenant's interest in the Ellison Harte Lease if they chose to do so. If the title which they would acquire contained an inaccuracy of which they were aware and which rendered it susceptible to rectification, that circumstances cannot, in my view be regarded as sufficient to render the acquisition a careless act.
In Mr McNeill's submissions an alternative approach to the identification of the careless act or omission was put forward. He suggested that the pursuers had it in their power to draw the inaccuracy in the title sheet to the Keeper's attention at the time they made their application to him for amendment of the register to reflect the transfer of proprietorship to them from Davy Monk. If they had done so, the amended title sheet could have reflected the "true" position with regard to the Asda Car Park, and no question of subsequent rectification, or loss caused thereby, would have arisen. It was a careless omission on the part of the pursuers not to take that course. In my opinion there is no merit in that argument. It is tantamount to saying that the pursuers were careless in not ensuring that at the outset of their proprietorship they immediately lost that which they would otherwise be at risk of losing at some indeterminate future date. Given that the title sheet as it stood during Davy Monk's proprietorship contained the parking right, the pursuers would have suffered the same loss as they eventually did if they had drawn the inaccuracy to the Keeper's attention when applying for registration of the transfer of title to them. They would simply have ensured that it happened earlier. I do not consider that failure to bring about that situation can be characterised as a careless omission.
In my opinion it is clear that the original inaccuracy in the title sheet was of the Keeper's making. The pursuers came on the scene at a time when the title contained that inaccuracy. They wished to acquire the tenant's interest in the Ellison Harte Lease. On doing so they were entitled to obtain a transfer in their favour of the title to that interest as it then stood. That title was not defective, but contained an inaccuracy which made it vulnerable to rectification. If they acquired that title and with it the inaccurate right, and that inaccurate right was then taken away by rectification, they suffered the loss of that right. Although they knew that the title which they acquired was vulnerable to such rectification, there was, in my view, nothing that they could do, consistent with acquiring the property, to avoid the risk that such rectification would take place. There was therefore nothing in what they did or omitted to do that can, in my opinion, properly be characterised as a careless act or omission. The real substance of the defender's position, as it seems to me, is that the pursuers should not be entitled to indemnity in respect of a loss which they knew from the outset they might suffer. That is not, in my opinion, a position supported by the statute. The statutory defence requires a careless act or omission, and the submissions in my view demonstrate that there was none.
I am therefore of opinion that the pursuers' averments cannot be held to be irrelevant on the ground that they disclose that the circumstances fall within the scope of section 12(3)(n).
It seems to me that no separate question arises as to whether the defender has relevantly averred a defence under section 12(3)(n). The facts are not in dispute. What is in issue is whether they can be construed as demonstrating a careless act or omission causative of the loss. If I had held that there were relevant averments from which it might be concluded that the pursuers had committed a careless act or omission, I would have held that those averments went no further than to support a case for proportionate reduction of the indemnity under section 13(4) rather than exclusion of indemnity under section 12(3)(n), since it seems to me to be clear that the initial cause of the loss resulting from the rectification was the Keeper's error in creating the inaccuracy in the title sheet, and any subsequent carelessness on the pursuers' part would merely have contributed to the loss.
Result
In the result, therefore, the pursuers are in my opinion entitled to a proof before answer on the question of whether they have suffered loss as a result of the rectification and, if so, the amount of that loss. The issue is not simply quantum, because the defenders offer to prove that:
"The value of the subjects let to the pursuers is unaffected by whether or not they benefit from the "for all purposes" parking provision of the Ellison Harte Lease or "the right of access" provision of the said Minute of Agreement."
Although I have held that it cannot be said as a matter of the relevancy of the pursuers' pleadings that the removal of the parking right by rectification cannot have caused the pursuers loss, it may be that the defenders will be able to establish the averment that I have just quoted. That turns, not on the pursuers' knowledge of the inaccuracy, but on the view which the market would take of the unrectified title. It may be that the reference in the pre-rectification title to the Minute of Agreement would prompt potential purchasers to investigate what lay behind the title, and that on discovery of the full terms of the Minute of Agreement the view would be taken that the parking right was so vulnerable to rectification as to have no value. That is, in my view, a matter which has to be resolved by proof. That being so, it would in my view be premature to sustain the pursuers' first plea-in-law or repel the defenders' second plea-in-law.
I shall therefore give effect to the conclusions which I have reached by -
(a) repelling the defender's first plea-in-law;
(b) sustaining the pursuers' third plea-in-law to the extent of -
(i) repelling the defender's third and fourth pleas-in-law, and
(ii) excluding from probation the averments in Answer 8; and
(c) allowing quoad ultra a proof before answer.
The case will be put out By Order with a view to discussing future procedure.
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CA63/98 |
OPINION OF LORD MACFADYEN in the cause DOUGBAR PROPERTIES LIMITED Pursuers; against THE KEEPER OF THE REGISTERS OF SCOTLAND Defender:
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Act: Haddow, Q.C., Sanderson
Bird Semple
Alt: McNeill, Q.C., Bevan
Secretary of State for Scotland
9 February 1999