Scottish Court of Session Decisions

On 22 December 1993 the defenders were granted first registration in the Land Register in respect of subjects which were the site of a former house at 81 Clyde Street, Carluke. Registration was granted by the Keeper on the basis inter alia of affidavits by the defenders and by a neighbouring resident to the effect that following (a) a Disposition dated 21st and recorded in the Division of the General Register of Sasines for the County of Lanark on 28th both days of September 1983 by which the second defender disponed the said subjects to the first defender and (b) thereafter a Disposition of the subjects by the first defender in favour of both defenders dated 21 December 1993, the defenders enjoyed possession of the subjects for the prescriptive period openly, peaceably and without judicial interruption. Registration was granted without exclusion of indemnity. It is accepted that the pursuers became aware of this registration in or about October 1994.

In this action the pursuers, who are the executors of the late James Stevenson-Hamilton, seek reduction of the said Dispositions and for an order under Section 9 of the Registration of Title (Scotland) Act 1979 ordering the Keeper of the Registers of Scotland to alter the relevant title sheet so that the proprietorship section reads in their favour. They do so on the basis of averment that as such executors they are the proprietors of landed estate in Carluke; that said property is known as Kirkton Estate; that title thereto was recorded in their favour on 23 December 1958 in the General Register of Sasines for the County of Lanark and that said title includes the subjects, the site of the former house at 81 Clyde Street, Carluke. In these circumstances it is averred that the said Dispositions were dispositions a non domino and that thereafter the defenders did not enjoy possession openly, peaceably and without judicial interruption for the prescriptive period. In these circumstances an order for rectification is sought on the basis that registration was obtained by the fraud of the defenders (the statements made by them as to prescriptive possession being to their knowledge false) or esto they were not made fraudulently (which is denied) on the basis that they were made carelessly. Although there is no specific reference to it in the pleadings, it is apparent that the basis upon which an order for rectification is sought is Section 9(3)(a)(iii) of the Land Registration (Scotland) Act 1979 (the Act of 1979).

Section 9 of the Act of 1979 provides:

The matter came before me on Procedure Roll at the instance of the defenders. No criticism was made of the relevance or specification of the case made by the pursuers for reduction and rectification. It was however argued that an additional claim for damages made by the pursuers on the basis of averments at Condescendence 7, supported by pleas-in-law numbers 5 and 6, was irrelevant.

Condescendence 7 is in the following terms:

Pleas-in-law 5 and 6 are in the following terms:

It was first argued that it is not made clear upon what basis the claim for payment is made, and in particular whether it is in some way an independent claim or whether it depends upon the pursuers being successful in their other claims. As to that, it seems to me reasonably clear, as indeed was submitted on behalf of the pursuers, that the claim being made is dependent upon success in the pursuers' main claims and in particular their claims for reduction and for an order for rectification; that what the pursuers, on the face of it, are claiming is a right to damages on the basis that the alleged actings of the defenders were wrongful (being wilful interference with the pursuers' rights of property); and this on the basis that rectification of the Land Register which the pursuers seek in their favour would be retrospective in effect to the date of registration, namely 22 December 1993.

Counsel for the defenders secondly submitted that on that assumption the pursuers' claim was irrelevant. In particular it was argued that any future rectification made for the reasons advanced by the pursuers would not, on a true construction of the provisions of the Act of 1979, be retrospective in effect and could not convert actings of the defenders which were lawful at the time they were executed into wrongs.

Before rehearsing briefly the arguments advanced on either side I should record the common ground which existed between the parties. It was agreed that registration in favour of the defenders of the said subjects in the Land Register gave the defenders the real right of ownership of the subjects, a right not qualified by the title recorded in favour of the pursuers in the Register of Sasines. This arose from the apparently unqualified terms of Section 3(1) of the Act of 1979 which provides:

It was agreed that so far as the relevant title sheet was concerned no matter relevant to the present dispute was entered under Section 6 of the Act and further that there was no question of any overriding interests as defined in Section 28 (covering inter alia the right of a lessee under a lease). It was further agreed that the real right of ownership would subsist until any rectification of the Register. It was also agreed that prior thereto the defenders could transmit their real right to third parties who could be entered on the register, after which, if such third parties had acted in good faith and rectification would prejudice them as proprietors in possession, rectification would not be possible where, as here, indemnity was not excluded (unless such rectification was consented to). This would be so even if the pursuers established that the original entry had been obtained by the fraud or carelessness of the defenders, albeit that the pursuers in these circumstances would be able to seek indemnity under Section 12 of the Act of 1979. Reference was made (albeit only briefly given the lack of any dispute between the parties) to certain authorities said to vouch these general propositions - in particular the proposition that an unqualified title was given by registration subject to possible rectification - namely Gordon on Scottish Land Law, chapter 12, paragraph 16 and Professor Kenneth G. C. Reid in the Stair Memorial Encyclopaedia, Vol. 18, paragraph 673 and in an article in 1991 Juridical Review at page 79.

Counsel for the defenders argued that it was clear as a matter of construction that rectification would not be retrospective in effect but would operate from the date of any rectification. If rights given were to be taken away retrospectively one would expect, as a matter of general construction, to find clear expression of that. Although the Act was not perhaps as clearly drafted as it could be, (it was in particular noted that Lord Jauncey in Short's Trustee v Keeper of the Registers of Scotland 1996 S.C.H.L. 19 at p. 26 had said, "Nobody could accuse the Act of being well drafted".) not only was there no clear provision for retrospective effect in the general case but it was reasonably clear that, in general, Parliament did not envisage that. Specific provision was made by Section 9(3A) (inserted by the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985) for retrospective effect where rectification of an entry was consequential on the making of an order under Section 8 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985 (providing for rectification of defectively expressed documents), although specific power was given to the Court in that case to order that the rectification should have effect from such later date as it might specify for the purpose of protecting the interests of third parties who had acted in reliance on the document or any consequential entry in the Land Register. Such a provision would have been unnecessary unless in the general case rectification was not to be retrospective. If rectification was retrospective in general, or in other cases, one would have expected similar provisions to enable the Court to protect the interests of third parties. Although it was apparently inequitable that a person who obtained registration through fraud could obtain any rights, it was accepted on any view that such a person could transmit real rights to third parties (subject to the true owner's claim for indemnity). Further the Act on the face if it did not render such a person invulnerable to action at the instance of the true owner for damages caused by the fraudulent removal of that person's real right to property. That, however, was not the basis on which the present claim for damages was presented. It was reasonable in a case where an inaccurate registration had been obtained in good faith but by lack of reasonable care that a rectification should not operate retrospectively (although in that case again a possible potential action for damages could be envisaged on the basis of the negligent deprivation of the true owner's real right). Parliament however had made no distinction as the effect of rectification in such a case. I was also referred, albeit tentatively, to two observations said to give tangential support to the defenders' argument. In the first place I was referred to comments of Lord Keith of Kinkel in

Short's Trustee at page 21 which suggested that the Act of 1979 gave full effect to principles described in the Henry Report as establishing that under registration of title "all registered interests become indefeasible except in the rare case in which rectification of the register is allowed" and to observations of the Lord Ordinary (Lord Hamilton) in MRS Hamilton Limited v Baxter 1998 S.L.T. 1075 at 1079 where it was said:

On behalf of the pursuers it was argued that there is nothing specific in the Act of 1979 to contradict the suggestion that rectification would operate retrospectively in the general case. Instead there are four broad indications in favour of that. In the first place where the power to rectify is given to "rectify any inaccuracy in the Register by inserting, amending or cancelling anything therein" this is consistent with the notion of an entry, ex hypothesi inaccurate from the day of registration, being cured with effect from that date. Secondly, in circumstances where by virtue of Section 12(3)(n) a proprietor in possession who suffers loss as a result of rectification would not have a claim to indemnity where he has "by his fraudulent or careless act or omission caused the loss", it was clear that Parliament envisaged that such a person should not obtain any benefit from his or her actings. Any construction which avoided or reduced any such benefit should be preferred. Thirdly, Section 9(3A) could be said to support the pursuers' position. The specific provision for the case where rectification was consequential upon an order under Section 8 of the 1985 Act (which would generally operate from the earlier date of the relevant document) was necessary lest it be thought that the Land Register was rectified from that date too. Fourthly, it was wrong to read the legislation as being truly retrospective. Instead it simply provided an important power to put the record straight. Neither of the observations in the two cases to which I was referred by the defenders (which cases were not concerned with the particular problem raised by the present action) were of assistance.

I have come to the clear view that although the references to Short's Trustee and MRS Hamilton Limited do not assist one way or the other, the general argument advanced on behalf of the defenders, essentially for the reasons advanced, falls to be preferred. By contrast, it seems to me that the position adopted on behalf of the pursuers is unsustainable. In the first place, the fact that the Keeper is given power to rectify "any inaccuracy in the Register by inserting, amending or cancelling anything therein" does not, as a matter of language appear to assist one way or the other. Secondly, the defenders' construction if right, does not mean, as was suggested, that persons who acquire registration on the basis of fraud could, with impunity, obtain benefit therefrom. It seems to me that such a person would, as accepted on behalf of the defenders, be vulnerable to suit at the instance of any true owner on the basis that the fraudulent obtaining of the registration was an actionable wrong. In any event, the pursuers themselves accept that Parliament has provided that prior to any rectification a third party could acquire rights by disposition from the registered proprietor. Although in these circumstances the true owner could obtain indemnity from the Keeper the original registered proprietors would, it seems, remain vulnerable in turn to indemnify the Keeper by virtue of Section 13(2) which provides:

Thirdly, and perhaps most significant of all, it seems to me to be difficult to explain the necessity for Section 9(3A) unless in the general case rectification would not have effect from the date when the entry was made. It is difficult to understand the suggestion that but for that sub-section it might have been thought that rectification of the Register was effective from the earlier date of a relevant deed - that is from a date earlier than the entry in the Register itself. Further, it does seem to me that the effect of the construction contended for by the pursuers would indeed be to take away retrospectively rights otherwise conferred by Parliament. In the whole matter I see no reason to construe the Act in such a way as to convert actings of the defenders in 1996 which were accepted then to be lawful (on and in defence of their own property) into wrongs capable of founding an action of damages at a later date.

In all the circumstances I shall sustain the defenders' first plea-in-law in relation to the averments in Article 7 of Condescendence, refuse probation to these averments and dismiss the claim for payment made in Conclusion 5.