Scottish Court of Session Decisions

[1] In this action, the pursuer sought an order upon the third defender, the Keeper of the Registers of Scotland, ordaining him in terms of section 9 of the Land Registration (Scotland) Act 1979 to rectify the Land Register in certain specified ways, and failing rectification, for declarator that she was entitled to be indemnified by him for her loss as a result of his refusal to make rectification.

[2] In 1994, the pursuer and her husband, who is the second defender, bought a flat in Woodlands Drive in Glasgow. The land certificate showed them as proprietors "equally between them and the survivor of them", and also showed a standard security which they had granted in favour of the Woolwich Building Society (now Woolwich plc) the fourth defenders. In March 1996, the second defender purported to sell the flat to Balbir Singh, the first defender. The disposition by which that purported sale was given effect bore to be executed by the pursuer and the second defender, but what bore to be the pursuer's signature was a forgery. The purported disposition was given effect in the Land Register, and in these circumstances the pursuer raised the present action, seeking either rectification or indemnification. By interlocutor of 22 February 1999, the Lord Ordinary declared inter alia that the purported signature of the pursuer was forged and adhibited without her knowledge or consent, and that the purported disposition was accordingly incapable of transferring any part of her interest in the subjects, and did not do so. He accordingly found and declared that the entry in the Land Register of Scotland relating to the subjects was to that extent inaccurate.

[3] Because rectification would prejudice the first defender (as currently the proprietor in possession) the third defender refused to make rectification, and the conclusion seeking rectification was dismissed. In these circumstances, the Lord Ordinary found and declared that the pursuer was entitled to be indemnified by the third defender for her loss as a result of the refusal to make rectification. Thereafter, the first and fourth named defenders were assoilzied, and the pursuer and third defender were allowed a proof before answer on the outstanding issues between them. The only such issue related to the amount of indemnification due in terms of section 12(1)(b) of the Land Registration (Scotland) Act 1979. All matters of fact were agreed, and no proof was necessary. After hearing parties' submissions on the agreed facts, the Lord Ordinary held that the amount thus due was £25,500 with interest, and by interlocutor of 23 June 1999, decerned against the third defender for payment to the pursuer of that sum, with interest. The third defender reclaims.

[4] In the opinion which accompanied that interlocutor, the Lord Ordinary sets out the circumstances, the submissions of the parties and his reasons for holding £25,500 to be the amount due. The submissions advanced to us by counsel on behalf of the third defender and appellant were in very large measure the same as the submissions advanced to the Lord Ordinary. We see no purpose in either a full repetition of those submissions or a reformulation of the reasons for rejecting them. There is comparatively little that we would wish to add.

[5] Section 9 of the 1979 Act deals with rectification of "any inaccuracy" in the register. The Keeper has a general power to rectify any inaccuracy, and is obliged to do so on being so ordered by the court or the Lands Tribunal for Scotland. However, in terms of section 9(3), if rectification would prejudice a proprietor in possession, the Keeper may exercise his power to rectify only in specified circumstances which do not here apply, and the power of the court or the Lands Tribunal to order rectification is similarly limited. In the present case, therefore, the inaccuracy could not be rectified, and it is accepted that the Keeper had no alternative but to refuse rectification. While it is perhaps somewhat paradoxical that what is ex hypothesi an inaccuracy thus remains permanently upon the register, and expresses, accurately, what may thereafter be relied upon as a true expression of title, Parliament's intention of avoiding prejudice to a proprietor in possession, except in certain specific circumstances, is clear.

[6] Section 12(1) of the 1979 Act provides that a person who suffers loss as a result of certain specified events "shall be entitled to be indemnified by the Keeper in respect of that loss." The specified events include at heads (a) and (b) respectively a rectification made under section 9, and "the refusal or omission of the Keeper to make such a rectification." Heads (c) and (d) refer to loss or destruction of a document lodged with the Keeper, and certain errors or omissions in certificates or information given by him in certain circumstances. Section 12(3) provides that there shall be no entitlement to indemnity under the section in respect of loss in various situations which are set out as heads (a) to (p) of that subsection. In terms of section 13(2), it is provided that on settlement of any claim to indemnity under section 12, "the Keeper shall be subrogated to all rights which would have been available to the claimant to recover the loss indemnified."

[7] Put shortly, the issue between the parties is this. The parties were agreed that the pursuer's claim should be valued as at 8 March 1996 - the date on which the inaccuracy in the register came into existence, by the entry which showed title to the subjects as having been transferred from the pursuer and the second defender to the first defender. (It is to be noted that this was a matter of agreement: we express no view as to whether that would indeed be the appropriate date for valuing the claim). The parties were also in agreement that the value of the subjects at that date was £51,000. Apart from any issue as to the standard security, therefore, the position is very simple. Before the inaccuracy entered the register, the pursuer had a one half interest in property worth £51,000, so that her interest was worth £25,500. If rectification had been made, she would have recovered that interest, which had that value at the agreed date. Rectification having been refused, she has lost that interest, and indemnification of that loss would require payment to her of £25,500. If the position were as simple as that, we do not understand the third defender to suggest that anything other than £25,500 would be the appropriate indemnification.

[8] If one simply compares rectification and refusal of rectification, the position is indeed as simple as that. The third defender acknowledges that if rectification had not been refused, the pursuer's interest would be restored on the register, and would have a value of £25,500 at the agreed date. Rectification having been refused, she has lost that interest, which would have had that agreed value. It is accepted that as at 8 March, the debt to the Woolwich, secured by the standard security, had already been redeemed on 7 March, in the sum of £41,089.94. There was thus no outstanding debt to the Woolwich on 8 March, and while the standard security was not discharged until somewhat later, on 8 March it was securing nothing. The value of the subjects at that date was therefore their full or gross value of £51,000.

[9] The third defender could not and did not dispute that if rectification had been made, the pursuer would have recovered her interest, with a value of £25,500 at the agreed date. The interest thus recovered would have been free of any debt to the Woolwich. By refusing rectification, the Keeper was depriving her of that interest with that value. But it was submitted that this was in some sense bizarre, since the value of her interest in the net equity of the subjects, before the debt to the Woolwich was paid off, had been only £4,955.03. It was submitted that that figure represented her "true" loss, since her husband would not have paid off her share of the debt to the Woolwich unless he had been carrying through the dishonest disposal of her interest in the subjects. It was said to be "bizarre" that she should receive the value of her interest as if it had been unencumbered by debt. In effect, she would be receiving a "windfall" from the public purse, putting her in a substantially better position than she would have been in if the whole dishonest proceedings had never occurred. She should not be able to make a "gain" of this kind, by virtue of section 12(1) of the Act. One should read that subsection as entitling her only to her true "loss" which was her interest in the net equity of the property, before the loan was redeemed with a value of only £4,955.03.

[10] These general submissions are those which were advanced to the Lord Ordinary, and are in our opinion unsound for the reasons given by him. The loan had in fact been cleared on 7 March 1996. If, after it had been cleared, the pursuer had discovered what was going on, and had managed to intervene before the inaccuracy was introduced to the register, she would have retained the interest which was on the register, with its full value, free of the debt. In considering what loss was suffered by the pursuer "as a result of" the Keeper's refusal to make rectification, we can see no basis for going back beyond the inaccuracy, and beyond the repayment of the debt to the Woolwich, to a situation of indebtedness which, for whatever reason, had been brought to an end before any alteration in the pursuer's interest as it appeared on the register.

[11] It was the inaccurate entry on 8 March which altered that position. Rectification of that inaccuracy would put matters right, by restoring that position. What the pursuer has lost as a result of the Keeper's refusal is the value of the interest which she thus previously had, and which is not being restored by rectification. We see no basis for going further back in time, and attempting by virtue of section 12 to put the pursuer back into a position different from that which she was in when the inaccuracy occurred, and which she would have regained if that inaccuracy had been put right by rectification.

[12] It was submitted that some light was thrown upon the matter by the terms of section 13(2). It does not, however appear to us that the Keeper's right to be subrogated to a claimant's rights is of any assistance in identifying or quantifying the loss which requires to be indemnified. It was also submitted that the terms of section 12(3), excluding the entitlement to indemnity in certain situations where there had been loss, showed that certain kinds of loss there referred to should be regarded as resulting from other causes, and not as losses which were a result of the Keeper's refusal to make rectification. The submission was made somewhat broadly, but it appears to us that the various heads contained in subsection (3) identify a variety of circumstances which are entirely compatible with loss having been suffered as a result of one or other of the four heads set out in section 12(1). These additional arguments, which seem not to have been before the Lord Ordinary, do not in our opinion alter the position.

[13] Reference was also made to the Keeper's power, in terms of section 12(2) of the Act on registration in respect of an interest in land, to exclude, in whole or in part, any right to indemnity under section 12 in respect of anything appearing in, or omitted from, the title sheet of that interest. The suggestion appeared to be that the Keeper might make very wide use of that power, if he was liable to have to indemnify claimants in terms of section 12(1) by paying them the value of the interest which they would have recovered, if rectification had been made, and had not recovered as a result of refusal. We do not find that to be a persuasive argument. It appears to us that Parliament has intended that normally matters should be put right by rectification, and has appreciated that either rectification or refusal of rectification may cause loss, which ought to be indemnified. It was pointed out that there might be cases in which this would be very expensive. That is no doubt so. But it does not appear to us to affect the clear meaning of section 12(1).

[14] So far as the present case is concerned, it is to be noted that if rectification had been possible and had been effected, so as to restore the pursuer to the position in which she was immediately prior to the inaccurate entry, the first defender would have lost the value of the pursuer's interest, and would presumably have had to be indemnified for that loss, at the same value.

[15] In the whole circumstances the reclaiming motion is refused, and the Lord Ordinary's interlocutor sustained.