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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Registers Of Scotland Keeper v MRS Hamilton Ltd [2000] ScotCS 20 (25 January 2000)
URL: http://www.bailii.org/scot/cases/ScotCS/2000/20.html
Cite as: [2000] ScotCS 20
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FIRST DIVISION, INNER HOUSE, COURT OF SESSION
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Lord President Lord Coulsfield Lord Caplan
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0/115/4/94 OPINION OF THE LORD PRESIDENT in APPEAL TO THE COURT OF SESSION under Section 11 of the Tribunal and Inquiries Act 1992 against a decision of the Lands Tribunal for Scotland in the case between THE KEEPER OF THE REGISTERS OF SCOTLAND Appellants; and M.R.S. HAMILTON LTD Respondents: _______ |
Act. J.J. Mitchell, Q.C., Bevan; R. Henderson (Appellants)
Alt. Sir Crispen Agnew Q.C., Maclean; Robsons, W.S., S.S.C. (for Robert Thomas & Caplan) (Respondents)
25 January 2000
This is yet another case arising out of the provisions of the Land Registration (Scotland) Act 1979 ("the Act") relating to the rectification of the Land Register of Scotland and the indemnity for loss which the Keeper of the Registers of Scotland is required to give under Section 12(1) of the Act.
In broad terms Section 3(1) sets up a system of registration of interests in land which has the effect of vesting the real right in the interest in the proprietor subject to the effect of any matter entered in the title sheet. In that situation there is a premium on the accuracy of the title sheet but, even in the best-regulated of systems, inaccuracies in the register will occur from time to time. Under Section 9 the register may therefore be rectified in certain limited situations. Section 9 provides inter alia:
"(1) Subject to subsection (3) below, 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.
(2) Subject to subsection (3)(b) below, the powers of the court and of the Lands Tribunal for Scotland to deal with questions of heritable right or title shall include power to make orders for the purposes of subsection (1) above.
(3) 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;
(b) the court or the Lands Tribunal for Scotland may order the Keeper to rectify only where sub-paragraph (i), (iii) or (iv) of paragraph (a) above applies or the rectification is consequential on the making of an order under section 8 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985.
(3A) Where a rectification of an entry in the register is consequential on the making of an order under section 8 of the said Act of 1985, the entry shall have effect as rectified as from the date when the entry was made.
Provided that the court, for the purpose of protecting the interests of a person to whom section 9 of that Act applies, may order that the rectification shall have effect as from such later date as it may specify...."
As the terms of the section show, there is no real limit to the kinds of inaccuracy in the register which may be rectified but, obviously, if the register could be rectified too freely, no-one would be able to rely on it and titles would lack stability. So, in practice there is an important limitation on the kinds of situation in which rectification can be allowed: it is usually ruled out if it would prejudice the proprietor of the relevant interest who is in possession (Section 9(3)). The policy behind this major restriction is to give security of title to proprietors who are in possession of property (Kaur v. Singh 1999 S.C. 180). But whenever rectification is either granted or refused, various parties may suffer loss as a result. In Section 12(1) the Act therefore imposes on the Keeper an obligation to indemnify them for that loss:
"Subject to the provisions of this section, a person who suffers loss as a result of -
(a) a rectification of the register made under section 9 of this Act;
(b) the refusal or omission of the Keeper to make such a rectification;
(c) the loss or destruction of any document while lodged with the Keeper;
(d) an error or omission in any land or charge certificate or in any information given by the Keeper in writing or in such other manner as may be prescribed by rules made under section 27 of this Act,
shall be entitled to be indemnified by the Keeper in respect of that loss."
It is worth observing, even at this stage, that the obligation to provide an indemnity does not rest on any element of fault on the part of the Keeper - it applies irrespective of what may be the cause of the inaccuracy in the register. For instance, it applies where the inaccuracy is the result of fraud on the part of the person applying to register the interest and someone else suffers loss. The Keeper's obligation to indemnify is simply a necessary part of the whole scheme of registration of title in which, inevitably, inaccuracies in the register will occur and people will suffer loss in consequence.
The present case is one of several litigations involving M.R.S. Hamilton Ltd. ("Hamilton"). Putting the matter briefly, at some point Hamilton (and perhaps others) spotted that in various long leases granted in the earlier part of the nineteenth century, particularly in the Lanarkshire area, the landlords had inserted a provision which required payment of a particular sum of money to be made whenever the tenant's right under the lease was assigned to someone else. These obligations have come to be known as "leasehold casualties" since they resemble the casualties which could formerly be demanded in certain circumstances in connexion with a feu but which were abolished by the Feudal Casualties (Scotland) Act 1914. Under Section 6(1)(e) of the 1979 Act, the Keeper is obliged to enter in the title sheet any "subsisting real burden or condition affecting" an interest in land. The tenant's interest under a long lease is an interest in land which requires to be registered whenever it is transferred (Section 2(a)(v)). The Keeper was therefore obliged to enter any subsisting real burden or condition affecting the tenant's interest under one of these long leases when it was transferred and he would have been obliged to enter the provision in the leases which required payment of the casualty on assignation of the tenant's interest, if that provision subsisted. It appears, however, that in common with much of the conveyancing community in Scotland, the Keeper took the view that these casualties had fallen into desuetude and, since they were thought no longer to subsist, he did not enter them in the burdens section of the title sheets. At some point it came to be recognised that in principle such casualties remained enforceable. None the less, the result of the omission of the casualties from the title sheets was, of course, that despite the terms of the leases themselves, upon registration the measure of the tenant's interest under any lease was thereafter to be found in the title sheet relating to his interest which did not show any condition requiring the tenant to pay the casualty. Hamilton acquired the landlords' interests in a number of properties in which the tenants had been under an obligation to pay the casualties. Hamilton then drew the Keeper's attention to the fact that the relevant provisions in the leases had been omitted from the register and sought rectification. The Keeper has not rectified the register and it is common ground that in practice he could not do so since, inevitably, rectification would be prejudicial to the tenants who were in possession.
Although the Keeper does not, of course, deny that he is under an obligation to indemnify a party who suffers loss as a result of his omission or refusal to rectify the register, he disputes the right of Hamilton in these particular cases to indemnity under Section 12. In that situation Hamilton appealed to the Lands Tribunal of Scotland under Section 25(1). In that appeal Hamilton at first based their claim to an indemnity on Section 12(1)(d) but later averred that they were entitled to an indemnity under Section 12(1)(b). The Tribunal repelled the Keeper's plea that Hamilton had no title to sue in respect of certain aspects of their claim and his plea that any rights of Hamilton had prescribed. On the other aspects of the appeal the Tribunal allowed a proof before answer. The Keeper appealed to this court and lodged grounds of appeal relating to most aspects of the Tribunal's decision but, at the hearing of the appeal, counsel for the Keeper really confined themselves to two grounds, one relating to the interpretation of Section 12(1)(b) of the Act and the other relating to the interpretation of Section 12(1)(d). A number of underlying issues surfaced during the discussion, in particular in relation to Hamilton's argument that the effect of the registration of the tenants' interests had been to destroy any rights to payment of casualties which had fallen due before the date of registration. In view of the decision which I have reached on the construction of the statutory provisions, I consider that these matters are best left to be resolved once the facts have been determined. I therefore reserve my opinion on them.
It is Hamilton's claim under Section 12(1)(b) which gives rise to the more fundamental point in the case. As is apparent from its wording, the provision makes the Keeper liable to indemnify for loss suffered "as a result of ... the refusal or omission of the Keeper" to rectify the register. In order to determine what loss a party may have suffered as a result of the register not being rectified, it is clearly necessary to consider what the position would have been if the register had in fact been rectified. This in turn raises the question of what might have been achieved by rectification. Counsel for the Keeper argued that in principle rectification can alter the register only from the date of rectification. The main submission on behalf of Hamilton was that, on the contrary, rectification has retrospective effect from the date of registration of the relevant interest. Alternatively, even if it did not always take effect from the date of registration, the Keeper had a discretion to give it effect from that date. Moreover, counsel argued that in this particular case it would have been appropriate for the Keeper to make any rectification fully retrospective since the inaccuracy had entered the register at the time when the tenants' interests were registered and the casualties were omitted from the burdens section. Any indemnity should therefore be for loss calculated by reference to the position if the register had been rectified with effect from the date of registration of the tenants' interests.
Since Section 9 does not say specifically whether the Keeper's power to rectify the register can have retrospective effect, Parliament's intention as to the scope of his power must be gleaned from the relevant sections of the Act as a whole. The draftsmanship of the Act has attracted some well-known and oft-quoted criticism of the highest authority. Not surprisingly, therefore, in the course of the argument before us, on several occasions counsel for Hamilton suggested that any difficulties which they perceived in the way in which the Act appeared to operate could be ascribed not to the intention of Parliament but to yet further failures on the part of the luckless draftsman. In my view, with this particular statute as with other legislation, the court must guard against directing at the draftsman criticism which, if appropriate at all, may more properly be directed elsewhere. The drafting of the provisions in a statute may be perfectly clear, but still ministers and officials may not have fully thought through the underlying policy or else they may not have accurately foretold all its effects. Such hazards are a frequent concomitant of reforming legislation. The result may therefore be that provisions, well drafted in themselves, do not provide a ready answer to all the possible questions which occur to a reader faced with a particular practical problem. Alternatively, readers who do not like the policy enshrined in a particular provision may be tempted to argue that Parliament could not have intended the result which appears to emerge from the wording of the statute and that the drafting must therefore be defective.
Despite what was said by counsel from time to time in the course of their submissions, the problems in the present case do not appear to me to arise from any failure of expression in the Act, but rather they stem from the inevitable difficulty which the courts have in understanding the way in which the completely new and complex structure of registration introduced by the Act is intended to work. Understanding that structure requires the court to identify its underlying principles. That is particularly important when, as Lord Keith pointed out in Short's Tr. v. Keeper of the Registers of Scotland 1996 SC (HL) 14 at p. 22, the previous system, epitomised by the Register of Sasines, and the new system, involving the Land Register, "rest upon entirely different principles". Since Parliament does not, of course, expressly declare the underlying principles which it is enacting, we have to deduce them from the operative provisions of the Act itself - upon which a certain amount of light may be cast by the reports on which the legislation was based.
Fortunately, in Short's Tr. Lord Keith identified certain principles by reference to paragraph 154 of the Henry Report which is in these terms:
"On the other hand, under registration of title, which we advocate, all registered interests become indefeasible except in the rare case in which rectification of the register is allowed (see paragraphs 114 and 115); even in that case the state guarantee will ensure full compensation of the owner, and any other person who suffers loss by reason of any rectification, and any person who suffers loss because the register is not rectified will also be entitled to compensation."
Lord Keith commented that "The Act of 1979 gives full effect to these principles." Similarly, in the same case when it was before this court Lord President Hope observed (1994 S.C. 122 at p. 138 E - F):
"The system of registration introduced by the 1979 Act is a system for the registration of a title to the land. The real right derives from the registration of the interest in the Land Register. Section 3(1) of the Act provides that registration shall have this effect insofar as the right or obligation is capable of being vested as a real right, of being made real or, as the case may be, of being affected as a real right, and subsection (2) of that section provides that registration in the Land Register shall supersede the recording of a deed in the Register of Sasines."
The obligation on the Keeper under Section 6(1) is to "make up and maintain a title sheet" for any registered interest in land. The Keeper's obligation under Section 5(1) is thus a continuing obligation which involves him in making any amendment to the title sheet and any consequential amendments in the register that are required to give effect to any application for registration which he accepts under Section 4. Since registration may occur in a large variety of situations (Section 2), these applications can be of many kinds. For example, the proprietor may dispone the interest and the Keeper will then need to amend the name and designation of the person entitled to the interest in the title sheet. Or else, the proprietor may grant a standard security over the interest and the Keeper will need to amend the title sheet to include details of the standard security. If that standard security is later discharged the Keeper will then require to amend the title sheet by deleting the relevant details. Likewise, a real condition affecting the interest may be created or discharged - again requiring an appropriate amendment of the register. All these changes, if notified to the Keeper, lead to amendments of the register and, as the amendments are made, the title of the proprietor of the registered interest changes. On the other hand, the title remains unaffected unless and until the register is amended. So, for instance, even if the proprietor grants a standard security over his registered interest, this has no effect on that interest unless and until it is registered - at which point the proprietor's interest becomes subject to the standard security (Section 3(1)).
The overall effect of the scheme of the Act is therefore to create a register which discloses the current state of the various registered interests in land. On first registration the Keeper makes up the necessary title sheet and issues a land certificate and charge certificate, where appropriate (Section 5(2) and (3)). In the case of any subsequent dealing the Keeper makes the necessary changes to the title sheet and returns the certificate duly amended so as to show the up-to-date position. The Keeper issues only one land certificate for any given interest and it constitutes a copy of the title sheet at the time of issue. The Keeper will, however, on request subsequently make the land or charge certificate correspond to the relevant title sheet in the register (Rule 16 of the Land Registration (Scotland) Rules 1980). In this way the certificate will be brought up to date and so will show any changes in the title sheet which may have been made since the certificate was issued or last brought up to date. Although - except where he issues a substitute certificate under Rule 19 - the Keeper will issue only one land certificate in respect of any interest, he may issue an authenticated (or office) copy of the title sheet to anyone who applies (Section 6(5) and Rule 24). Again, that will be a copy of the title sheet as it stands at the date of the application. It will therefore show the registered interest as it is vested in the proprietor at that time.
The principle which underlies the system brought into existence by these provisions appears to me to be that at any given moment the title sheet of an interest in land should show not only who is the proprietor of that interest but also the nature and extent of that interest. Moreover, as the provisions for the issue of land certificates, charge certificates and office copies demonstrate, it is intended that, in planning and conducting their affairs, both the proprietors of the interests and third parties should be able to rely on the register to tell them all that they need to know at any given moment about any particular interest in land. This is subject to certain qualifications, of which two may be noted.
The first qualification is that certain matters do not require to enter the register. In particular, unless they are disclosed in any document accompanying an application for registration, there is no obligation on the Keeper to note overriding interests in the register (Section 6(4)). But, whether or not noted in the register, overriding interests affect any relevant registered interest (Section 3(1)). Moreover, the interest of a tenant under a short lease and the right of a non-entitled spouse under the Matrimonial Homes (Family Protection)(Scotland) Act 1981 may not be noted in the register but will none the less affect any relevant interest (Section 6(1) and (4)). Undoubtedly it can be seen as a defect in the system that these interests are omitted from the general scheme of registration but the reasons for the exceptions are purely practical and somewhat similar exceptions are not unknown in other systems of registration of title.
The second qualification is that the information contained in the title sheet may not in fact be accurate. But that does not affect the position - unless and until the Keeper rectifies the register. Unless and until that happens, the proprietor is vested in the interest as it is to be found in the title sheet. And, while the Keeper has a power to rectify the register in certain circumstances, he is under no duty to do so unless ordered by the court. In any other situation, the Keeper may decide that, even where he could rectify the register, having regard to the particular situation or to the interests of the system as a whole, he should exercise his discretion by not doing so. In other words the Keeper may properly decide that, even though the register is admittedly inaccurate, it is preferable to leave it in that inaccurate state rather than to correct it. In which case, unless he is ordered to rectify by the Lands Tribunal or court, the title remains as it is and the situation is dealt with in terms of the Keeper's duty to indemnify those affected (Section 12(1)(b)). The general bar on rectification to the prejudice of the proprietor in possession (Section 9(3)) and the discretion of the Keeper not to rectify serve to ensure that any contested rectification - and hence any rectification which goes beyond the correction of a minor clerical error - is likely to be rare. This in turn serves to increase the confidence with which parties can arrange their affairs on the basis of the information to be found in the register at any particular time.
Since the making-up and maintenance of title sheets upon which all can rely are at the heart of the system of land registration as created by the Act, it follows in my view that anything which tends to undermine the trust which can be placed in the content of the title sheets will run counter to the scheme and principles of the legislation.
With these general observations in mind, I turn to look at the competing arguments about the Keeper's power to rectify the register. It is convenient to begin with Hamilton's argument that rectification will always take effect from the date of registration. I should emphasise that we heard no submissions about cases involving fraud and I should wish to reserve my opinion on them. Subject to that qualification, I am satisfied that Hamilton's argument is inconsistent with the specific terms of the legislation.
Among the situations where rectification may take place is where its purpose is to note an overriding interest or to correct any information in the register relating to an overriding interest (Section 9(3)(a)(i)). The term "overriding interest" in relation to any interest in land is defined in Section 28(1) and includes, for example, the right or interest over it of the proprietor of the dominant tenement in a servitude (Section 28(1)(d)). It follows that, unless the servitude is mentioned in the documents accompanying an application to register the interest of the proprietor of the servient tenement, the Keeper is under no obligation to note it in the title sheet of the servient interest in land (Section 6(4)). Indeed, unless it is mentioned in the documents, the Keeper may well not be aware of the existence of the servitude. None the less, even though the servitude is not entered in the title sheet, the relevant interest will be subject to the servitude. If, for example, when the dominant interest in land comes to be registered, the Keeper becomes aware of the servitude, then he may then note it in the title sheet of the servient interest (Section 6(4)(b)(ii)). This he will do by rectifying the register under Section 9(1). Cf. Section 9(3)(a)(i). Of course, in another case the servitude may be created after the (servient) interest has been registered. Again, the Keeper may be quite unaware that this has happened and the existence of the servitude will not be noted in the title sheet of the servient tenement at the time of the creation of the servitude. But, again, the existence of the servitude may come to the Keeper's notice if the dominant interest is subsequently registered. In that situation, if the Keeper chooses to note the servitude in the title sheet of the servient interest, he will do so by rectifying the register. But the rectification could not have the effect of affecting the servient interest from the date of registration, for the simple reason that the servitude did not exist at that date. It is therefore clear that rectification under Section 9(1) cannot in all cases be intended to mean rectification of the title sheet as from the date of registration. The principal submission advanced by counsel for Hamilton must accordingly be rejected.
Their subsidiary submission was that the Keeper's power to rectify under Section 9(1) included a power to rectify with retrospective effect in an appropriate case and that in this particular case, if rectification had been possible, it would have been appropriate for the Keeper to rectify the register from the date of registration of the tenants' interests under the long leases. Counsel submitted that the effect of the rectification of the register in respect of the tenants' interests would have been to insert into the title sheets from the outset a reference to the casualty due on assignation of the lease. Of course - and very understandably - counsel found it hard to describe plausibly how this could have been expected to work, precisely because in these cases the tenants were in possession and rectification would therefore have been excluded. For the purposes of considering the point of principle, it is therefore preferable to imagine a situation where, say, an interest was registered in 1990 but the proprietor of the interest (A) was not thereafter in possession of the subjects. In 1994 it emerges that the registration had been obtained by the fraud of A and the "true" owner of the property (B) seeks rectification of the register. If the Keeper decides to rectify the register by deleting A's name and designation and inserting B's name and designation in the title sheet, should that rectification have effect only from the date of rectification in 1994 or could the Keeper give it retrospective effect from 1990?
In my view, to hold that rectification under the general provisions of Section 9 could be given retrospective effect would be to introduce into the system of registration of title a new and disruptive element. Admittedly, under Section 9(3A) Parliament has made specific provision for rectification to work retrospectively where it follows on an order for rectification of a document under Section 8 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985 ("the 1985 Act") and, whatever the difficulties, the courts must give due effect to that provision where it applies. None the less, there can be no doubt that, if in the case which I have envisaged, the Keeper could and did rectify the register with retrospective effect from 1990, the result would be that the state of the register in the intervening period between 1990 and 1994 would vary depending on when the question arose. If anyone had consulted the register, say, in 1993 they would have found that A was the proprietor of the interest in question, but after rectification in 1994 the law would deem that in 1993 B had been the proprietor of the interest. The register as it existed in 1993 would therefore ultimately prove to have been misleading. In other words, if retrospective rectification were allowed, no-one consulting the register could be confident that it was determinative of the state of the title at that time: the law might subsequently hold that, even at that time, the legal position had been different from the position disclosed in the title sheet. Moreover, a third party would usually have no means of ascertaining the "true" position for himself, since the whole scheme of registration is constructed on the assumption that there will generally be no need to look behind the title sheet in the register. Retrospective rectification might also have the effect of unsettling transactions undertaken in reliance on the register. At the very least, it would introduce a large degree of uncertainty - without any of the safeguards which Section 9(3A) and Section 9 of the 1985 Act contain. The interpretation of Section 9(1) for which counsel for Hamilton contended would therefore tend to undermine, rather than to promote, the trust and confidence which people could properly place in the register. In this way that interpretation would run counter to what I conceive to be the scheme and principles of the Act. That being so, it would in my view be inappropriate to interpret Section 9(1) as containing an implied power to give retrospective effect to any rectification. Essentially the same view was taken by Lord Kingarth in First National Bank of Southern Africa Ltd. v. McStay 17 February 1999 unreported, when he observed that to give retrospective effect to rectification would be "to take away retrospectively rights otherwise conferred by Parliament".
I have reached this view by construing the original provisions of the Act. There is, of course, a further argument which can be prayed in aid, based on the terms of Section 9(3A). This was indeed the principal argument advanced on behalf of the Keeper before us and it was an argument upon which Lord Kingarth placed considerable weight in reaching his decision in First National Bank.
As counsel pointed out, subsection (3A) begins by providing that, where a rectification is consequential on the making of an order under Section 8 of the 1985 Act, the entry is to have effect as rectified from the date when the entry was made. In other words rectification is to be retrospective. In the proviso Parliament gives the court power to protect the interests of persons to whom Section 9 of the 1985 Act applies by ordering that the rectification shall have effect as from such later date as it may specify. Counsel argued that, if the effect of rectification under Section 9(1) or under Section 9(3)(b) of the Act were always retrospective, then there would have been no need for Parliament to state in the first part of subsection (3A) that in this particular instance rectification was to be retrospective: that would have gone without saying. So, counsel contended, Parliament must have assumed that in other cases the entry as rectified would have effect only from the date of rectification.
There is no doubt that the argument, as stated, tends to support the conclusion which I have reached by considering other provisions in the Act. If I have hesitated to place it at the forefront of my reasoning, it is simply because I find the argument - whatever its technical merits - somewhat artificial. It presupposes that, when enacting the 1985 Act and in particular paragraph 21 of Schedule 2 to that Act, Parliament did in fact consider whether the power of rectification in the unamended version of Section 9 was retrospective or not. In reality Parliament is unlikely to have had a view either way - especially as to the implications of such a consequential amendment contained in a Schedule. Indeed it is hard to know whether anyone considering or drafting the 1985 legislation would have been charged to review the effects of the land registration legislation in any depth. There is certainly nothing in the preceding report of the Scottish Law Commission to show that they had considered that particular matter in detail, though the report makes it clear that they were very much alive both to the need to preserve a high level of certainty as to the contents of the register and to the implications of retrospective rectification. See Report on Rectification of Contractual and other Documents (No. 79, 1983), Part VIII. I should therefore be somewhat reluctant to put undue weight on the implications to be drawn from the language of subsection (3A), if there were nothing else pointing to the same conclusion. On the other hand, having reached the conclusion that the other provisions of the Act should be interpreted as providing that the Keeper usually has no power to rectify the register with retrospective effect, like Lord Kingarth, I find support for that interpretation in the terms of subsection (3A).
For these reasons I am satisfied that, except under Section 9(3A), the Keeper has no power to rectify the register with retrospective effect. Any rectification has effect only from the time when it is made. From that moment onwards the registered interest is vested in the proprietor in its rectified form and those consulting the register may rely on its new rectified form as disclosing the state of the title at that time. Indeed, within a system where the register is intended to reveal the current state of the title, retrospective rectification is, almost by definition, anomalous. It follows that the obligation of the Keeper under Section 12(1)(b) must be to indemnify any interested party for the loss which they suffer after the Keeper omits or refuses to rectify the register and as a result of that omission or refusal.
In the course of the argument before us Sir Crispin Agnew, Q.C., who appeared for Hamilton, pointed out that there was reason to believe that, as early as 1992 - 1993, the Keeper had become aware of possible problems arising from the failure to include casualties in the title sheets of tenants' interests under long leases. We were referred to an article by Professor John Sinclair, "Casualties: Suitable Cases for Treatment" (1996) 1 Scottish Law and Practice Quarterly 125 where he refers to an indication of the existence of this problem in the Keeper's Report for that year of operation. Sir Crispin suggested that it might be that the Keeper should have been alerted to the problem in the present cases at that period. That being so, Sir Crispin indicated that, if we rejected his argument for backdating the claim under Section 12(1)(b), he wished to consider whether Hamilton's claim under Section 12(1)(b) should be amended so as to be based on the assumption that the Keeper had omitted to rectify the register from about 1992 onwards rather than simply on the basis that he had refused to rectify it after Hamilton wrote to him in 1994. In other words the loss might be calculated by reference to the period from 1992 rather than from 1994. It appears to me that the point might be of some significance for the quantification of any claim and that it would therefore be appropriate to allow counsel time to consider whether to amend the pleadings in this respect.
The other issue raised in the appeal related to the interpretation of Section 12(1)(d). On that matter I find that the wording of the provision leaves no room for doubt as to the correct interpretation. In particular I could detect no lack of clarity in its terms: any supposed infelicities in its drafting seemed to me to arise only out of a desire to give the provision a meaning which its words would not support. The contention for Hamilton, which succeeded before the Tribunal, was that the subsection should be interpreted broadly. So interpreted, there would be an error or omission in a land certificate whenever there was an underlying error or omission in the title sheet in the register. Adopting that approach the Tribunal held, apparently obiter:
"It may be that section 12(1)(d) like section 12(1)(c), was inserted primarily to cover the risk of clerical or administrative error, and that the risk of an inaccurate copy was, indeed, in mind, but we cannot accept that the provision as enacted is restricted to deficiencies in copying. It covers errors or omissions in information given by the Keeper in writing and that must be errors or omissions in information assessed by reference to the true facts. A Land Certificate which does not include a burden which should have appeared on it, can be said to contain an omission even if the explanation for the omission is that it was missed from the title sheet."
In M.R.S. Hamilton v. Keeper of the Registers (No. 1) 1999 S.L.T. 829 at p. 834 F - I Lord Hamilton, again obiter, indicated that he would be inclined to accept the view of the Lands Tribunal.
Despite these views, I am satisfied that subsection (d) should not be interpreted in this way. In the first place, the language of the subsection is plain: it is dealing with errors or omissions in land certificates, charge certificates and written information given by the Keeper. If one looks at Section 5(2) and (3) it is apparent that land and charge certificates are intended to comprise a copy of the title sheet or of the entry in the title sheet relating to the heritable security in question. The same is true of the office copy envisaged in Section 6(5). If the land or charge certificate or the office copy is indeed an accurate copy of the title sheet or entry relating to the heritable security, then it cannot be said to contain any error or omission. What subsection (d) is designed to do is to deal with the situation where, although the relevant title sheet or entry relating to a heritable security is accurate, the certificate or office copy contains an inaccuracy when judged against the title sheet in the register. In that situation, a party relying on the land or charge certificate or on an office copy may indeed suffer loss and the Keeper will be bound to indemnify him for that loss. But it will be loss which is due to the error or omission in the certificate or office copy as opposed to loss due to an error or omission in the register. Depending on the circumstances, the two kinds of loss are likely to be very different. Where there is an error in the register, the party affected may actually have lost either his title to part of his land or some real right pertaining to his land. On the other hand, where, for instance, the land certificate omits part of the subjects which should be included or omits some real right pertaining to the land, the owner will still have the title and the relevant real right in the area of land. Even though he may have been misled into thinking that he did not have the title or right and may have thereby suffered loss of some kind, any resulting loss will be different from the loss of the actual title or real right. Paragraph (d) is intended to cover this kind of loss only.
The second difficulty which I have with the view of subsection (d) advanced by counsel for Hamilton is that it renders subsection (b) and, arguably, subsection (a) redundant. The only way in which a party is likely in practice to discover the content of the relevant title sheet is by looking at the land certificate or at an office copy. In all cases where a party sought but was refused rectification of the register, he would be claiming indemnification of loss suffered as a result of an inaccuracy in the title sheet which the Keeper had refused to rectify. On the wide interpretation of (d) favoured by Hamilton, that would be loss suffered as a result of the entry in the title sheet being different from the "true facts". The party affected could therefore seek an indemnity under subsection (d) without bothering to refer to subsection (b). Equally, where some party had taken steps in reliance on the entry in the register, he would in practice have relied either on the land certificate or on an office copy. If the Keeper subsequently rectified the register and this resulted in loss to him, again it would appear that he could claim that loss under (d) since the loss would be one which he had incurred because the information in the land certificate or office copy was different from "the true facts". In this case also, paragraph (a) of subsection (1) would be redundant.
The supposed attraction of the argument for the wide interpretation of subsection (d) lies in the fact that it allows greater scope for recovery of losses than would be allowed under subsections (a) and (b) alone. It was not difficult, for instance, for counsel for Hamilton to point to cases where, even after an entry in the register was rectified, the party who had sought the rectification might still suffer loss - for example, loss of a sale from which the purchaser had withdrawn when the error in the register came to light. I accept, of course, that such losses may be experienced even after rectification. It follows that, if the Keeper refuses to rectify the register and is merely bound under subsection (b) to indemnify the party seeking rectification for the loss resulting from that refusal, then the Keeper will not be bound to indemnify the party for the loss of the bargain. Counsel for Hamilton submitted that Parliament had perceived that difficulty in the scope of paragraph (b) and had therefore inserted paragraph (d) inter alia to make good this deficiency. But, in my view, there is no reason whatever to suppose that the draftsman failed to draft paragraph (b) appropriately or that Parliament was dissatisfied with the scope of the indemnity which it was enacting in paragraph (b). On the contrary we can easily suppose that, where the Keeper did not rectify the register, Parliament intended to impose on him an obligation to provide an indemnity of the scope envisaged in paragraph (b).
The scheme of the legislation is to give the Keeper a power under Section 9(1) to rectify the register in certain circumstances, coupled with a duty to do so when ordered by the Lands Tribunal or by a court having the necessary jurisdiction. In an appropriate case, therefore, when he becomes aware of an inaccuracy in a title sheet, the Keeper can solve the problem by rectifying the title sheet. It is only where he does not do so, either because he cannot or because he omits to do so or refuses to do so, that he comes under an obligation to indemnify the party affected by that omission or refusal. In that situation it seems to me quite comprehensible that Parliament should have measured the scope of the indemnity by reference to the effect which rectification would have had and should have intended to put the party in no better position financially than would have been achieved by rectification - even though such an indemnity would not cover all of the party's losses. That is precisely what we find in subsection (b). Especially since rectification and indemnity apply even where the inaccuracy is due to no fault on the part of the Keeper, this measure of indemnity, though not covering all loss, may well have been seen as both adequate and appropriate.
Nor does the actual history of the legislation make it easy to dismiss this as a view which Parliament could never have intended to adopt. As is well known, the rectification and indemnity provisions in the Act were modelled to a considerable extent on Sections 82 and 83 of the Land Registration Act 1925 which applied in England and Wales at the time. Even before 1979, the limits to the scope of the indemnity under the English Act had been recognised. In particular counsel for the Keeper referred to Working Paper No. 45 of the Law Commission on Land Registration (1972). In paragraph 96 the Commission pointed out that Sections 82 and 83 did not appear to have envisaged that rectification might not in all cases be an adequate remedy and that in some cases compensation might be required in addition to rectification. If rectification would not provide full compensation in all cases, then equally an indemnity designed to make good loss suffered as a result of an omission or refusal to rectify might well not provide a full indemnity in all cases. Even though this effect of the equivalent English provisions was already known, Parliament chose to enact Section 12(1)(b) in terms which in substance reflect the terms of Section 83(2) of the English Act. We may suppose that Parliament intended that those suffering loss in similar circumstances in Scotland were to have a similar and not a greater right to an indemnity out of public funds. To interpret paragraph (d) as giving a right to an indemnity which is not given by paragraph (b) in these circumstances would be to subvert rather than to apply the legislation enacted by Parliament. If the indemnity provided under paragraph (b) is thought to be inadequate, then, particularly in view of the possible expenditure implications, it is for the Scottish Parliament to amend the Act and not for this court to extend it by a "generous" interpretation. In any event, I see no basis for saying that any limitations on the scope of paragraph (b) constitute a reason for giving anything other than their plain meaning to the words of paragraph (d). Given their plain meaning, these words constitute no foundation for Hamilton's claim in this case: that claim must stand or fall on Section 12(1)(b).
I should accordingly allow the appeal and sustain the Keeper's second plea-in-law to the extent of excluding from probation Hamilton's averment in Article 5 relating to Section 12(1)(d) of the Act. In addition I would allow a proof before answer in respect of the loss which Hamilton suffered as a result of the Keeper's omission or refusal, as the case may be, to rectify the register. I express no view upon the issues relating to quantification of that loss which may fall to be determined after proof. In the meantime I would allow Hamilton six weeks to lodge a minute of amendment, if so advised, and the Keeper four weeks thereafter to lodge answers to the minute, if so advised. Quoad ultra I would remit the appeal to the Lands Tribunal to proceed as accords.
FIRST DIVISION, INNER HOUSE, COURT OF SESSION
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Lord President Lord Coulsfield Lord Caplan
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0/115/4/94 OPINION OF LORD COULSFIELD in APPEAL TO THE COURT OF SESSION under Section 11 of the Tribunal and Inquiries Act 1992 against a decision of the Lands Tribunal for Scotland in the case between THE KEEPER OF THE REGISTERS OF SCOTLAND Appellants; and M.R.S. HAMILTON LTD Respondents: _______ |
Act. J.J. Mitchell, Q.C., Bevan; R. Henderson (Appellants)
Alt. Sir Crispen Agnew Q.C., Maclean; Robsons, W.S., S.S.C. (for Robert Thomas & Caplan) (Respondents)
25 January 2000
Your Lordship has set out the circumstances of the action and the terms of the statutory provisions and I need not repeat them. The argument before us ranged widely over the scheme established by the 1979 Act but, as I see the position, we are asked at this stage to decide only a relatively limited question. This is a claim for an indemnity under section 12 of the Act but we heard very little argument on the question how the loss to be indemnified should be measured. The only issue focussed was whether a rectification of the register, if made, would operate retrospectively: that is, as I understand it, whether such a rectification could, in some way, be deemed or assumed to have been made at an earlier date than that at which it was actually made. In the present case, there is some artificiality in considering this question at all, since it is clear that, once the error had been made, rectification would only have been possible with the consent of all interested parties. Nevertheless, if attention is directed to the limited question, it can, I think, be seen that rectification cannot be taken to be retrospective in the sense contended for. At any given time, the register is as it is, and transactions may take place on the faith of what appears on it. A later rectification could not be held to change the position as it was at any earlier date, in the absence of some power in terms of which a rectification might be deemed to have effect from an earlier date. If there were such a power, it would be necessary also to make provision for the consequences of a rectification deemed to have effect from a date earlier than that on which it was made, such as is included in the 1985 Act and in section 9(3A) of the 1979 Act, but there is no such provision. In these circumstances, I agree that the case should be disposed of, at this stage, as your Lordship proposes. I also agree with your Lordship in regard to the question of the construction of section 12(1)(b) of the 1979 Act.
I should, however, say that I am not convinced that this decision takes the question of the proper approach to the assessment of an indemnity for loss under section 12 very much further and that, in my view, that question remains open. The indemnity under section 12 is an indemnity for loss and therefore it is necessary to look at the circumstances of each claimant and consider what actual loss that claimant has sustained. That loss is not, in my view, necessarily the same as the amount which might have been recovered if the burdens which are at the root of this case had remained enforceable or as any diminution in the market value of the property to which the benefit of these burdens was attached. I should also say that we heard no substantial argument about the effects which any fraud or misrepresentation in regard to entries on the register might have and that, in my view, this decision also may have limited effect only in regard to any question as to how the rights of parties might be affected in a case in which there was fraud or misrepresentation.
FIRST DIVISION, INNER HOUSE, COURT OF SESSION
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Lord President Lord Coulsfield Lord Caplan
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0/115/4/94 OPINION OF LORD CAPLAN in APPEAL TO THE COURT OF SESSION under Section 11 of the Tribunal and Inquiries Act 1992 against a decision of the Lands Tribunal for Scotland in the case between THE KEEPER OF THE REGISTERS OF SCOTLAND Appellants; and M.R.S. HAMILTON LTD Respondents: _______ |
Act. J.J. Mitchell, Q.C., Bevan; R. Henderson (Appellants)
Alt. Sir Crispen Agnew Q.C., Maclean; Robsons, W.S., S.S.C. (for Robert Thomas & Caplan) (Respondents)
25 January 2000
I have had the advantage of reading the opinion of your Lordship in the chair and I agree therewith. The background to the appeal and the submissions of the parties, so far as significant, are set out and I need not repeat them.
A crucial issue in the questions put to us is the construction to be accorded to section 12 of the Land Registration (Scotland) Act 1979. The appellants, MRS Hamilton Limited ("Hamilton") claim that they are entitled to an indemnity in respect of loss which they allege has been suffered by them in terms of sub-section 1(b) or 1(d) of section 12. They make this claim of course against the background of a failure on the part of the Keeper of the Registers to rectify the register in correction of the mistake that was made when the casualty provisions of the relevant long leases were not entered in the title sheet at the time the leases were registered. Since the indemnities claimed in terms of section 12(1)(b) must flow from the refusal or omission of the Keeper to make rectification of the register, any loss giving right to indemnity must be based on the position which would have arisen if the Keeper had in fact rectified the register. The parties advanced opposing contentions on the matter. Hamilton contended that the effect of rectification is to correct the register as at the date of the original registration of the relevant deed. The Keeper, on the other hand, contends that rectification only takes effect from the date when it was actually carried out. This of course plainly means that any rectification will not be retrospective in effect.
In my view to give retrospective effect to a rectification under section 9 of the 1979 Act would offend against the whole purpose of the Land Registration system provided by the Act. The registration or recording of deeds is aimed at the creation of real rights effective not only against personal obligants but against the world. The mechanism for achieving the creation of real rights affecting land was formerly by recording in the Register of Sasines and now, in the relevant areas, by registration under the 1979 Act. The critical element in the creation of real rights is a publication in the public records of the documents or deeds which are intended to create such rights. Thus the key to the ascertainment of the existence of real rights (and their nature, extent, and qualifications), is to consult the public registers. With the creation of a system of registration of title to lands the objective was to reinforce the system of publication by having relevant rights (and all the qualifications affecting them) registered with their description thereafter inscribed in the title sheet which then, for registration purposes, becomes a substitute for the deeds themselves. The registration of land rights system was intended to simplify and reinforce the publication system which pre-existed it and certainly was not intended to weaken it. It thus seems to me unlikely that the legislators would have intended to introduce a system which weakened the reliance that could be placed on the registered details of title.
If a registered right or obligation is subject to an inaccuracy, or has been incompletely expressed, nevertheless from the date of registration the title sheet as it stands is available as an effective record of the right or obligation in question to anyone who cares to consult it or act upon it. Thus there may be a period when the Keeper is not even aware of an inaccuracy, or in any event has not come to any decision about rectifying it. During that period the registration affecting the relevant land will be based on an uncorrected entry and anyone consulting the title sheet would be entitled to act upon the basis of what the register contained. Section 6(2) of the Act provides that any summary or statement of terms in the title sheet shall be presumed to be a correct statement of the terms of the right, burden, or condition, which is therein described. It would strike at the reliability of the records if that presumption were to be read as implying that it was to be subject to any subsequent rectification of the register. In these circumstances I consider that a construction of section 9 of the Act to the effect that the rectification system which it provides should operate retroactively could only be justified if there was special provision to that effect. A construction which undermined the registrations system could not confidently be implied.
In my view a rectification effects a correction and not a reduction of the original entry. The title sheet is a vital document which will incorporate changes and developments affecting the registration entry as they occur. The rectification will take the form of the Keeper "inserting, amending, or cancelling anything therein". However, these activities do not require that the original terms of the entry be eliminated. They are merely varied as from a particular date and that date need not be the date of the original registration entry, notwithstanding that the variation will bring about what should have been recorded originally. The position in relation to rectification of inaccuracies and omissions, must be contrasted with the rectification of deeds in terms of section 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. Section 9(3A) of the 1979 Act specifically provides that, where there is rectification of an entry in the register by way of an order under section 8, the entry will have effect as rectified as from the date when the entry was made. It is noteworthy, of course, that when retrospective effect is required in respect of a rectification, a specific provision to that effect is considered necessary. In addition it is necessary to consult the 1985 Act to see why special arrangements may be required to cover rectification of documents rectified under that Act.
Thus, it must be noted that all rectifications under section 8 are imposed and controlled by the court. Moreover, under section 8(4) a document rectified under the section shall have effect, normally, as if it has always been rectified. Thus it is intrinsic to the creation of a rectified document under section 8 that it shall be supposed that the document always corresponded to the true intentions of the parties. Further it should be noted that backdating will apply even in the case of a rectified document which has never been registered. The backdating of rectified documents could of course be important in the working out of parties' respective rights under that document. Section 9 of the 1985 Act has very specific provision for the disallowance of rectification in certain circumstances. One such circumstance would be if a third party to the relevant agreement had acted or refrained from acting in reliance of the terms of the document as these are shown in the Land Register. Thus statutory requirements of retrospective rectification are designed so as not to affect, in the normal case, parties who may have relied on the public registers. Moreover, the court is in any event given a power in section 9(4) of the 1985 Act to vary the effective date of a rectification to a time later than that which would otherwise apply. Section 9(7) gives the court wide powers to remedy the situation if a person affected was not aware of the rectification proceedings. Section 9(3A) of the 1979 Act must be viewed against this whole background. Clearly when the legislature is prepared to provide for retrospective effect in the case of a rectification, the provision will be hedged with very specific protections and considerable control and flexibility, all to ensure that the normal operation of the public records is not undermined. This, I think, is in stark contrast to the arrangements set out for section 9 of the 1979 Act.
The incidents of land transactions are so varied that it is difficult to work out in the abstract the possible implication of the view I have taken of the effect of rectification under section 9 of the 1979 Act. However, section 9 contains provisions designed to avoid rectification where other interests are likely to be affected, so that many difficulties caused by a variation of the original registration (if such difficulties could arise) are likely in practice to be rare. Moreover, it seems to me that the scheme of the Act is that if problems arise because of inaccurate registration and of the necessarily inflexible nature of the registration system, they should not be resolved by departing from the principles intrinsic to the public records but rather by the payment of indemnity.
The second construction problem that arises in the appeal relates to the application of section 12(1)(d). Your Lordship in the chair has dealt with this very comprehensively and, since I am in full agreement with the views expressed, I consider that I can add little that is useful.
The positions arrived at in relation to construction in my view lead inevitably to the proposals for disposing of the appeal set out by your Lordship and I agree with them.