Экзамен зачет учебный год 2023 / SLC, Report on land registration. Vol 1

would be for the Keeper to supply an acquirer with a list of previous owners. Another variant would be to impose on the Keeper a duty on the lines of the duty under section 6(1)(c) of the 1979 Act in relation to the Register of Inhibitions. But such solutions would be unsatisfactory. They would impose significant costs and would not survive a cost/benefit analysis. In DP 130 we concluded that the law should be left as it is, and that the Keeper should continue to bear the risk of undisclosed insolvency affecting a previous corporate owner.21 Those who responded agreed.

30.11 Further reflection has confirmed us in this conclusion. If the Keeper has to indemnify the liquidator (or other official), the sum so paid would presumptively be recoverable from the solicitor who acted in the purchase from the company, who should have checked the company's status, and thus presumably failed in the duty of care owed to the Keeper. Moreover, cases where a transaction is purportedly entered into by a company, but it is invalid because of the opening of an insolvency process, are comparable to the routine cases where a company that is not subject to an insolvency process transacts, or purports to transact, but the wrong persons have acted in the name of the company: for example, a disposition by XYZ Ltd is signed by two persons who have no power to sign for that company. Such cases involve the Keeper in a risk as well. The analysis is the same: assuming that the buyer from XYZ Ltd should have taken reasonable steps to check that the right persons signed for the selling company, then failure to do so would amount to breach of the duty of care and so if the Keeper does have to pay compensation the sum in question is presumptively recoverable from the negligent buyer or the negligent buyer's solicitors.

Floating charges

30.12 In DP 130 we put this case.22 Suppose that A Ltd, having granted a floating charge over its whole property and undertaking to X Bank, dispones certain land to B Ltd, and further suppose that, before the disposition is delivered, the floating charge attaches (crystallises) and becomes a fixed security.23 The disposition to B Ltd is invalid because, following receivership or liquidation, the directors of A Ltd would have been unable to act for the company by granting a disposition. B Ltd then dispones to C Ltd which is registered as owner. Assuming good faith etc, C Ltd would have an unchallengeable title as owner, both under current law and under the new scheme. But under current law a floating charge is an overriding interest and presumably therefore continues to affect the land.24 It does not appear that there is anything in the 1979 Act to protect C. We proposed that C, if in good faith, should be protected.25 Respondents generally agreed. The draft Bill protects the acquirer from prior unknown floating charges. Accordingly we recommend:

21DP 130, para 8.28.

22DP 130, para 8.29.

23If the floating charge crystallises after delivery it does not attach the land: Sharp v Thomson 1997 SC (HL) 66.

24Part (but only part) of the underlying problem is that under current law a floating charge can attach without any way of third parties finding out except later. Accordingly we recommended that a floating charge should not attach until notice to that effect is registered in the Register of Floating Charges: see Scottish Law Commission, Report on Sharp v Thomson (Scot Law Com No 208, 2007). This has so far not been implemented.

25DP 130, para 8.30 (proposal 21).

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124.A registered disponee acting in good faith should take free of any floating charge granted by a predecessor in title of the disponer, being a charge that has attached.

(Draft Bill, s 47)

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Part 31 Litigation about land titles: the position of the Keeper

31.

Introduction

31.1 This part of the Report is about the Keeper's role in litigation about land titles. To a large extent what is said here is merely consequential upon changes that we recommend elsewhere, in relation to inaccuracies and their rectification. But the issue's practical importance is such that it merits separate discussion.

The Keeper as litigant: the influence of the Midas touch

31.2Under the 1979 Act system, titles to land are, in a sense, in the Keeper's gift. If the Keeper declines an application for registration, the rejected deed has no effect on title. If the Keeper accepts an application for registration, then there is an effect on title, even if the application should not have been accepted because it was based on a void deed.1 Thus if an identity thief forges the owner's signature on a disposition, the disponee, on registration, acquires ownership, and does so even if in bad faith. Of course, wrongful registrations are sometimes2 capable of being undone by rectification, and rectification, like registration, is a means of changing titles to land.3 But here again the power lies in the Keeper's hands. The rights of the parties hang, like puppets, from threads held by the Keeper. If the Keeper denies a right, the right is denied, and if the Keeper confers a right, the right is conferred. The Keeper giveth and the Keeper taketh away. Title flows from the Register, and the Register is written by the Keeper. Of course, the Keeper must act in accordance with the law, and is always subject to review by the courts. But what has been said is nevertheless the position.

31.3Hence it is hardly surprising that parties dissatisfied with the state of the Register should tend to direct their fire at the Keeper. Suppose that Elfrieda and Wilbur are neighbours and are in dispute about a boundary area. At present the area is in Wilbur's title sheet. That means that regardless of whether the area should be his or not, it is his, and so it is not Elfrieda's.4 The only way that Elfrieda would be able to acquire ownership of it is if the Keeper were to delete it from Wilbur's title sheet and add it to Elfrieda's. The obvious course of action for Elfrieda is therefore to seek to persuade the Keeper to make those two matching changes to the Register, and, if the changes are not made, to sue the Keeper. Under the 1979 Act, therefore, the Keeper is what may be called the natural defender in

1 This is what we called the Keeper's Midas touch. See Part 13.

2 Not always. See s 9 of the 1979 Act. The issues are discussed in Parts 17 and 18.

3 In the case of bijural inaccuracies. See DP 128, para 6.8. Whether the Keeper's Midas touch extends to rectification as well as to registration is uncertain. The issue would come into focus if the Keeper were to make a wrong rectification. In practice the working assumption is that the Midas touch does so extend. See further para 17.21 above.

4 In some cases the Keeper includes the disputed area in both title sheets. The consequences are obscure, but probably title rests on the most recent entry. That can result in title shuttlecock, for if the most recent entry was in Elfrieda's title sheet, and Wilbur then sells, the result will be that Wilbur's title sheet has the most recent entry. For discussion of this "title shuttlecock" see Part 13. In the new scheme overlap registration is not allowed.

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disputes about land titles.5 Whilst Elfrieda will also convene Wilbur, the practice is to name the Keeper as a defender and typically as first defender since the primary conclusions are directed against the Keeper: the pursuer requests the court to order the Keeper to rectify the Register. Indeed, it is not clear that it is strictly necessary, under current law, for Wilbur to be convened at all.

31.4If the Keeper has declined Elfrieda's request to rectify, she can, instead of raising an action in the ordinary courts, with the Keeper as defender, appeal to the Lands Tribunal against the Keeper's refusal to rectify.6 The same remarks apply. The Keeper is the respondent and whilst the practice is to call Wilbur, it is the Keeper who is procedurally at the centre of matters, and indeed even if Wilbur is called he may not take part in the proceedings. (In the same way, if the matter is handled by action in the ordinary courts Wilbur may choose not to enter appearance.) As an example, take Sexton and Allan v Keeper of the Registers.7 This was part of a dispute that had been going on for more than 30 years about the ownership of two properties in Coatbridge. The Keeper eventually registered X and Y as co-owners of both properties. The two rival claimants then sought rectification. When the Keeper declined to rectify, they appealed to the Lands Tribunal. X and Y did not participate to defend their rights. The result is that a dispute between two people, or rather sets of people, about the ownership of certain properties, is handled procedurally not as a dispute between the two sets of rival claimants, but as a dispute between one set of claimants and the Keeper. That this is an unsatisfactory state of affairs seems to us selfevident. It is a topsy-turvy way to do justice. And the costs to the Keeper in staff resource required and litigation expenses are substantial.

31.5Section 9(1) of the 1979 Act says, moreover, that "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…" Not many statutes say that a public official has to obey the orders of the court, this being regarded as simply self-evident. Whatever the reasons for the inclusion of the italicised words, they have in practice re-inforced other aspects of the legislation in encouraging those disappointed with what the Register says to sue the Keeper.

Taking the Keeper out of the line of fire: the new scheme

31.6 In the new scheme the Keeper's decisions will naturally continue to be subject to the jurisdiction of the courts of Scotland (and also subject to the Lands Tribunal). But disputes about land titles are almost invariably disputes between two parties – commonly neighbours

– and we think that if such disputes have to be resolved by litigation, the proper parties to the litigation are the parties to the dispute. The Keeper's role should simply be to give effect to whatever decisions the courts arrive at. The Keeper has, under the draft Bill, a duty to rectify any inaccuracy that comes to light.8 Take for example the dispute between Elfrieda and Wilbur over a boundary area. In the new scheme it would be pointless for Elfrieda to convene the Keeper as first defender, or as a defender at all. Her course is to raise an action against Wilbur with whatever conclusions may be appropriate, such as declarator and

5 Having said that, it occasionally happens that a summons is signetted that contains conclusions directed against the Keeper but without calling the Keeper as defender. This seems to us inept.

6 1979 Act, s 25(1).

7 17 August 2006, Lands Tribunal, unreported. See Kenneth G C Reid & George L Gretton, Conveyancing 2006 (2007), p 39.

8 Draft Bill, s 54(1).

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reduction, very much as for disputes about titles in the Register of Sasines.9 We give some examples.

31.7(i) Charles is registered as owner of property following a gratuitous disposition from Beth. A guardian is then appointed to Beth and the guardian raises an action to reduce the disposition on the ground that Beth was incapax at the time she signed. Charles denies that Beth was incapax. There is no need for the Keeper to be a party to the action. If the action succeeds, the result will be that the court has determined that the disposition was void, for a deed granted by someone without capacity is void. That being so, ownership never passed to Charles. (Under the 1979 Act, it would pass. But in our scheme the Midas touch would disappear and the ordinary rules of property law would apply.10) Hence the decree would mean that the Register was inaccurate in showing Charles as owner. The Keeper would therefore now be bound to rectify the Register, by deleting Charles' name and re-instating Beth's. That alteration of the Register would not divest Charles and would not re-invest Beth: it would merely bring the Register into line with the never-changed rights of the parties. The summons would be in much the same style as if the disposition had been recorded in the Register of Sasines.

31.8Before going further, one or two procedural notes. In the first place, the decree obtained by the guardian could contain a declaratory finding that the Register was inaccurate. That, though advisable, would not be necessary. If it is apparent from the decree that the disposition was not merely voidable but void, then it follows that the Register was inaccurate from the outset. In the second place, the decree does not need to contain an order for rectification: any such order would be pointless.11 In the third place, what if the decree is merely a decree in absence? That would equally be a good basis for rectification.12

31.9(ii) The same as above, but the summons does convene the Keeper as defender and does contain conclusions directed against the Keeper requiring rectification of the Register. Even if the action succeeds, there would be likely to be an award of expenses against the pursuer in favour of the Keeper, the reason being that the pursuer has sued the Keeper without any reason.13 Why? Because the Keeper's obligation to rectify an inaccuracy is engaged only if the high evidential standard of "manifest" inaccuracy exists. In other words, the Keeper is not to rectify the Register if it appears merely more likely than not that some entry is inaccurate. That means that in any genuine dispute about land titles, the Keeper is not to rectify the Register. The duty to rectify is not engaged until the fact of inaccuracy has been clearly established, typically by decree, or by the agreement of the parties involved. So at the time when the guardian raises the action, the Keeper's conduct in refusing rectification was correct - the conduct required by law. The Keeper's job is to await the outcome of the litigation,14 and then, if the pursuer succeeds, to rectify. If the pursuer brings the Keeper in as defender before the substantive issue has been determined by

9 In disputes about titles in the Register of Sasines the Keeper is not a party. Indeed, in the past hundred years there has only been one reported case in which the Keeper has been convened as a defender in respect of Sasine recording: Macdonald v Keeper of the General Register of Sasines 1914 SC 854. The contrast with the Land Register is striking.

10See Part 13.

11Though it would not be incompetent for there to be such a conclusion, it would necessitate calling the Keeper as defender, which would be likely to result in an award of expenses against the pursuer. See below.

12See para 18.19 above.

13Awards of expenses are a matter for judicial discretion, but an award is normally made where a party has been convened without good reason.

14Or the agreement of the parties, if that happens.

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decree, the pursuer has jumped the gun, and like other pursuers who convene unnecessary defenders can expect to be found liable in expenses. This is true whether or not the action is defended by Charles. If the action is undefended by Charles, decree will pass against him, but the Keeper can be expected to have entered appearance and will seek expenses against the pursuer.

31.10Whether Charles enters appearance or not, the Keeper's pleadings will typically be "not known and not admitted" in relation to the articles of condescendence that deal with the substantive dispute. As far as the conclusion for rectification directed against the Keeper is concerned, the plea will be that the pursuer's case is irrelevant, in that unless and until the alleged inaccuracy has been established to the required "manifest" standard, the Keeper is bound not to rectify the Register. Of course, if the pursuer succeeds in the substantive case, the Keeper will at that point come under an obligation to rectify (and could have no objection to doing so), but the pleadings are to be directed to the situation as at the raising of the action.

31.11(iii) The previous examples involved a void deed. The next involves a voidable one. The facts are the same, but the guardian's case is not that Beth was wholly incapax, but that Charles obtained the deed from her by facility and circumvention. This, if true, means that the disposition is voidable, and the action of reduction has as its aim the avoidance of the deed. Suppose that the guardian is successful and the disposition is reduced. No question of the accuracy of the Register arises. In our scheme, decrees of reduction of voidable deeds enter the Register not by rectification but by registration.15 The procedure is for the pursuer to extract the decree and submit it, together with a registration application form, to the Keeper. The Keeper will accept the application, delete Charles' name and replace it with Beth's. The action of the Keeper is, in its externals, the same as in the previous examples, but this is a registration not a rectification. Once again there is no point in convening the Keeper as a defender in the action. The summons should be in much the same style as if the disposition had been recorded in the Register of Sasines.

31.12(iv) The same as (iii) but the pursuer does convene the Keeper as a defender. The pursuer has a conclusion for rectification of the Register. That conclusion is irrelevant, or perhaps incompetent, because in the new scheme the reduction of a voidable deed cannot be given effect to by rectification, but only by registration. As in example (ii) above, the Keeper will enter appearance and can expect to be awarded expenses against the pursuer regardless of the outcome of the case on the merits.

31.13(v) The guardian raises an action of reduction on the grounds of incapacity, with an esto case that if Beth was not incapax, the deed should be reduced on the grounds of facility and circumvention. Here again the Keeper should not be convened, and if convened should seek dismissal of the action – in so far as directed against the Keeper - plus expenses against the pursuer.

31.14(vi) Dan and Dick are neighbouring owners. Dick applies for voluntary first registration and is duly registered. Dan, who still holds on a Sasine title, claims that Dick has been registered as owner of too much, ie that a boundary area included in Dick's title sheet belongs to Dan. In the absence of an amicable settlement, Dan should raise an action of

15 Decrees of reduction of void deeds enter the Register by rectification, as in the first two examples.

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declarator that he is the owner of the disputed area. If he succeeds, the Keeper will rectify the Register.16 There is no reason for the Keeper to be called as defender.

31.15(vii) Goldie applies for registration of a disposition. The area disponed overlaps slightly with a neighbouring property. Goldie's position is that the Register is inaccurate in so far as it includes the overlap area in the neighbour's title sheet. The Keeper accepts Goldie's application except for the overlap area, in respect of which it is rejected. She appeals to the Lands Tribunal. How should the Tribunal deal with her appeal? Her application in relation to the overlap area should be accepted by the Keeper only if the neighbour's title sheet is inaccurate, and would involve rectification of the Register by the removal of the area from the neighbour's title sheet. The Keeper cannot do that unless the inaccuracy is established to the "manifest" standard. Unless the neighbour agrees that her title sheet is inaccurate, it is highly unlikely that the "manifest" standard could be attained without a decree against the neighbour. Accordingly if Goldie appeals to the Lands Tribunal against the Keeper's decision, her appeal will almost certainly fail. That would be true even if the Tribunal tended to agree with her about the title. For the question before the Tribunal would not be "who would succeed if there were to be litigation with the neighbour about the disputed area?" but "did the Keeper correctly apply the rules about the accept/reject decision?"

31.16We make no specific recommendations at this point because in this section we have merely been exploring the implications, in relation to civil proceedings, of recommendations made elsewhere in this Report.

Intervention by the Keeper

31.17 Whilst in the ordinary case there is no reason for the Keeper to be involved in property litigations in which one party asserts that the Register is inaccurate, we consider that there should be an option to intervene. A precedent can be found in the Trade Marks Act 1994, which provides that "in proceedings before the court involving an application for

(a) the revocation of the registration of a trade mark, (b) a declaration of the invalidity of the registration of a trade mark, or (c) the rectification of the register, the registrar is entitled to appear and be heard…"17 Our provision is shorter than the provision in the Trade Marks Act, because we envisage that details would be regulated by court rules.18 The only specific rule that we recommend is that the Rules of Court should require intimation to the Keeper, for without intimation the Keeper may be unaware of relevant actions. Accordingly we recommend:

125.The Keeper should have the right to appear and be heard in any action in which the accuracy of the Register is in dispute. The appropriate procedure (which should include provisions for intimation to the Keeper) should be determined by rules of court.

(Draft Bill, s 57)

16This could be done by (a) deleting the disputed area from Dick's title sheet, and nothing more or (b) deleting it and at the same time constituting it as a new title sheet with Dan named as the owner in the B Section or (c) registering the whole of Dan's property including the disputed area. In our new scheme the Keeper can register unregistered property without the need for the owner's consent.

17Section 74.

18Cf Rules of Court 13.12, providing for intimation to heritable creditors.

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31.18 Though the Keeper should have this power, we would not expect it to be exercised in ordinary cases.

Implications for the Keeper's purse

31.19Taking the Keeper out of the line of fire should result in savings in legal expenses. There might be the opposite concern. When the Register is rectified, the Keeper will usually have to pay compensation to someone. That is so under the current legislation19 and will also be the position in the proposed new legislation.20 Take this case. Horatio sues Jemima alleging that her title to a registered area is void and he is successful. Either the decree states that the Register is inaccurate, or the inaccuracy of the Register is a necessary implication from the terms of the decree. The Keeper must now rectify the Register. If Jemima must now be compensated, does that not open the door to the danger that actions will not be properly defended? So should not the Keeper be a party to such actions to protect his/her own interests?

31.20In our view there is, at least in the typical case, no such danger. The draft Bill provides that the Keeper is not liable for losses caused by the claimant's failure to act in a reasonable manner.21

Actions against the Keeper: still possible?

31.21 The draft Bill does not say that actions against the Keeper to require rectification of the Register are incompetent. What it implies is that in most cases they are likely to be irrelevant. They will be relevant only in such cases where the pursuer can aver that the Keeper is in breach of the duty to rectify a manifest inaccuracy. We think that the Keeper will seldom be in breach of that obligation.

191979 Act, s 12(1)(a).

20Draft Bill, s 39.

21Draft Bill, s 40(d).

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Part 32 Litigation about land titles: caveats

32.

Introduction

32.1 This part is about how information about certain types of pending court action should be integrated into the land registration system. We say "pending" because if a decree has been granted, the question of how that decree is to be dealt with in the Register is considered elsewhere.1 We begin by outlining the various mechanisms that exist in current law.

Notice of summons of reduction: section 159 of the 1868 Act

32.2If an action of reduction is raised, the pursuer can register in the Register of Inhibitions a notice of summons of reduction.2 The reason for this facility is to protect the pursuer against the possibility that the defender might, before decree can be obtained by the pursuer, grant a deed to a third party. The effect of the notice is that the fact of the depending action of reduction will be known to any such third party in advance, for the simple reason that the Register of Inhibitions is a public register, and is in practice always searched in the course of a conveyancing transaction. For example, if X concludes missives to sell to Y, the latter, before paying the price, will search against X's name in the Register of Inhibitions. Such a search will show up a variety of potential show-stoppers such as inhibitions (from which the register takes its name) and sequestrations.

32.3Though section 159 of the 1868 Act applies to all actions of reduction, including actions of reduction ex capite inhibitionis, in practice it is hardly relevant to the latter, because the inhibition itself will have brought about litigiosity.3

32.4Actions of reduction can be in respect of a void deed or of a voidable deed. In the former case the decree is merely declaratory of a state of affairs that already existed before the decree: the deed reduced was void ab initio, ie it was void even before reduction. In the latter case it is valid until reduced. If a deed is void, a notice of summons of reduction is strictly speaking unnecessary, for if the defender's title is void, the defender is incapable of granting any right to a third party. It is where the deed being attacked is voidable rather than void that the notice of summons of reduction comes into its own. For example, Ross holds

1 If the decree is for the reduction of a voidable transaction, we recommend that it be given effect by registration. If it is for the reduction of a void transaction it is given effect by rectification: see Part 28. If it is for the rectification of a document under s 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 it is given effect to by registration: see Part 29. If the decree is a declarator that the Register is inaccurate that would be given effect to by rectification.

2 Titles to Land Consolidation (Scotland) Act 1868, s 159 read with Conveyancing (Scotland) Act 1924, s 44(2)(a).

3 Litigiosity means the voidability of a transaction on the ground that it would tend to prejudice the claims of a pursuer in a pending litigation. Sections 155 and 159 of the Titles to Land Consolidation (Scotland) Act 1868 established the rule that for heritable property registration in the Register of Inhibitions was required to create litigiosity. (The common law rule that litigiosity for heritable property could arise without public registration had been strongly criticised: see eg J G Bell, Commentaries on the Law of Scotland (7th edn, ed J McLaren, 1870) ii, p 144.) The interaction of the law of litigiosity with the general law about voidable titles has, we think, never been fully explored and some tensions may exist.

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on a voidable title4 and transfers to Kirsty. She acquires title (because Ross had title, albeit voidably) and the question is whether her title is voidable or not. If, as is usually the case, Kirsty has taken for value and in good faith, her title is not voidable. But if she has taken in bad faith or gratuitously, the title is voidable. The effect of the registration of a notice of summons of reduction is that she cannot plead ignorance of the fact of the depending action of reduction, and so cannot plead good faith.

32.5 The description just given represents the law as it applies to titles in the Register of Sasines. For Land Register titles the position is more complicated because reductions work differently in that Register. We discuss the topic of reductions and the Land Register elsewhere,5 but in brief under current law titles in the Land Register are almost never void, because of the Keeper's Midas touch.6 Moreover, the rules in section 9 of the 1979 Act forbid the rectification of the Register in many circumstances, with the result that an action of reduction, even if successful, may not lead to any change in the title. If our recommendations were to be implemented, reductions in relation to Land Register titles would work rather more closely to the way they work in relation to titles in the Register of Sasines.

Notice of summons of reduction: section 159A of the 1868 Act

32.6 As well as section 159 of the 1868 Act there is section 159A, inserted by the Bankruptcy and Diligence etc (Scotland) Act 2007.7 This is also about the registration of notices of summons of reduction, and in some respects it overlaps with section 159, while in other respects it does not. Like section 159 it is about registration of notices of summons of reduction. Whereas section 159 applies to all actions of reduction, section 159A applies only to summons ex capite inhibitionis. In respect of such actions both sections appear to be applicable. Whereas section 159 is permissive,8 section 159A is mandatory.9 Whereas section 159 provides only for registration in the Register of Inhibitions, section 159A requires double registration, once in the Register of Inhibitions and once in the Land Register.10 And whereas section 159 specifies the effect of non-registration, namely that the property is not subject to litigiosity, section 159A does not specify the effect of non-registration.

Law Reform (Miscellaneous Provisions) (Scotland) Act 1985

32.7 An applicant for an order under section 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 198511 may register a notice of litigiosity in the Register of Inhibitions.12 The law is probably that the existence of such a notice has also to be noted on the title sheet.13

4 A voidable deed makes the resulting title voidable, but a title can also be voidable even if the immediate underlying deed is not voidable: this can sometimes happen, as the text explains, where the title of the granter of that deed was itself voidable.

5 See Part 28.

6 See Part 13.

7 Section 162. Many of the provisions of the 2007 Act had their origins in our Report on Diligence (Scot Law Com No 183, 2001) but this is not one of them.

8 "It shall be competent…"

9 "The pursuer shall…"

10Or Register of Sasines if the property is still in that register.

11We discuss this provision in Part 29.

12Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, s 8(7).

131979 Act, s 6(1)(c).

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