12.2.7.4. Other functions

Transfer and grant 459

Seriously’, p. 515). This not only benefits the parties, it also ensures that a clear record of the terms is available for third parties such as purchasers proposing to buy subject to the interest created. The benefit to the parties may, however, not be so obvious in all legal cultures, as Perillo notes:

A leading Japanese industrialist has written of the discomfort and apprehension felt by Japanese businessmen when faced with the ‘American insistence on spelling out the smallest details in writing’ (referring to C. Fujino, ‘Get to Know the Japanese Market’, New York Times, July 8, 1973; Mr Fujino was then president of the Mitsubishi Corporation). His attitude is reflected in the lack of either writing requirements or of a parol evidence rule in the Japanese legal system. There is a genuine possibility, then, that a legal system may not wish to induce parties to thrash out the potential difficulties in advance, but to induce ongoing informal dispute resolution in the course of the contractual relationship. (Perillo, ‘The Statute of Frauds in the Light of the Functions and Dysfunctions of Form’, p. 54)

Publicity

Some property interests such as mortgages and charges pose such threats to prospective purchasers that it is justifiable to insist that they should be put in such a form that the existence and terms of the interest are made apparent to the whole world. Registration is the ideal solution, but there are other possibilities. Under the Land Charges Act 1972 (now applicable only to the relatively few unregistered land titles in this country) mortgages and charges of land are not enforceable against third parties unless either the mortgage or charge is registered or the mortgagee holds the borrower’s title deeds. This works because in unregistered land the owner is unable to deal with the property without the title deeds, so there is no danger of third parties being misled. The Law Commission nevertheless took the view that even this was insufficient, and recommended that no mortgage or charge over land should be enforceable against third parties unless made in writing (Law Commission, Transfer of Land – Land Mortgages (Law Commission Report No. 204, 1991)) and while this was never implemented by Parliament, the courts achieved the same result by a different route in United Bank of Kuwait v. Sahib [1997] Ch 107, as we see in section 12.3 below.

State functions

Requirements of writing and registration can provide both a paper record of transactions on which tax can be levied, and also data from which statistical evidence can be gathered. The best example in this country of the fiscal role of formalities used to be stamp duty, which until very recently was levied not on property transactions but on the documents by which the transactions were effected. This was changed by the Finance Act 2003, partly because large-scale land developers were increasingly using conveyancing devices to avoid passing value by documents liable to stamp duty, but also because the scheme was clearly not going to be viable once transactions could be effected electronically.