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because it enables them to overreach any beneficial interests. Also, in

the immediate aftermath of the Boland decision, it became standard practice for institutional mortgagees to require all occupiers to sign ‘consent’ forms, confirming they agreed to the mortgage. On what basis would such a consent be binding on an interest holder? (See Woolwich Building Society v. Dickman [1996] 3 All ER 204.) Can the consent of a prior-interest holder ever be implied? (See Paddington Building Society v. Mendelsohn (1985)

50 P&CR 244.)

15.5. Indemnity

15.5.1. Function of indemnity

A land registration system provides an opportunity to solve one of the perennial problems of any property law system – how to balance the interests of innocent property holders whose interests conflict through some mistake or fraud, so that neither loses. In an unregistered system, one of the conflicting interest holders must lose, and there will be no prospect of compensation unless recovery can be made from the person responsible for the mistake or fraud. A registration system, however, can be made to generate an insurance fund out of which those who suffer loss can be compensated, via fees charged for dealing with registration applications.

To a certain extent this is what is done in our land registration system. Schedule 8 to the 2002 Act makes provision for the payment of indemnities by the Land Registrar, replacing provisions originally found in section 83 of the 1925 Act and amended by the Land Registration Act 1997. Under Schedule 8, indemnity is payable in essentially two circumstances. The first is to a person who suffers loss by reason of a rectification of the register or a mistake whose correction would involve rectification of the register (paragraph 1(1)(a) and (b): for an analysis of the circumstances in which the register can be rectified, see Farrand and Clarke, Emmet and Farrand on Title, paragraphs 9.022–9.029). The second is to a person who suffers loss by reason of a mistake in the registration process (for example, a mistake in a search result, or in a copy document kept at the registry, or a lost document): paragraph 1(1)(c)–(h). It is then provided by paragraph 5 that no indemnity is payable on account of any loss suffered by a claimant wholly or partly as a result of his own fraud, or as a result of his own lack of proper care (with the indemnity to be reduced proportionately if only partly as a result of his own proper care).

15.5.2. Shortfall in the provision of indemnity

The problem with all of this is that, while the indemnity should cover all cases where loss is caused by a malfunctioning of the system, it does not even aspire to cover all cases where the land registration machinery has to resolve the conflicting interests of innocent parties to the loss of one or other of the interest holders.

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The number of indemnity claims is insignificant in comparison with the number of applications the Land Registry deals with every year. According to the Land Registry’s Annual Report and Accounts 2002–2003, they dealt with nearly 27 million applications in the year 2002/3, of which over 3.5 million were applications of registration. During the same period, they received 799 claims for indemnity, and paid out a total of £2,656,998.99 (£1,559,424.87 in respect of loss, minus £5,950.37 recovered under section 83(10) of the Land Registration Act 1925 – the Land Registry can sue any person responsible for causing the loss – plus £1,102,573.49 in costs). The largest payment was approximately £194,000 (including interest) in respect of loss arising from a forged transfer of a registered property. As the Annual Report and Accounts explains:

The title was not rectified to reinstate the true owner, a company incorporated in Gibraltar, because by the time the forgery came to light the property had passed into the hands of innocent third parties who were in possession of it. The true owner was, however, entitled to be indemnified under section 83 of the Land Registration Act 1925. The whereabouts of the persons who committed the fraud are unknown, and the police have been unable to trace them. We have not, therefore, been able to try to recover the money from them under our statutory rights of recourse.

During the same period, the Land Registry’s fee income was some £415 million, and towards the end of the accounting year in question they brought out the Land Registration Fee Order 2003 (SI 2003 No. 2092) adjusting fees downwards with a view to reducing fee income by 10.5 per cent. After meeting all costs and expenses (including a payment of £2.4 million towards the indemnity fund), they were left with a surplus of £97.9 million, £22.3 million of which was paid to the government via the Consolidated Fund.

Part 4

Proprietary relationships