Keeping a clean sheet

Determining whether a title is good is not always a straightforward task. One of the functions, and achievements, of our system of registration of title is to increase certainty in determining whether a title is good.

It is implicit in the Land Registration (Scotland) Act 1979, although not express, that the Keeper will register good titles. Indeed, registration in the Land Register of an ex hypothesi good title, induced by any of the registrable events identified in s 2, is a right and not a matter for the Keeper’s discretion.

Boundaries for the Keeper

However, s 4(1) only requires that the Keeper register a title where it is accompanied by “such documents and other evidence as he may require”. The effect is to place the onus on the applicant to satisfy the Keeper that the title is good. If the applicant fails to do so, the application may be rejected,(1) or it may lead to registration of the title, but under exclusion of indemnity.

The Keeper’s discretion in relation to registration, therefore, extends only to the “documents and other evidence” that he may require to accompany an application for registration in order to satisfy himself that the title is good, or at least is deserving of registration in circumstances where that is not prohibited by s 4(2). But, if the Keeper is satisfied that the title is good, he is obliged to register it, and in so doing, he is not entitled to exclude indemnity.

In the event that the Keeper fails or refuses to register an ex hypothesi good title, he can be ordered to do so either by the courts or the Lands Tribunal. Although there is no express provision in the Act conferring authority to make such an order (unlike in the case of rectification: s 9(2)), or requiring the Keeper to comply (again unlike rectification: s 9(1)), there can be little doubt that such a power exists and that the Keeper would require to comply with such an order. Of course, it is unlikely that an order should or could be issued in isolation, and it should be accompanied by a declarator or finding that the applicant’s title is good.

There is no timescale specified in the Act within which the Keeper must either register or reject an application (whether for registration or rectification, and whether or not accompanied by an order of the court or tribunal). If the application is so accompanied, it would likely be a contempt of court not to register the title forthwith. There can be no good reason for further delay. The court or tribunal proceedings will have been intimated on the Keeper and he will have had the opportunity to make any challenge to the title or application, and to profer any explanation as to why registration is not possible, at that time.(2) Accordingly, if an applicant is dissatisfied with the length of time the Keeper is taking to make a decision whether to register or reject an application, he will have a remedy through the courts.

That is not to say that the Keeper incurs any financial liability to an applicant through any delay in deciding whether to register or reject an application. Prior to submitting the application, the applicant will already have satisfied himself whether he has a good title; and when and if registration does take place, it is effective from the date of application. Accordingly, it is difficult to see how an applicant can ever suffer loss as a result of any delay on the part of the Keeper in coming to his decision (at least where the applicant has a good title). There almost certainly would be a financial consequence on the Keeper where he wrongly rejects an application.

Defects and indemnity

Although it is implicit in the Act that the Keeper will register all good titles (and will not exclude indemnity in respect of any title he is satisfied is good), it is not implicit that he will reject all defective titles. If the position were otherwise, there would be no need for any discretion on the part of the Keeper to exclude indemnity. Section 12(2) expressly provides for such a discretion.

Accordingly, if the Keeper is satisfied that a title is good, he will not exclude indemnity. Obversely, unless the Keeper is satisfied that a title is good, he may exclude indemnity. The Keeper does not require to be satisfied that a title is defective before he can exclude indemnity, although if he is satisfied it is defective he should exclude indemnity. Of course, if he fails to exclude indemnity where the title is not good, he may incur a liability either to the registered proprietor or to the true proprietor on a grant or refusal of rectification respectively, in terms of s 12(1). But where the Keeper does not exclude indemnity on registration, the remedy of a dissatisfied party lies in indemnity and the Keeper’s decision not to exclude indemnity is not challengeable by judicial review or otherwise. Indemnity is not amenable to rectification. Once granted, indemnity cannot be taken away. Of course an indemnity claim may be defended by the Keeper on any of the grounds identified in s 12(3) or s 13 (4) of the Act. Nor can indemnity be excluded on a subsequent registration in respect of circumstances relating to a prior registration.

The extent to which the Keeper is not satisfied that the title is good will (or at least should be) clear from the terms of the exclusion note. Of course, if the Keeper is satisfied that a title is defective, he may decide not to register the title at all. But there are circumstances and good reasons why the Keeper will register titles he is not satisfied are good. A non domino titles complying with his policy requirements are the obvious example.

Another example is that of an ex facie valid, but voidable, disposition. Unless and until such a disposition is reduced, it is effective. However, the Keeper may not be satisfied that it is exempt from challenge because of information brought to his attention by the applicant or a third party, or through the Keeper’s own examination of the title. There may be sufficient prima facie evidence and/or argument to lead the Keeper to the conclusion (reasonably formed) that there is a risk that the title is or may be voidable, that is to say he will not be satisfied that the title is good. Nevertheless, because the Keeper has no judicial or quasi-judicial function or power, he must treat the disposition as valid and effective until it is reduced. And therefore he must proceed with registration,(3) but he can exclude indemnity.

An exclusion of indemnity in these circumstances is not an entirely negative act. Although the registered proprietor does not get the benefit of indemnity, nor the protection afforded by the Act to a proprietor in possession, it does mean that he can obtain the benefits afforded by s 1 of the Prescription and Limitation (Scotland) Act 1973. If he possesses the registered subjects openly, peaceably and without judicial interruption for a continuous period of 10 years following registration, his title will become exempt from challenge. At that point he can seek registration of his title without exclusion of indemnity.(4) If indemnity had not been excluded, the title would always have been rectifiable in the future at the instance of a “true proprietor” in the event that the registered proprietor, or any future registered proprietor, was not in possession.(5)

It is clear from the terms of s 12(2) that excluding indemnity is an administrative discretion afforded to the Keeper. There are no instructions or guidelines within the Act (or any subordinate legislation) as to what considerations the Keeper may or must have regard in exercising this discretion, or whether any particular factors may or must be disregarded. However, whilst the discretion appears to be absolute in terms of the Act, there are limitations. The Keeper’s administrative discretion to exclude indemnity would undoubtedly be amenable to judicial review by the Court of Session, and therefore the decision making process would require to comply with the grounds of judicial review. But judicial review is concerned with the legality and propriety rather than the merits of a decision. However, s 25(1) permits an appeal to the Lands Tribunal on any question of fact or law arising from anything done or omitted to be done by the Keeper. This may include the exercise of the Keeper’s administrative discretion under s 12(2).

But, it is the Keeper’s and not the tribunal’s discretion. Even if the tribunal cannot order the Keeper to register without exclusion of indemnity, it will be able to make findings relative to the issues of fact and law arising from the decision (and in particular whether a title is actually good). Either the tribunal could then remit the decision back to the Keeper for further consideration in light of such findings (if the decision to register and exclude indemnity has not yet been implemented), or alternatively, the applicant could make a further application for registration of the title without exclusion of indemnity, supported by the tribunal’s findings. As the Keeper will have been the respondent in such proceedings, he will be bound by the findings of the tribunal, and therefore to treat the title as good, and to register without exclusion of indemnity. Failure to do so would be in contempt of the tribunal.

Applicant’s duty of care

The proper completion of the application forms for registration, and submission of all necessary documentation and evidence of title, are essential to the registration process. Rectification is possible even against a proprietor in possession, when the inaccuracy has been caused wholly or substantially by the fraud or carelessness of such a proprietor. The questions on the application form are intended to elicit any reservations the applicant has about the title, and the applicant requires to certify the answers he gives to “the best of his knowledge and belief”. Very careful consideration should therefore be given to the terms of these answers. Otherwise, there is a risk either that the resultant registered title will be subject to subsequent rectification on the basis that an inaccuracy has been caused wholly or substantially by the carelessness of the proprietor in possession, or that an indemnity claim might be excluded or proportionately reduced on this basis.

It is implicit in s 9(3)(a)(iii) that applicants owe a duty of care to the Keeper when making an application for registration. Whilst the existence of such a duty is reasonably clear (albeit it has not yet been judicially recognised), its extent and standard is less clear. It might be said that an applicant has a duty to seek registration only of a title he considers to be good, unless he draws to the Keeper’s attention the circumstances in which the Keeper should proceed to register something other than a good title; it is careless to submit an unqualified application for registration in circumstances where, and in terms of which, it is reasonably foreseeable that it may lead to an inaccuracy entering the register.

The standard of care is more difficult to determine. “Carelessness” is perhaps wider in definition than negligence. It might be said that negligence is a subset of carelessness. At any rate, it is implicit that the applicant must act reasonably in assessing whether the title is good. Such assessment is a matter of legal analysis. As conveyancing is the preserve of the solicitor, the standard of the ordinarily competent solicitor might therefore be considered to be a suitable standard to employ in most circumstances in order to demonstrate carelessness. Would no conveyancing solicitor of ordinary skill acting with ordinary care have reached the conclusion that the title was good?

Of course that is to impose a professional standard of care on a non-professional, the applicant. Applicants almost universally instruct solicitors in these circumstances, and therefore it might be considered not unreasonable to apply such a standard. And why should a lower standard of care apply to an applicant who has not availed himself of the services of the solcitor? Applicants will have a right of recourse against their solicitors, as the duty of care owed to them by the solicitor will likely be the same as that owed by the applicant to the Keeper.

Although it will never be in the applicant’s interest to instruct his solicitor not to disclose in an application for registration a known problem with the title which may lead to an inaccuracy entering the register, what should the solicitor do if he is so instructed? The solicitor would certainly require to advise his client as to the consequences of proceeding in that manner (i.e. the title may be rectifiable). But there is no express duty of care owed by the solicitor directly to the Keeper in terms of the Act, and it is difficult to find any wording in the Act which it might be reasonably possible to interpret as impliedly giving rise to such a duty. So the solicitor may require to follow his client’s instructions in that regard. Of course, it is very unlikely that a client would instruct a solicitor not to disclose information to the Keeper, and therefore although the duty is owed to the Keeper by the applicant, it is the solicitor signing the application who is discharging that duty on the applicant’s behalf, and therefore the solicitor who is likely (ultimately) to incur the liability.

In addition to being satisfied that the title is good, an applicant also has a duty to take reasonable care to ensure that the granter of a deed inducing registration is who he bears to be. A failure to take reasonable care in discharging that duty will also be carelessness for the purposes of s 9(3)(a)(iii). The standard of care required is unlikely to be any higher than required in respect of the money laundering regulations, and accordingly, solicitors will routinely meet the standard of care required of an applicant in that regard.

The Keeper’s rights...

However, the consequences of a breach of the applicant’s duty of care to the Keeper may extend beyond the issues of rectification and indemnity. It may enable the Keeper to seek to recover from an applicant any indemnity payment he (the Keeper) subsequently requires to make. For example, an inaccuracy enters the register in respect of A’s title. The inaccuracy has been caused by A’s carelessness. B purchases the property and becomes the registered proprietor. B is not careless in relying on A’s title even though it is inaccurate, and even if B knows of the inaccuracy. The true proprietor seeks rectification of the register. B is in possession, so rectification is refused. The true proprietor receives indemnity. Although the Keeper’s liability for indemnity results from rectification or a refusal of rectification, it might be argued that the Keeper has suffered loss as a result of A’s breach of the duty of care he owed to the Keeper when the inaccuracy entered the register. While there may be issues of prescription and causation, in principle it seems likely that the Keeper would have a right of recourse against A to recover the indemnity payment. The Keeper does not appear to have sought to exercise this right. That may be more as a result of difficulties of proof than doubt as to the existence of the right.

... and liability?

But (I hear you say) the Keeper has also examined the title and has satisfied himself that it is good before proceeding to register it (on the basis of the documents, evidence and application forms submitted by the applicant). The same standard of care must surely be expected of the Keeper in this examination as is expected of an applicant. It might be thought that the Keeper is therefore equally as careless as the applicant (unless the applicant has withheld information from the Keeper). Even if that was the case, that will not prevent rectification, because the requirement for rectification is that the carelessness of the proprietor in possession need only be “substantially” the cause of the inaccuracy; and it might reasonably be said that equal responsibility between the Keeper and the proprietor in possession meets that requirement.

However, it may be doubted whether the Keeper has any liability to an applicant or true proprietor beyond the terms of the Act. That liability is extensive because it does not depend on fault or duties of care. It is an absolute liability, subject to the limitations of s 12(3), and in particular sub-para (n) which excludes liability where the loss results from the careless act or omission of the claimant. Accordingly, there is no basis for suggesting that the Keeper has a duty of care to applicants to save themselves from the consequences of their own carelessness. Any carelessness of the Keeper in examining a title or application is therefore irrelevant and will not serve to reduce an applicant’s (or his solicitor’s) liability. If you want to avoid the possibility of liability, then avoid carelessness in your application for registration.

Rectification and fairness

The register cannot be both accurate and inaccurate at the same time for the purposes of rectification. Registration law says that the register is always accurate; it is only inaccurate for the purposes of rectification (when compared with the factually true position or the legally true position in terms of property law). It would therefore be wrong to treat the register as inaccurate as a result of an application of registration law: i.e., the register cannot be inaccurate in failing to contain an inaccuracy. Accordingly, if the Keeper rectifies an inaccuracy in the register in circumstances where the Act did not permit him to do so (e.g. to the prejudice of a proprietor in possession who had not been careless), the remedy of the aggrieved party lies in indemnity, not “re-rectification”.

That might be thought to be unfair, but it is no more unfair than the true proprietor losing his right to the property in the first place in circumstances where the Keeper has made an error in registration (however that error arose). Nor should it cause undue concern, because as a responsible public official, the Keeper will always seek to avoid error in both registration and rectification. However, it would be better if the Keeper would take the same approach to carelessness for the purposes of rectification (as distinct from those of indemnity) as he does with issues of possession, namely, not to make any determination on the issue unless the position is unequivocal. Issues of carelessness, like possession, are best left to the courts (or the Lands Tribunal).

Future proposals

The Act is complicated and has been the subject of much (sometimes unjustified) criticism since its enactment. But there can be little dispute that it is working well in practice. Although many issues still remain, a good number have been the subject of judicial resolution. The Scottish Law Commission is in the course of preparing its report on land registration in Scotland with a draft bill to reflect its recommendations and proposals. It is understood that although these will result in little change in the practical way in which applications for registration require to be made in the majority of cases, the consequences of registration and the implications for rectification and indemnity will be considerable. It will be interesting to see in due course whether the Commission’s proposals result in increased certainty in our system of registration of title, or whether they simply replace one set of problems with another.

Footnotes

1 The Keeper may exercise a discretion to permit applicants an opportunity to submit all such necessary documents and evidence subsequently, even where they are not submitted with the application at the outset (although such a discretion is not entirely without limitation). Of course, the consequences in not getting an application right first time, in the event that the Keeper does not exercise his discretion to request further documents and evidence, could be very serious, both for the applicant and his agents.

2 The court or tribunal may find that the title is good, but registration is still not possible at that time because, for example, the OS map has not been updated to identify the interest in land. Indeed, although the Keeper is sometimes accused of taking too long to register titles, the real culprit (especially in the case of transfers of part of titles) is often Ordnance Survey.

3 If intimation of proceedings to reduce a deed are made to the Keeper he will hold any application which is dependent on that deed in abeyance pending the outcome.

4 There are only two ways to alter the register, registration and rectification. An exclusion of indemnity is removed by means of an application for registration. An exclusion of indemnity cannot be “rectified” because it is not an inaccuracy; it is the exercise of an administrative discretion by the Keeper. So, although it is often said that it is the exclusion that is being removed, more correctly the title is being registered without exclusion of indemnity. And that is true whether or not the Keeper alters the date of registration on the title sheet.

5 The protection against rectification afforded by s 9 of the 1979 Act is only to “proprietors in possession”.