INDEMNITIES

HC Deb 11 February 2002 vol 380 cc34-44

Mr. Cash

I beg to move amendment No. 7, in page 61, line 23, at end insert— '(i) the exercise by the court of its powers under section 46.'. The amendment relates to schedule 8, which deals with indemnities and the entitlement to them. In turn, the schedule is connected with clause 102. The reason for the amendment boils down to the fact that there appears to be an omission in respect of those circumstances in which a person should reasonably be entitled to be indemnified by the registrar if he suffers loss. Under the schedule, those circumstances include rectification of the register…a mistake whose correction would involve rectification of the register…a mistake in an official search. Those things really happen. We may not be overwhelmed by the attention of many hon. Members this afternoon, but they would be deeply concerned if they found that a mistake in an official document affected their home, and they might all come flooding back into the House.

Mr. Wills

I wish that they would all turn up.

Mr. Cash

So do I.

Other circumstances include a mistake in a document kept by the registrar which is not an original and is referred to in the register". Alternatively, there might be the loss or destruction of a document lodged at the registry for inspection or safe custody", or a mistake in the cautions register". Let us imagine that happening in the Whips Office. There might also be a failure by the registrar to perform his duty under section 50. We propose that there should be a further category of entitlement to indemnity in circumstances in which the power of the court to order entry was involved. To the provisions whereby a person would be entitled to be indemnified by the registrar if he suffered loss because of the other matters to which I have referred, the amendment would add: the exercise by the court of its powers under section 46. As I said, that refers to the power of the court to order entry. Under clause 46, that could arise If it appears to the court that it is necessary or desirable to do so for the purpose of protecting a right or claim in relation to a registered estate or charge". The court could then make an order requiring the registrar to enter a restriction in the register. Such circumstances could give rise to a mistake or something similar.

Clause 46(2) adds: No order…may be made for the purpose of protecting the priority of an interest which is, or could be, the subject of a notice. Although the court may exercise its power subject to such terms and conditions as it thinks fit, that power would not extend—I do not think that the Minister would argue that it would—to a person having the entitlement to being indemnified by the registrar if that person suffered as a result of the court exercising its powers under clause 46.

The object of the amendment is to ensure that priority of interest is maintained in all but the most extreme circumstances. In circumstances in which priority is lost, the person involved should be entitled to indemnity. At present, the Bill contains insufficient safeguards for the public, but the amendment would help to rectify that problem. At present, there is an absolute right for a person whose position has been prejudiced to receive an indemnity, but citizens will be powerless unless that point is clearly spelled out.

If the Bill is enacted in its current form, will the position of a totally innocent person be prejudiced? Will the person who has priority on the search have locus standi in the subsequent proceedings? That is the key question, because that person must be heard. If he is not, that would be against the rules of natural justice and human rights.

Just in case the Minister wants further reassurance from those who may be able to amplify the points that he wishes to make, I repeat my questions. Is it intended that the person who has priority on the search will have locus standi in the subsequent proceedings? Is it not right that that person be heard? If he is not, is that not against the rules of natural justice and human rights?

Mr. Harry Barnes (North-East Derbyshire)

I am interested in the amendment because I am interested in cases in which courts make decisions that adversely affect those who believe that their rights were established by Land Registry entries that were correct. In some cases, however, the decisions of a court are perverse. Such decisions may require a land registrar to alter the recorded material and that may not be in the interests of the purchaser of the property. That is because courts sometimes make decisions in which they say what is being purchased is not what is described in the deeds, but what was seen by the purchaser. There may be a distinction between the two.

I cited such a case in Committee, but I appreciate that there is much in the Bill to ensure that the evidence provided by the Land Registry will usually hold sway with the courts. The law will be tightened up by the Bill. Its provision for indemnity for errors committed by the Land Registry are important, but knock-on consequences may arise as a result of decisions made by the courts. The Bill might reduce the effect of those consequences, and I am interested in any provision that means that someone adversely affected by a court decision receives indemnity. I am not sure that the amendment would deal with the cases that interest me, but I wish to flag up my concerns.

4.30 pm

Mr. Wills

The amendment would impose on the registrar a liability to pay indemnity when the court exercised its powers under clause 46 and the person in question suffered loss as a result. I understand the concerns voiced by the hon. Member for Stone (Mr. Cash) and my hon. Friend the Member for North-East Derbyshire (Mr. Barnes), who want to ensure effective protection for those whose interests might, through no fault of their own, be adversely affected by use of the powers in clause 46. However, as I explained in Committee, there is a way to achieve that other than through invoking the registrar's indemnity powers. The litigation in question would be beyond the registrar's jurisdiction, so another, more appropriate method would be available.

Of course, as I said in Committee, if a person suffers loss outside of litigation through a mistake that falls within the scope of schedule 8—for example, if a restriction is mistakenly entered against the wrong title—indemnity will be payable. In the first circumstance to which the hon. Member for Stone referred, indemnity would be payable. The registry, not the courts, is involved in such matters, for which it should make payments and for which, in some cases at least, it may be responsible. However, the amendment deals with a completely different issue—when there is no mistake on the register and litigation is instigated by one of the parties.

Clause 46 empowers the court to require the registrar to enter a restriction. It is likely that that power will be used where an inhibition is currently entered in the register—for example, where the court grants a freezing injunction. The power to require a restriction to be entered may be exercised, even where an intending purchaser has protected himself or herself by making a priority search under clause 72. Under clause 46(3), the court may direct that an entry made under clause 46 shall have overriding priority. Under subsection (5), the court may make the exercise of its powers under subsection (3) subject to such terms and conditions as it thinks fit.

One of the most likely uses of that power is made clear in paragraph 6533 of the joint Law Commission and Land Registry report, "Land Registration for the 21st Century: A Conveyancing Revolution". Paragraph 6533 explains that the court would probably make an order under subsection (3) only if the applicant undertook to indemnify any person who suffered loss in consequence.

We consider subsection (5) sufficiently wide to enable the court to require such an undertaking, but discussion of the issue in Committee caused the Government to register the fact that the Civil Procedures Rules Committee would be invited to consider drawing the matter to the court's attention if there were doubt about the court's considering use of subsection (5).

In reality, the matter is akin to cases in which the court grants an interim injunction. In such cases, the court will invariably require the applicant to give an undertaking in damages, should he or she lose when the case comes to trial. In other words, it will be for the applicant for an order under clause 46(3) to provide the necessary indemnity, not the registrar. The Government consider that the preferable course, because the registrar has no interest in the matter. It is difficult to see why the taxpayer should pick up the tab for litigation over which the registrar has absolutely no control and from which the public derive no benefit.

In the light of my comments, I hope that the hon. Member for Stone will withdraw the amendment.

Mr. Cash

I welcome you to the Chair, Mr. Deputy Speaker, if I may.

I listened with care to the Minister and I am extremely interested in his concluding remarks, which seem to acknowledge that the issue is not all that simple and that the circumstances to which I referred could arise. I am happy to withdraw the amendment, with this qualification: if things go wrong—we cannot read a crystal ball or be certain of how the provision will work in practice—and matters do not proceed quite as the Minister and his advisers hope, the problem will be rectified.

With respect to the question of indemnities in general and the remarks of the hon. Member for North-East Derbyshire (Mr. Barnes), I simply say that what he referred to is not directly relevant to clause 46, but he is right to be concerned that titles and matters that go on the register lead to serious problems from time to time. Courts are not infallible, nor is the Land Registry. The greatest possible care must be taken to ensure that the most important aspect—not the creation of the law, but the right solutions for the public at large—is delivered in respect of contention over, for example, a boundary dispute or a title's validity.

Bearing in mind all those matters, it is right to withdraw the amendment in the light of what the Minister said, but subject to the reservations that I expressed as to the manner in which the Bill may apply. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Order for Third Reading read.—[Queen's Consent, on behalf of the Crown, and Prince of Wales's Consent, on behalf of the Duchy of Cornwall, signified.]

Motion made, and Question proposed, That the Bill be now read the Third time.—[Jim Fitzpatrick.]

4.36 pm

Mr. Wills

I, too, welcome you to the Chair, Mr. Deputy Speaker. I thank the members of the two Committees who examined the Bill, which is unusual in a number of ways. First, it is the product of an extensive programme of work undertaken jointly by the Law Commission and Her Majesty's Land Registry. Both here and in another place, the result has been widely welcomed as an admirable balance between looking back and looking forward. Secondly, it provides a re-examination of the legislation from first principles—a task for which the Law Commission is particularly suited and one that the draft Bill achieved with particular distinction. I have already paid tribute to the achievement of Charles Harpum, the former law commissioner responsible for the report, and to the distinguished parliamentary counsel who worked with him, and I happily do so again. We are extremely grateful for their work on the Bill.

It is unusual, if not unprecedented, for a Department to collaborate with the Law Commission on a report, but the way in which the Bill benefits from the Land Registry's unparalleled knowledge of the operation of land registration and its aim of improving the registry's service to its customers shows how successful such collaboration can be. Much credit for that must go to the solicitor to Her Majesty's Land Registry, Chris West. Mr. West is shortly to retire and his work on the Bill represents the crowning of a long and distinguished career of public service. I want to put on record the Government's appreciation of that.

The Law Commission believes that the Bill represents its single largest law reform achievement since its establishment in 1965. It follows, therefore, that the Bill is the most substantial to be considered on Second Reading by a Committee. I certainly felt that the debate in Committee was particularly helpful and constructive, and it showed the effectiveness of the special procedure for such Bills.

The Bill represents a thorough spring cleaning of the existing legislation, almost all of which dates from 1925 or half a century before. We examined in Committee how necessary, simplification and clarification has been achieved and tested the scope for further change. We also spent much time looking into the future.

Above all, the Bill is radical and forward thinking. It sets out a framework for electronic conveyancing and so opens the way for the benefits that that will bring to the still excessively protracted and painful business of buying and selling property.

The hon. Member for Torbay (Mr. Sanders) asked a question about which I shall now reassure him. In the first instance, the Land Registry will assess what has happened, but substantial disputes will be decided by the civil or criminal courts.

A great deal remains to be done to put flesh on the skeleton. In addressing concerns expressed by the hon. Member for Stone (Mr. Cash), I make it absolutely clear that the Land Registry will seek to strike a balance in devising arrangements for ensuring proper authorisation by clients where conveyancers are to sign electronically on their behalf. I understand the concerns that have been raised on many occasions during the Bill's passage through the House. The arrangements will be the subject of detailed consultation on the basis of practical proposals, and they will be piloted. We shall thus seek to meet the real concerns that the hon. Gentleman has raised, and I believe that we shall do so.

The helpful and constructive approach taken in the debate highlighted some of the areas where the profession and customers have concerns. Above all, there is a need for a system that can be short yet meet high requirements for reliability and security. The Land Registry is well aware that in planning the next stages it must work with everyone involved in the property market. That will be essential if the ultimate solution is to meet all the needs of the various groups that will benefit. The task will be a considerable challenge to the Land Registry, and the Government will do all we can to help meet it fully.

4.41 pm

Mr. Cash

We embarked on this odyssey on Second Reading, and moved on to consideration in Committee. The Minister was right to contend that the procedure was justified for a Bill such as this. The procedure provides us with an opportunity to consider the consequences of proceedings both in Committee and subsequently on Report. We can now wrap up, as it were, the arguments on Third Reading.

The Bill is monumental. It is not a vast Bill by current standards, but it contains a huge amount of complexity. As I said on Second Reading, during the heady days when I was sitting my conveyancing examinations—too long ago for me to care to remember—the law was complicated and made no better by the fact that the Acts, which have now been axed by the Bill, were deficient. I am sure that that is something that my tutors would have told me, rather than something that would have I observed for myself at the time. However, difficulties and complications arose, and the Bill goes a long way to solving them.

I pay tribute vicariously to the Minister's advisers and to the Law Commission. The Minister has been ably assisted throughout on the various points that I have had the temerity to raise from time to time. Consideration of the Bill in Committee was conducted in a good spirit. Mr. Charles Harpum's time at the Law Commission has only recently concluded. He worked throughout with the parliamentary counsel who was seconded to the commission; they both deserve tribute.

I do not want to test your patience, Mr. Deputy Speaker, but we shall shortly consider the Commonhold and Leasehold Reform Bill on Report. I hope that the criteria that led the Law Commission to be so effective in relation to this Bill will be borne in mind when we discuss the Commonhold and Leasehold Reform Bill, in which a number of unresolved issues remain. I hope that we can arrive at some satisfactory conclusions before our consideration is concluded.

This Bill lays the foundations for a system of electronic conveyancing that will bring the whole system up to date, providing a faster and more open mechanism for the buying and selling of homes, which will benefit consumers. Indeed, it will affect many millions of people. I notice that the Minister looked up when I mentioned millions of people. That is a lot of people, and we want to be sure that they are all satisfied by the way in which the Bill is enacted.

The Land Registration Act 1925 had to be disposed of, and the Government are engaging in a sensible pace of reform here. To begin with, the new system will apply only to certain simple registered transactions; other transactions will be drawn into it as time goes by. The system will, in the end, have to be compulsory if the full benefits are to be enjoyed, but as clause 5(4) makes clear, that will be feasible only when electronic conveyancing has by common consent become the most effective way of dealing with transactions.

There was considerable argument in Committee about the provisions on the length of leases. Our difficulty with clause 91 has been addressed again today, and we have dealt with a significant number of the points made not only here but in the other place. I pay tribute to those in the other place who took the initial phases of the Bill through in such a competent fashion.

I also want to put on record, however, the fact that the Bill contains a vast number of rule-making powers. I have already expressed concern about the extent to which such powers are becoming the norm. I looked the other day at the array of statutory instruments that have been introduced in any given year. If we aggregate them with European directives, the burdens that over-regulation can impose and the lack of scrutiny given to all such matters, we realise that the appearance that, because the procedures are followed, these matters are given sufficient consideration is not really justified. I do not mean that the consideration is not justified. I mean that it would be an exaggeration to believe that, when statutory instruments and rules are made, they are given the kind of consideration that the Minister was suggesting they are given. I do not believe that that is the case. The way in which we deal with subordinate legislation needs to be much tighter; far too much goes through on the nod.

On the compulsory registration of leases in excess of seven years, the profession—by which I mean, broadly speaking, the Law Society—generally believes that such compulsory registration is neither necessary nor desirable at this stage. I said in Committee: The Law Society and other bodies have made it clear that they would prefer a system of compulsory registration of leases with terms of 14 years or more. In the event that that were successful, the term of registrable leases could be reduced and the Bill contains the power to do that."—[Official Report, Second Reading Committee, 29 November 2001; c. 12.] Concerns have been expressed about whether there will be a vast increase in applications for registration. We discussed that in Committee and it was also considered in the House of Lords. My noble Friend Baroness Buscombe tabled an amendment that would have reduced the length of leases that must be registered from 21 to 14 years, instead of to seven years. She was strongly supported in the background by the Country Landowners Association, among others. As the Member of Parliament for Stone, which is a rural constituency, I can confirm that people are worried about the complexity of the system. I hope that that will be borne in mind.

It is important to ensure that client confidentiality is sustained, especially between solicitors and their clients; we raised that in Committee and we remain concerned about it.

Having reached the dying days of the Bill, we have, after some argument, obtained assurances from the Minister about the way in which it should operate in practice. The Government have tabled amendments to the Bill, and by and large it has been improved, both in Committee and in the other place, so as to benefit the public as a whole.

We support the Bill and we are glad that the Law Commission and the Land Registry played such a distinguished part in helping it to reach the statute book. If and when any glitches occur in practice, I hope that the Government will enthusiastically ensure that they are rectified as soon as possible.

4.52 pm

Mr. Sanders

I promise not to take up much of the House's time. I shall not go on until 10 o'clock tonight or drag out the debate. I want merely to note a concern that we raised in Committee. We accept hat the Bill is the first step towards achieving a comprehensive Land Registry, but it could have been introduced more quickly. That is a lost opportunity.

The debates on Second Reading, in Committee and today on Report and Third Reading have been good natured and they have clarified the provisions. We hope that the Bill will succeed in speeding up conveyancing, which is important to any prospective house buyer or vendor. We also hope that it will encourage people who might not otherwise have registered their land to do so. Perhaps one day there will be proposals to speed up the system even further; we shall have to wait and see.

I thank hon. Members for the way in which business has been conducted. It has been civilised, enjoyable and educational. We have all learned something from the process.

4.53 pm

Angela Watkinson (Upminster)

I rise to speak in support of the Bill, although I was not a member of the Committee that scrutinised it. I should have preferred it to include tougher remedies against squatters and the creation of a more effective land register for empty public sector property. As with most Bills, the devil is in the detail.

I want to draw hon. Members' attention to clause 115, which is entitled "Reduction in unregistered interests with automatic protection", in relation to manorial rights. Essentially, it means that owners of manors will have 10 years from the appointed day to register any interests in the land that they hold as lords of the manor. If registration is contemplated after the 10-year period, it will be too late, and any rights or potential rights in the land will be lost. Any unregistered rights will not be capable of registration, and therefore incapable of enforcement.

Although it may seem that 10 years is a long enough period for everyone to register, that presupposes that everyone knows of the change in the law. Experience of the Commons Registration Act 1965, under which a period of seven years was allowed for registration of an interest, showed that after 1972 many people had not registered because they did not know that they had to. In fact, discretion was granted to the Commons Commissioners to register after the final date, but there is no discretion contemplated in the Bill, as one of my constituents thinks there should be.

My constituent, Mr. John Hornchurch, purchased the lordship of the local manor of Hornchurch hall some years ago, and gave it to his family's charitable trust, the Hornchurch hall trust, as a foundation asset. He writes on behalf of the trust: his only personal interest is that he is the trustee whom the other trustees have nominated to use the title "lord of the manor" for life.

Only a small part of the Bill affects manorial rights, but unfortunately the manorial provisions seem to be adverse and unfair. Under one provision, where a title is registered, it will be possible to have it deregistered, so that future proof of title will depend on title deeds rather than on a register. Mr. Hornchurch believes that that provision is an unfair step. At considerable personal time and expense, he registered the Hornchurch hall trust as the proprietors of the title of lord of the manor of Hornchurch hall. His aim was to obtain benefits of registration, and to make the title and its ownership certain. Clearly, he does not want the trust's position to be arbitrarily weakened.

Another provision will require unregistered manorial rights to be registered within 10 years of the Bill coming into force, or the rights will be lost. Many rights are uncertain, and become evident only when particular circumstances arise. It seems unfair that the time limit should be imposed, and Mr. Hornchurch feels that it should at least be longer or that there should be provisions for exceptions.

In the case of the lordship of Hornchurch hall, there is a degree of uncertainty about rights, which Mr. Hornchurch doubts could be removed without considerable further expense. Neither the trust nor the trustees of Hornchurch hall, who provide all the income of the trust, have ever benefited financially from those rights. They make financial gifts to deserving causes. They have wide discretionary powers, and conform to the Charity Commissioners' rules. The trust is entirely philanthropic.

The Bill will revise and bring up to date much of the law on the way in which the ownership of land is recorded. However, there is an incidental consequence for lords of the manor, which may not have been intended. Land registration works through a register, which now exists in computerised form and records many details of the land. It also includes rights belonging to lords of the manor. The general rule is that, if anyone is registered as the owner of land, that is free of any third-party rights unless a note is made on the register of title that it is subject to such rights. That rule is subject to certain exceptions.

One of the important exceptions relates to overriding rights, which are rights that affect the land even if they are not noted on the register. As the law stands, if someone owns land that is subject to the rights of the lord of the manor in relation to these matters, the rights of the lord will continue whether or not the matter is mentioned on the register. Under the Bill, if rights are not registered within 10 years from the date of the legislation coming into force, they will cease to bind the land. If the law comes into force in the way suggested, lords of the manor will have to register their rights within 10 years or, for practical purposes, they will lose them. That may be fair if the lord of the manor knows what his or her rights are, but the rights may often be difficult to ascertain. Anyone who knows about their rights will need legal advice on protecting them.

The Bill also contains other provisions on manors. One is that when the title to the manor itself is registered, as distinct from the land over which the manorial rights can be exercised, it will be possible to have the title deregistered so that from then on proof of title will depend on the title deeds rather than on a register.

Another factor that will affect owners of roadside verges or similar areas is that after the Bill comes into force it will no longer be possible to lodge a caution at the Land Registry. A lord of the manor may register a caution when he or she is unable to provide evidence of ownership of the verge to the satisfaction of the Land Registry, but still claims ownership. If someone else, such as the owner of an adjoining field, applies to be registered as owner, the Land Register will tell the person who has lodged a caution, and the matter can then be resolved. It will not be possible to lodge such cautions in the future, however.

It seems that there is a fundamental principle of human rights here. Under the European convention on human rights, now incorporated in United Kingdom law, it is unlawful for citizens to be deprived of their property without due process. The Bill will deprive some citizens of their property simply because they will be unaware of the relevant provision. They will lose their property by default, which cannot be right.

5.1 pm

Mr. Wills

With the leave of the House, I shall reply briefly. I echo the thanks others have expressed to all who have been involved with the Bill.

The hon. Member for Upminster (Angela Watkinson) raised the complex and technical issue of manorial rights. I will write to her in detail in response to the concerns raised by her constituent, but I can say now that there is an effective network for the spreading of information about new developments among lords of the manor and their professional advisers.

There is another side of this coin. Members have complained to me about the many anxieties, and the costs, that can arise from uncertain rights held by lords against them. We must strike a balance, and 10 years seems about right to us; but as I have said, I will write to the hon. Member for Upminster with a detailed response to the complex and technical issue that she raised.

The task of the Land Registry remains to ensure that the legislation is implemented effectively. I repeat my assurance that the Government will do all we can to help it to rise to the challenge.

Question put and agreed to.

Bill accordingly read the Third time, and passed, with amendments.