HL Deb 20 June 1994 vol 556 cc68-74

7.15 p.m.

Report received.

Clause 1 [Covenants to be implied on a disposition of property]:

The Lord Chancellor moved Amendment No. 1:

Page 1, line 17, at end insert: ("(2A) Sections 2 to 4 have effect subject to section 6 (no liability under covenants in certain cases); and sections 2 to 5 have effect subject to section 8(1) (limitation or extension of covenants by instrument effecting the disposition).").

The noble and learned Lord said: My Lords, in moving the amendment I should like to say a few general words about the amendments before the House today. The amendments principally carry through or tighten up the wording of amendments accepted in the Public Bill Committee or, in two instances, give effect to the principle of amendments tabled in the Public Bill Committee but withdrawn to enable consideration to be given to the best way of putting the principle into effect. I think that I may say without fear of contradiction that the very detailed consideration which the Special Standing Committee was able to give to the Bill, with the assistance of some very full evidence, has enabled some very worthwhile improvement to be made to what was already, to borrow the Hansard Society's metaphor, a fully-baked legislative cake.

Amendment No. 1 is tabled in response to the suggestion of my noble friend Lord Coleraine that the Bill should specifically draw the reader's attention to the fact that the implied covenants in Clause 2(1) (a), Clause 3 and Clause 4 are subject to the exclusions in Clause 6. Clause 6 excludes liability under those covenants for matters to which the disposition is already made subject—matters of which the covenantee actually knows, or matters which are the necessary consequence of something he actually knows. I quite agree with my noble friend's suggestion, and, indeed, consider that the logic behind it also requires that the effect of Clause 8, which enables the parties to vary the effect of the implied covenants in appropriate cases, should be flagged up in the same way.

I am grateful for my noble friend's forbearance in withdrawing his own amendments so that I might take the advice of parliamentary counsel as to the best way of bringing about the desired effect and table an amendment accordingly. Parliamentary counsel's ad-vice, which I accept, is that the insertion of a single provision in Clause 1 is the best drafting solution. It has the benefit of economy, since to insert the words "of subjection" in respect of each covenant affected would require amendments in five separate places and would run contrary to the aim of making the drafting of the covenants as straightforward as possible.

In addition, it is considered that the single provision will be no less effective than the five separate ones in bringing the effect of the later clauses to the reader's attention. This is because, in order to ascertain the full effect of the implied covenants, the reader must start with Clause 1, which not only provides definitions of important terms which apply to all the covenants, but also sets out which covenants are to be implied according to the key words used in the disposition. This amendment inserts the necessary provision immediately after the existing provision in Clause 1 explaining which covenants are implied by the use of which key words, and that seems to be the ideal place for it. I beg to move.

Lord Coleraine

My Lords, I am grateful to my noble and learned friend for bringing forward this amendment which admirably meets the point which I made in Committee. As my noble and learned friend said, I had put the words "of subjection" at the beginning of the individual clauses but I agree with him that one cannot read the later clauses properly without having read the first clause and it is both economical and common sense to limit the words "of subjection" to their appearance, as now, in Clause 1.

On Question, amendment agreed to.

Clause 6 [No liability under covenants in certain cases]:

The Lord Chancellor moved Amendment No. 2:

Page 3, line 36, after ("any") insert ("particular")

The noble and learned Lord said: My Lords, this amendment tightens up the wording of an earlier amendment, which made it clear that there is to be no liability under certain of the implied covenants for anything to which the disposition is expressly made subject. There was some concern that vendors might attempt to water down these covenants by inserting blanket provisions in dispositions making them subject to all manner of undisclosed incumbrances.

As I mentioned in the Public Bill Committee, there is a well-established rule that the existing provision in the Law of Property Act whose wording that amendment followed does not permit such general exclusions. Parliamentary counsel has nevertheless re-examined the formulation, and the resulting insertion of this one word will, I hope, put the position beyond doubt. I beg to move.

On Question, amendment agreed to.

Clause 7 [Passing of benefit of implied covenant]:

The Lord Chancellor moved Amendment No. 3:

Leave out Clause 7 and insert the following new clause:

Annexation of benefit of covenants

(". The benefit of a covenant implied by virtue of this Part shall be annexed and incident to, and shall go with, the estate or interest of the person to whom the disposition is made, and shall be capable of being enforced by every person in whom that estate or interest is (in whole or in part) for the time being vested.").

The noble and learned Lord said: My Lords, in moving Amendment No. 3,I should like, with the leave of the House, also to speak to Amendments Nos. 6 and 9. Amendment No. 3 removes Clause 7, which limits the passing of the benefit of the implied covenants for title to express assignment and certain exceptional cases where title passes by operation of law. It substitutes a new Clause 7 designed to continue expressly the position under the existing law, whereby the benefit of the covenants is annexed to the estate or interest of the person taking the disposition and runs with it so as to be capable of enforcement, within the limitation period, by any successor in title. This is a change of some substance, but one overwhelmingly favoured by the Committee, which took the view that the provision recommended by the Law Commission, while having the advantage of simplicity of concept in line with the increasing prevalence of registered land, might have harsh results in some exceptional cases, and might also result in buyers routinely attempting to secure express assignment, which would thwart the very streamlining at which the provision was aimed.

This change was proposed by my noble friend Lord Coleraine, and I am once again grateful for his graceful withdrawal of his own amendment so that I might take advice on how best to give effect to the principle. The amendment quite simply preserves the existing principle, presently contained in Section 76(6) of the Law of Property Act 1925 but extending back to 1300 —therefore it is of respectable antiquity—that the benefit of the covenants for title is annexed to the estate or interest of the covenantee. It was considered appropriate to set out the provision on the face of the Bill rather than to incorporate it by reference to Section 76(6), in order to make the position as clear as possible to the reader. The new clause does the same as Section 76(6) has done since 1925 and its predecessors have done since the 14th century, but Parliamentary counsel has, in keeping with the spirit of the Bill, taken the opportunity to simplify and modernise the wording.

Amendments Nos. 6 and 9 are consequential on the deletion of the existing Clause 7. They remove from the transitional provisions in Clauses 10 and 11 subsections which apply the provisions of the existing Clause 7 in certain transitional cases. I beg to move.

Lord Mishcon

My Lords, I think it should be known generally to the House that this was one of the matters upon which the Special Standing Committee differed from the Law Commission, as the noble and learned Lord has said. However, it did not differ from the Law Commission in one moment of speech—there was in fact a considerable debate. I remember that our chairman drew up a memorandum on this which was carefully considered by the Special Standing Committee. In that memorandum he put the arguments for and against very concisely. It was indeed after quite a bit of deliberation that the Standing Committee decided in this one major respect to differ from the recommendations of the Law Commission. I think the public should know and the legal profession should know that this was, as I said, very carefully considered. It is a maxim that I suppose weighed with the Special Standing Committee—that if one has something that works perfectly well, why alter it?

The Lord Chancellor

My Lords, I think if would be right for me to endorse what the noble Lord, Lord Mishcon, has said about the care with which this matter was considered by the Committee. Certainly I would also wish very specially to say how much the Committee was indebted to the Chairman of the Special Standing Committee, my noble and learned friend Lord Brightman, for the care that he took in marshalling the arguments on both sides of this question, as well as the care he took in bringing to our attention all the other points raised on the Bill by a variety of commentators. I wish to mention one commentator in particular, Mr. Nugee, of senior counsel, who is extremely experienced in these matters, and who provided the Committee with very detailed memoranda. I think it would be fair to say that the main thrusts of these memoranda have been met by the two main changes that the Committee approved —as I hope your Lordships will, also—in the Law Commission's proposals; namely, to modify somewhat the terms of the full guarantee and also to go from the Law Commission's proposals of no running with the land for these covenants, to what is embodied in this amendment. I should like to acknowledge the help that we obtained from these memoranda as well as from all the other contributions by the Law Society and by a number of other distinguished commentators who have helped the Committee to see where the Law Commission was right, and also to see perhaps whether it would be wise to deviate to some extent—as we have done—from the detailed work of the Law Commission. I beg to move.

On Question, amendment agreed to.

Clause 8 [Supplementary provisions]:

The Lord Chancellor moved Amendment No. 4:

Page 4, line 31, after ("gwarant") insert ("teitl").

The noble and learned Lord said: My Lords, in moving Amendment No. 4, I should also like to speak to Amendments Nos. 5, 7 and 8 and Amendments Nos. 10 to 13, and 15 to 19 inclusive.

These amendments complete the job begun by my noble friend Lord Coleraine in a series of amendments tabled in response to a suggestion by the Law Society to which I referred just a little while ago. The effect is to change the key words which will be employed to imply the new statutory covenants for title into a disposition. Instead of dispositions being expressed to be made "with full guarantee" or "with limited guarantee" they will be expressed to be made "with full title guarantee" or "with limited title guarantee" as appropriate, to make the purpose of the implied covenants entirely clear and avoid the possibility that a layman might believe the guarantee to involve matters other than title.

Parliamentary counsel has identified a further 12 places in the Bill, in the transitional provisions of Clauses 11 and 12 and the consequential amendments in Schedule 1, where the word "title" needs to be inserted, and Amendments Nos. 7 and 8, 10 to 13 and 15 to 19, and indeed also Amendment No. 20, take care of this.

To leave the matter at that would be to leave out an important aspect of the amendments. Amendments Nos. 4 and 5 arise out of the fact that the Bill provides for key words not only in English but also in Welsh. They ensure that those who carry out conveyancing in Welsh will also have the benefit of this important change, by inserting the word "teitl" in the appropriate places. I have it on the best authority that the result conveys the correct meaning. I beg to move.

7.30 p.m.

Lord Prys-Davies

My Lords, I support Amendment No. 4, which has been fully explained to the House by the noble and learned Lord the Lord Chancellor. The Welsh translation of the key words is a complete, and I believe accurate, translation.

I wish to express my gratitude to the noble and learned Lord the Lord Chancellor for having alerted me to the changes to the original form of the key words. I am grateful for the amendments. I am sure that those who prepare documents in the Welsh language will be grateful that at long last we have the amendment, which we have been seeking for 20 or 30 years.

Lord Mishcon

My Lords, I know that my noble friend Lord Cledwyn of Penrhos, who always rises in this House in order to spread the glory of the Welsh tradition, as a distinguished Welsh solicitor would have wished to thank the noble and learned Lord for what he has done in regard to the Welsh insertion.

Lord Coleraine

My Lords, I am grateful to my noble and learned friend and parliamentary counsel for completing in ample measure the work which I started in Committee. I believe that these words will be read a million times a year by people up and down the country. It is very good that people should be reading the words "title guarantee" rather than just "guarantee" because the word "guarantee" was unhelpful.

The Lord Chancellor

My Lords, I am extremely glad that we have been able to improve the proposals of the Law Commission in this way. It illustrates that sometimes the practical aspects of these matters need further consideration, even after the cake has been fully baked with care by the Law Commission.

On Question, amendment agreed to.

The Lord Chancellor moved Amendment No. 5:

Page 4, line 33, after ("gwarant") insert ("teitl").

The noble and learned Lord said: My Lords, I have already spoken to the amendment. I beg to move. On Question, amendment agreed to.

Clause 10 [General saving for covenants in old form]:

The Lord Chancellor moved Amendment No. 6:

Page 5, line 12, leave out subsection (3).

The noble and learned Lord said: My Lords, I spoke to the amendment with Amendment No. 3. I beg to move.

On Question, amendment agreed to.

Clause 11 [Covenants in old form implied in certain cases]:

The Lord Chancellor moved Amendments 7 to 9:

Page 5, line 25, after ("full") insert ("title").

Page 5, line 35, after ("full") insert ("title").

Page 5, line 39, leave out subsection (4).

The noble and learned Lord said: My Lords, the amendments were spoken to with Amendments Nos. 3 and 4. I beg to move.

On Question, amendments agreed to.

Clause 12 [Covenants in new form to be implied in other cases]:

The Lord Chancellor moved Amendments Nos. 10 to 13:

Page 6, line 9, after ("full") insert ("title").

Page 6, line 12, at end insert ("title").

Page 6, line 19, after ("limited") insert ("title").

Page 6, line 23, after ("full") insert ("title").

On Question, amendments agreed to.

The Lord Chancellor moved Amendment No. 14:

Page 6, line 28, at end insert: ("(6) Similarly, where-—

  1. (a) this section applies, and
  2. (b) any of the covenants implied by virtue of this Part on the intervening disposition referred to in subsection (1) took effect in a modified form,
the contract shall be construed as requiring (so far as possible in the circumstances) a corresponding modification of the covenants so implied on the disposition referred to in subsection (2), (3) or (4).").

The noble and learned Lord said: My Lords, the amendment was intended to deal with a potential problem in the transitional provisions for certain exceptional cases in Clause 12. It arose out of a reconsideration of the Bill when the various amend-ments had been incorporated. The circumstances which were envisaged and which the amendment was intended to address would be very rare. However, it was considered worth dealing with the problem, however small, on the basis that the remedial provision had no undesirable side effects. In the event, however, I am indebted to the noble Lord, Lord Mishcon, for identifying, once he had seen the amendment, just such a possible side effect.

The amendment concerned the very rare transitional cases where a contract entered into before commence-ment of Part I has effect after commencement, and between commencement and the eventual disposition required by the contract there is an intervening disposition made with full title guarantee to the person making the eventual disposition. Clause 12 has the effect, in those circumstances, of requiring the final disposition to be made either with full title guarantee or limited title guarantee according to the key words referred to in the contract. The amendment would cater for the possibility that the full title guarantee in the intervening disposition might have been varied to reduce its strength and would have ensured that the person making the final disposition would be required to pass on only the guarantee as modified.

That seemed a reasonable solution, but unfortunately in solving one potential problem the amendment might give rise to another; namely, that the intervening disposition might be made, for example to a nominee, expressed to be with full title guarantee but modified to an extent that would make it worthless to the person taking the eventual disposition.

That point was kindly brought to my attention by the noble Lord, Lord Mishcon, and has led me to reconsider the need for the amendment. I am persuaded that the best way of handling the problem is for publicity to be given to the possibility at which the original amendment was aimed so that parties can make the necessary contractual arrangements to avoid any problems. In that event the amendment itself would not be necessary. It is certainly possible to deal with the matter, so long as one knows of the problem, by the terms of an individual contract.

I have already committed myself to providing the publicity necessary to ensure that the provisions of the Bill are known in advance of its commencement to those whom it will affect. That particular point will be highlighted.

Although I have indicated my ultimate view about the amendment, I believe that I ought to move it so that the matter is properly on the record and in order to give your Lordships an opportunity to comment on the matter. However, I certainly do not intend to press the amendment, for the reasons which I have given. I beg to move.

Lord Mishcon

My Lords, I should like to thank the noble and learned Lord for the notice that he took of the point which I put to his department. I believe that his solution to the problem is the correct one. I am grateful to him for the attention which he paid to the comments I made.

The Lord Chancellor

My Lords, in those circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 [Consequential amendments]:

The Lord Chancellor moved Amendments Nos. 15 to 20:

Page 11, line 33, after ("limited") insert ("title").

Page 11, line 44, after ("limited") insert ("title").

Page 12, line 40, after ("full") insert ("title").

Page 13, line 26, after ("limited") insert ("title").

Page 13, line 40, after ("limited") insert ("title").

Page 14, line 3, after ("limited") insert ("title").

The noble and learned Lord said: My Lords, I spoke to the amendments with Amendment No. 4. With your Lordships' leave, I should like to move the amendments en bloc. I beg to move.

On Question, amendments agreed to.

The Earl of Strathmore and Kinghorne

My Lords, I beg to move that the House do now adjourn during pleasure until 8.15 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.37 to 8.15 p.m.]