Экзамен зачет учебный год 2023 / SLC, Report on land registration. Vol 1

19.9 Nevertheless, the protection for the buyer is imperfect. The fact that a seller is in principle obliged to give full and prompt compensation to a buyer if there is a title defect does not mean that in reality such compensation is always in fact paid, especially if there is a question over the seller's solvency. And the buyer's solicitors have no liability except for fault. Some title defects, such as a forged signature, may be undetectable even by the best conveyancer, and there is no fault in failing to detect the undetectable. In summary, cases where a buyer suffers from a title defect are rare, and in those rare cases compensation is likely to be available, but nevertheless it can very occasionally happen in the Sasine system that a title defect causes uncompensated loss.

Title insurance from commercial insurers

19.10 In the USA, where deeds registration prevails,11 title insurance is used almost universally. It is used as a matter of routine, not only where some problem has been identified. The same is true in some other jurisdictions. In the Sasine system insurance is taken out only where there is an identifiable title defect. This happens only in a very small minority of cases.12

The 1979 Act

19.11We give here a mere outline of the 1979 Act's guarantee of title: details are discussed in subsequent parts. Under the 1979 Act, titles are normally guaranteed. The guarantee has two barrels. Either (a) the person registered keeps the property itself,13 notwithstanding the title defect, or (b) is compensated for its loss by the Keeper. In brief, the registered grantee is sure of either "the mud or the money".14 Whether a person keeps the mud or takes the money depends on possession. A person in possession keeps the mud. A person who does not have possession receives compensation. We say that titles are "normally" guaranteed because there are certain exceptions,15 but these are fairly unusual in practice: the vast majority of titles are fully guaranteed.

19.12If the registered grantee keeps the mud then the true owner16 loses it, and the 1979 Act provides that the Keeper is to compensate that person.17 If the registered grantee loses the property, the Keeper must compensate that person.18 So in a typical case the Keeper must compensate someone – either the person who suffers because a registration is reversed, or the person who suffers because it is not reversed. "Whoever wins, the Keeper loses" is a saying that comes fairly close to the truth.19

11Land registration is a matter for state law. A few states have title registration, of a Torrens type, as an optional alternative to deeds registration, but the number of properties so registered is very small.

12For more about title insurance see Part 26.

13To be precise: keeps the registered right. That right may be a right of ownership or it may be another right, such as a lease.

14This expressive phrase is the brainchild of the Canadian scholar, Thomas W Mapp, in his important work

Torrens' Elusive Title: Basic Legal Principles of an Efficient Torrens' System (1978), para 4.24.

151979 Act, ss 9 and 12.

16Here and elsewhere we use the phrase "true owner" as shorthand. In some cases the right in question might not be ownership but a lesser right.

171979 Act, s 12(1)(b).

181979 Act, s 12(1)(a).

19It is not wholly accurate. There are cases where the Keeper is not liable to anyone. For example someone who caused the problem by fraud or carelessness has no claim against the Keeper.

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19.13In the case of an omitted encumbrance, keeping the mud means keeping the property free from the encumbrance. So in the case of Fay and Gary,20 if he keeps the mud he keeps the property free of the standard security. The alternative would be to accord the standard security full effect, but to compensate Gary.21 Either way the Keeper must pay £100,000 to someone – either to the bank or to Gary. But admittedly the term "mud" does not fit such cases so well, because whatever happens Gary has and keeps the mud, the question being whether the encumbrance is re-instated or not. Nevertheless "mud or money" is useful shorthand and we make use of it through this Report.

19.14The positive guarantee of title does not free from liability those who would otherwise have been liable for a title defect. For example, Chloe owns land. Davina impersonates her and sells to Edna. Edna (assuming that she is in possession etc) keeps the property and Chloe is entitled to compensation from the Keeper. But that does not let Davina off the hook. Davina is liable in delict to Chloe for having deprived her of the property. If Chloe, instead of claiming from Davina, claims from the Keeper, then Davina is still not off the hook, for the Keeper is, on paying Chloe, subrogated to the latter's claim against Davina.22

When the title guarantee does not apply

19.15If the title problem is caused by "fraud or carelessness", that results in the forfeiture of the guarantee, in both of its forms.23 For example in McCoach v Keeper of the Registers of Scotland 24 a seller disponed more land than she owned. The Keeper did not notice the error and registered the buyer as owner of the whole property described in the disposition. When the error came to light it was held that the Register was to be rectified and that the buyer was not entitled to compensation from the Keeper, because she knew that there was at least a question mark over the seller's title to the extra ground, and by not mentioning the issue at the time of the application for registration she herself had caused the inaccuracy.

19.16The title guarantee is also inapplicable where the Keeper excludes indemnity.25 The 1979 Act does not say when the Keeper is or is not to exclude indemnity. In practice exclusion is uncommon.

Title guarantee and title registration systems

19.17All land registration systems give some guarantee to a buyer. A deeds registration system such as the Register of Sasines gives a negative guarantee, ie a guarantee against off-register deeds. The Land Register also gives that negative guarantee, but it goes further: a buyer can (subject to certain exceptions) be sure of the mud or of the money.

19.18A title registration system could provide that monetary compensation is to be the sole guarantee given by the system. Thus the ordinary rules of law would apply, and if those rules say that Z's title is void, it is void and X recovers the property. Z is compensated by the Registration Department. As far as we know, no title registration system has adopted that

20The case in which Fay forged a deed of discharge.

21In fact that is not the approach taken either by the 1979 Act or by the new scheme.

221979 Act, s 13(2).

231979 Act, s 9(3)(a)(iii) removes the mud guarantee. Section 13(4) removes the monetary guarantee.

2419 December 2008, Lands Tribunal, discussed in Kenneth G C Reid and George L Gretton, Conveyancing 2008 (2009), pp 121-133.

251979 Act, s 9(3)(a)(iv) excludes it as far as the mud is concerned and s 12(2) for the money.

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solution, though we can offer no reason for that fact: it would be a workable system.26 Alternatively, a title registration system could provide that good faith acquirers always keep the mud. The various Torrens systems come close to that approach.27 As was said in a Canadian case, "indefeasibility is the heart of a Torrens system."28 If a good faith acquirer takes the mud then the issue of compensation does not disappear, for the question arises as to whether the person who suffers as a result is entitled to compensation from the Registration Department. Here the answers vary according to the system: for example in the European system the rule tends to be that the Registration Department is liable for loss caused by its fault but not otherwise.

19.19 The 1979 Act system, like the English system on which it was, broadly speaking, based, is a compromise: sometimes mud and sometimes money. And where the registered grantee takes the mud, the person who suffers is compensated. The Keeper's liability is absolute, not fault-based. It is perhaps worth recalling at this stage that the Land Register is self-financing: the income received from registration fees, and certain other income sources, notably data supply, meet the costs of running the Register, including compensation payments. Hence compensation payments are not met by the taxpayer. The system is thus similar in some respects to a mutual insurance society.

Title insurance and the Land Register29

19.20Earlier we mentioned the role that commercial title insurance plays in Sasine transactions. At first sight it might appear that there could be no role for commercial title insurance in respect of Land Register titles. In fact, such a role does exist. Where the Keeper excludes indemnity from a title, the effect is that the registered grantee does not have the benefit of the title guarantee, either in respect of mud or of money. For example, Fraser dispones land to Gloria. The Keeper is doubtful about title to a boundary area, and although Gloria is registered for the whole area disponed, indemnity is excluded for the boundary area. It later emerges that the boundary area should have been included in the title sheet of the neighbour, Harry. What will now happen is that the boundary area will be removed from Gloria's title sheet (she loses the mud) and, when this happens, she will receive no compensation from the Keeper.

19.21It is in cases such as this that commercial title insurance may be used. Gloria, on buying the property, may take out a title policy in respect of the boundary area. As in other cases of commercial title insurance, the premium (normally a one-off premium) is calculated on the basis of the value of the property insured, the scale of the risk as perceived by the insurer, and so on.

Evaluation

19.22 The title guarantee that exists in the modern land registration system is a remarkable one. Nothing quite like it exists for other types of property, and in a majority of countries in

26At first sight it might seem more costly. That is not so. If the registered grantee keeps the mud, that does indeed save the Keeper's purse, but only momentarily, for the Keeper must then compensate the person who suffers from the non-rectification.

27As do most European title registration systems. The difference here between the typical Torrens system and the typical European system is that indefeasibility in the former is immediate and in the latter it is deferred. This distinction is discussed in a number of places in this Report including Parts 13, 21 and 23.

28Re Cartlidge and Granville Savings & Mortgage Corp (1987) 34 DLR (4th) 161 (Manitoba CA).

29For further discussion of title insurance, see Part 26.

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the world buyers of land are not so well protected.30 But there has been no suggestion that the basics of our law should be changed. In principle it would be open to us to recommend a reversion to an unguaranteed title system, but we have no doubt that such a change would be regarded as unacceptable. It would also be possible to move to a system in which compensation was the only form that the title guarantee took – money, not mud. We said above that such a system would be workable. But no one has suggested it to us and there seems to be no compelling reason to make such a major change. Indeed, there are positive reasons for thinking that in some types of case the guarantee should take the form of mud rather than money: we refer to Part 21 of this Report.

19.23 In DP 125 we proposed:31

"2.	(a)	The title of a bona fide acquirer should continue to be guaranteed in
	respect of Register error.32

3.(a) The title of a bona fide acquirer should continue to be guaranteed in respect of transactional errors arising out of the invalidity of the conveyance in the acquirer's favour."

19.24Respondents supported this view. Though proposing to continue the rules in broad terms, we also proposed modification of the details of the title guarantee system. One such modification we particularly urged was that the test in the 1979 Act for determining when a registered grantee should take the mud and when, on the other hand, there should be monetary compensation, should be adjusted: in some types of case where at the moment the grantee takes the mud we argued that monetary compensation would be more appropriate. And we proposed certain other adjustments. These adjustments will be set forth in detail in the following parts of the Report. For the present it is sufficient simply to state that we consider that the broad principle created by the 1979 Act of guaranteed title has proved successful and should be retained.

19.25The Keeper has commissioned research as to the comparative cost-effectiveness of

(a) the current system which is in effect a compulsory mutual insurance system and (b) a system in which most buyers take out title insurance from commercial insurers, as in the USA and certain other countries. The results indicate that our system delivers title guarantee more cheaply.33

19.26We recommend:

77.The title of a bona fide acquirer should continue to be guaranteed in respect of Register errors.

30In broad terms, where the land registration system is one of deeds registration, the only guarantee is the negative guarantee. Some title registration systems offer a protection that is comparable to what exists here, but others do not: the typical European system of registration of title offers rather less.

31DP 125, paras 3.20 (proposal 2(a)) and 3.34 (proposal 3(a)).

32For the distinction between Register error and transactional error see Part 17.

33See Appendix C. As already indicated, that does not mean that there is no role for title insurance from a commercial insurer in special cases. Special cases exist under the current system and will continue to exist in the new scheme. For title insurance generally see Part 26.

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The title of a bona fide acquirer should continue to be guaranteed in respect of transactional errors arising out of the invalidity of the conveyance in the acquirer's favour.

(Draft Bill, Parts 5 and 6)

No requirement of actual reliance

19.27In practice a grantee will almost invariably check the Register and so will actually rely on what it says. But this is not a requirement in the new scheme any more than it is a requirement under the 1979 Act. Nor is it a requirement in at least most other title registration systems round the world. What is protected is not the actual trust of the particular grantee, but the dependence of legal transactions on the reliability of the Land Register in general. Making an exception for those who do not actually rely on the Register would have little effect since almost everyone does in fact rely. Moreover, it would drag the system into messy and expensive disputes as to whether there had been actual reliance in any given case. We think that the approach of the 1979 Act was right.

19.28In the next paragraph we consider the position of donees and other gratuitous grantees. In practice gratuitous grantees do not rely on the Register while onerous grantees do. But whilst the onerous/gratuitous distinction in practice tends to be much the same as the relier/non-relier distinction, they are nevertheless not the same.

Donations and other non-onerous transactions

19.29 Should the guarantee of title be limited to buyers, and others who give value, or should it extend to gratuitous grantees? The 1979 Act makes no distinction. We discussed in detail the arguments both for and against in DP 125,34 and asked consultees firstly whether the guarantee of title should apply to donees and others who do not give value, and, secondly, if the title guarantee is to apply, whether the rules should be the same as for onerous grantees or whether the guarantee should be monetary only. Of those who responded a majority took the view that no distinction should be drawn between gratuitous grantees and onerous grantees. We accept that view. We would add that if a different view were to be taken then presumably the registration fees for gratuitous grantees would have to be reduced to reflect the fact that they would not be benefiting from the title guarantee. We recommend:

78.No distinction should be made, as far as the guarantee of title is concerned, between gratuitous and onerous grantees.

34 DP 125, paras 7.21–7.35. An argument that we did not mention which runs against making a distinction between donees and others is that such a distinction is sometimes difficult to draw and so could be productive of expensive litigation.

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Part 20 The guarantee of title: (B) voidable titles

20.

Introduction

20.1 Should a voidable title benefit from either form of the title guarantee? Or, to put the question in other words, in so far as a title is voidable should it be protected by either form of the title guarantee? At first sight the answer might appear to be affirmative, because if in general void titles are guaranteed (and in most cases they are and will continue to be) why should not merely voidable titles have a similar protection? And that conclusion is supported by the fact that under current law voidable titles are, at least in principle, guaranteed. In fact matters are more complicated than they appear and our conclusion is that titles should not be guaranteed against the possibility of voidability. The present part overlaps to some extent with Part 28 and should be read in conjunction with that part.

The mud guarantee

20.2A voidable title is one that is subject to the possibility of a future challenge. Unless and until it is set aside, it is valid. Suppose that Fraser fraudulently induces Gail to dispone land to him. Fraser has a voidable title, but that does not alter the fact that he is, for the time being at least, the owner, for the effect of fraud is voidability, not nullity. If Gail decides to take up her right of challenge, and reduces his title, then as far as general law is concerned ownership will pass back to her as a result. But that does not happen with retrospective effect, or, to put the point in academic language, the reduction takes effect ex nunc and not ex tunc.1 In practice the option to reduce is sometimes not exercised. Among other reasons, a voidable transaction2 occasionally proves to have been advantageous to the person who has the option to set it aside, so that reduction would be counter-productive.3 Since a voidable title is a valid title, unless and until it is set aside, voidability does not make the Register inaccurate. In the example, unless and until Gail reduces the deed, the Register is accurate. It says Fraser is the owner and it is correct in so saying, for he is.

20.3If a voidable deed is reduced, the Register becomes inaccurate,4 but under current law that does not necessarily mean that the Register can be rectified. That depends on whether or not the registered owner (here Fraser) is in possession and whether or not the inaccuracy was caused by his fraud or carelessness. In Fraser's case, there was fraud, and so once Gail has succeeded in her action of reduction, the Register can be rectified. But in some cases of voidability the position is different: it may be that the inaccuracy created by the decree of reduction has not been caused by the owner's fraud or carelessness. In one of the leading cases on the 1979 Act, Short's Trustee v Keeper of the Registers of Scotland,5

1 In some legal systems the effect is retrospective, such the German Civil Code (BGB) §142(1). At one time it was arguably retrospective here too. But the standard view of the modern law is as stated in the text.

2 A voidable transaction results in a voidable title.

3 If a transaction is void that fact can be asserted by either party.

4 Under current law. Under the new scheme the position would be different. 5 1996 SC (HL) 14.

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Mr Short, when already insolvent, disponed some properties to Mr Chung and did so at undervalue. Mr Chung then disponed them gratuitously to Mrs Chung. Mr Short having been sequestrated, the trustee in sequestration sought to recover the properties. The trustee raised an action to reduce the dispositions and was eventually successful.6 He applied for the decrees to be implemented in the Register by registration (not by rectification) but the Keeper refused. The trustee raised an action to compel the Keeper to register the decrees, but was unsuccessful. The reason that the trustee sought registration rather than rectification may have been because it would have been difficult to show "fraud or carelessness" on Mrs Chung's part. However, had the trustee sought rectification and had the application been refused on the ground of lack of "fraud or carelessness", then the trustee could have sought indemnity from the Keeper under section 12(1)(b) of the 1979 Act. According to anecdotal evidence the Keeper intended to resist such a claim and this, if true, may explain, at least in part, why the trustee in the third stage of the struggle7 took a different approach. He called on Mrs Chung to dispone the properties to him, and when she did not comply he raised an action to compel her to do so. In this action he was successful.8 Thus the barriers erected by the 1979 Act to protect the person registered as owner were ultimately overcome.

20.4This final outcome (recovery of the properties by the trustee in sequestration) seems to us right in terms of legal policy. The insolvency legislation has over the centuries9 developed a set of rules about what happens if someone who is insolvent deals with property in such a way as to prejudice creditors. There is no reason for those rules to be turned upside down as a sidewind of land registration law. If the policy of the law is that someone in Mrs Chung's position ought to return the properties, then it should not at the same time place obstacles to that happening, and certainly it should not depend on the accident of which register the title happens to be in. The "fraud or carelessness" test is a workable (albeit imperfect) device for regulating the fate of void titles. That it should apply also to voidable titles seems to have been no more than a conceptual accident: the 1979 Act did not draw the void/voidable distinction. Indeed the disaggregation of void and voidable titles would meet a key argument that found favour in Short's Trustee, namely that to allow the registration of a reduction of the latter would defeat the operation of the Act in respect of the former.10

20.5It might be argued that, since the problem created by the 1979 Act can be circumvented, as happened in the third stage of Short's Trustee, there is no problem that needs to be solved. In a sense that is true. But there are several reasons for ensuring that reduction can be given effect to in relation to Land Register titles. (i) It is not certain that the route successfully taken by the trustee in the third stage of Short's Trustee could be taken in every type of voidable transaction. It might be so, but at this point matters become speculative, and the law in this area should not be left to speculation. (ii) Suppose that the trustee had, after the second stage, applied for rectification, and suppose that the application had failed. In that case the Keeper would presumptively have been bound to pay the trustee compensation, whereas in the event the trustee took a different route and the Keeper did not

6 Short's Trustee v Chung 1991 SLT 472.

7 The first stage was the reduction of the dispositions. Here the trustee succeeded: Short's Trustee v Chung 1991 SLT 472 (IH). The second stage was the attempt to register the decrees. Here the trustee failed: Short's Trustee v Keeper of the Registers of Scotland 1994 SC 122 aff'd 1996 SC (HL) 14. The third stage was the action to have the properties conveyed to him. Here the trustee succeeded: Short's Trustee v Chung (No 2) 1999 SC 471 (IH).

8 Short's Trustee v Chung (No 2) 1999 SC 471.

9 Our law is ultimately based on the Roman actio pauliana.

10 Short's Trustee v Keeper of the Registers of Scotland 1994 SC 122 at 141C per Lord President Hope.

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have to pay him compensation. This difference, depending on the free choice of the trustee, seems an odd result. (Though, had this happened, the Keeper might have been able to recover from Mrs Chung by means of a claim based on section 13(2) of the 1979 Act.) (iii) If the 1979 Act does not in fact protect voidable titles, there is no rational basis for not allowing reductions to take effect.

20.6It might be argued that reduction of a voidable transaction is itself an unsatisfactory mechanism, and that the remedies of a person who challenges a voidable transaction should be either (a) a reconveyance by the grantee or (b) compensation from the grantee. On that view, the current situation is actually in policy terms the right situation. This is a topic of some complexity and we cannot here enter into it. For present purposes we must accept the general law of reduction as it stands.

20.7In DP 125 we proposed that there should be no barrier to reductions of voidable deeds being given effect to in the Land Register.11 Most respondents agreed and we make a formal recommendation to that effect in Part 28. This being the position, a person with a registered title does not benefit from the "mud" guarantee.

The money guarantee

20.8There is also the "money" side of the guarantee of title. In other words, if a person with a voidable title loses that title as a result of reduction, should compensation be payable by the Keeper? For the same reasons as have been sketched above, in DP 125 we proposed that "as a general rule indemnity should not be paid in respect of rights lost by reduction of a voidable deed"12 and again most respondents agreed.

20.9Once again, in many cases this is already the law because of the "fraud or carelessness" rule. And again, even where there is no fraud or carelessness the person registered cannot rely on "money" protection, as Short's Trustee once again illustrates. Mrs Chung had to return the properties, and obtained no compensation from the Keeper. In fact, there are one or two special types of case where a person holding on a voidable title could claim indemnity under the current law, but that merely shows up the incoherence of the current law. Thus suppose that Mrs Chung had not been in possession of the properties. In that case she would not have been a "proprietor in possession" and so there would have been no bar to rectification. And if the Register had been rectified Mrs Chung would have been compensated. Such a result would, we think, be arbitrary.13

20.10Accordingly we recommend:

79.Indemnity should not be payable in respect of rights lost by reduction of a voidable deed.

(Draft Bill, s 39(1) and (2))

20.11 This recommendation can be regarded as being merely a special case of the more general recommendation, made in Part 22, that the Keeper's warranty of title should warrant the title as at the date of registration – the "only for today" principle. Subsequent events

11DP 125, para 6.18 (proposal 10).

12DP 125, para 6.23 (proposal 11).

13See DP 128, para 7.7.

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should fall outwith the scope of the warranty. And here the void/voidable distinction comes into sharp focus. If a title is void, then a subsequent decree of reduction is simply declaratory of that fact, a fact that already existed at the date of registration. But if a title is voidable, a subsequent decree of reduction is quite different in its effect.

Is the result paradoxical?

20.12 The result might at first sight seem paradoxical: in the new scheme registered grantees will usually be protected against the risk of void deeds but not against the risk of voidable ones – protection against the greater risk but not the lesser one. But in our view that is the sound approach. In the first place, if a title is voidable, a subsequent good faith buyer is protected by the general law and that will continue to be true: for example if, before Gail acts, Fraser sells to Hilary, Hilary's title is not voidable, assuming good faith. Thus under general law good faith protects against voidability in a way that it does not in the case of nullities. In the second place, under the general law voidability strikes against the unmeritorious acquirer and there is no reason why land registration law should protect those whom general law has identified as unmeritorious. Land registration law should protect those who, though deserving, are unprotected by the general law. It should not enhance the protection of those whom general law already deals with fairly.14

Is the doctrine of notice a threat to land registration objectives?

20.13 The needs of other jurisdictions may be otherwise. The introduction of title registration in some jurisdictions was motivated in part because the general law was thought to be unsatisfactory. The first Torrens statute, of 1858, began with the explanation that "the inhabitants of the Province of South Australia are subjected to losses, heavy costs, and much perplexity, by reason that the laws relating to the transfer and encumbrance of freehold and other interests in land are complex, cumbrous, and unsuited to the requirements of the said inhabitants".15 Among the perceived difficulties were equitable interests, numerous and liable to affect innocent acquirers by reason of an overly expansive doctrine of constructive notice.16 Torrens statutes sought to remove the problem by protecting acquirers except in the case of actual "fraud" – the remote original, it may be, of the term in the 1979 Act. Something of the same pattern can be detected in the development of the legislation in England and Wales, where it has been said that:17

"Above all, the system [of land registration] is designed to free the purchaser from the hazards of notice – real or constructive – which, in the case of unregistered land, involved him in inquiries, often quite elaborate, failing which he might be bound by equities … The only kind of notice recognised is by entry on the register."

14For further discussion, see DP 125, Part 6.

15Torrens himself was more forthright still, castigating the law of real property as something which "could not be patched or mended: the very foundation was rotten therefore the entire fabric must be razed to the ground and a new super-structure substituted. Like a blundered calculation on a slate, it was in too much confusion for correction, so he would take a sponge and rub the whole out." See Torrens' Printed Speeches, p 8, quoted in Peter Butt, Land Law (4th edn, 2001), p 621.

16See eg Alberta Law Reform Institute, Proposals for a Land Recording and Registration Act for Alberta (Report No 69, 1993), Vol 1 p 62.

17Williams & Glyn's Bank Ltd v Boland [1981] AC 487 at 503F per Lord Wilberforce.

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20.14In Scotland, however, the position was different. There are no equitable proprietary interests. In DP 125 we wrote that "the doctrine of constructive notice is narrow and does not seem to have caused difficulties in practice."18 (By the doctrine of notice we were referring to what is sometimes called the "offside goals rule" whereby a real right can be defeated by a prior personal right if known to the acquirer of the real right.19) We now recognise that the position is not as satisfactory as we thought. Distinguished conveyancers have since said to us that the doctrine does cause problems in practice and have gone so far as to suggest that it should be abolished. We consider this issue in Part 14, where we suggest that it might be possible to develop the system of advance notices in such a way as to allow the offside goals rule to be abolished. But such abolition cannot be done as part of the present project.

20.15The draft Bill does offer some assistance. It provides that the matters that enter the Register are (a) such matters as are authorised by an enactment and (b) such other matters as the Keeper thinks fit to enter, but the latter is subject to an important proviso: the additional matters that the Keeper may enter must not include rights.20 That will not fully satisfy those who are concerned that the doctrine of constructive notice has gone too far. But it provides some comfort. By excluding from the Register merely personal rights, it reduces the scope for arguing that a registered right is challengeable. This is probably already the law,21 but the draft Bill puts the matter beyond doubt.22

Voidability: the general law and the Keeper's liabilities

20.16 As a matter of general law, if X has a voidable title and transfers that title, or grants a subordinate real right to Y, and Y is in good faith,23 Y's title is protected. If Fraser by fraud induces Gail to dispone to him, his title is voidable. If he then dispones to Hilary her title is not voidable, assuming good faith. In such a case the Keeper is not liable to Gail. She has lost her power to recover the property not by virtue of any rule of land registration law but by virtue of the general law. (Her right to claim damages for fraud from Fraser remains.)

18DP 125, para 6.14.

19For the offside goals rule see Reid, Property, paras 695-700; and David A Brand, Andrew J M Steven and Scott Wortley, Professor McDonald's Conveyancing Manual (7th edn, 2004), paras 32.52-32.62.

20Draft Bill, s 6(3) and (5)(e).

21See in particular Brookfield Developments Ltd v Keeper of the Registers of Scotland 1989 SLT (Lands Tr) 105.

22The issue discussed here is also mentioned in paras 4.28-4.31.

23For whether value is also required see Reid, Property, paras 692 and 699.

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