Schedule 8: Indemnities
Entitlement
278.Paragraph 1 sets out eight circumstances in which a person who suffers loss is entitled to be indemnified. Five of the grounds arise from a mistake of some description, either in the content of an official copy, a copy document referred to in the register, an official search, the register (the correction of which would result in that register being rectified) or the cautions register. In this context a mistake includes anything mistakenly omitted or included. The other three grounds relate to the rectification of the register (rectification is a correction which causes loss), the loss of a document lodged at the registry (which could include an electronic document that has been corrupted), or the failure to serve notice of an entry of a statutory charge (see section 50).
279.Paragraph 1 contains three statements to assist with the interpretation of the listed circumstances. Firstly, until a decision has been made about the correction of a register by rectification, no entitlement to indemnity arises in respect of a mistake in a register. Once a decision is made, however, the right to indemnity arises whether or not the decision was made to rectify the register. It is possible for a person in whose favour rectification is made to suffer loss as the alteration is not retrospective and losses may have occurred before rectification is effected. Secondly, anyone suffering loss because of the upgrading of a class of title (see section 62) will be entitled to indemnity as if there had been a rectification of the register. This ensures that a person who suffered loss because the title was upgraded on application after the passage of twelve years could claim indemnity even though the registrar was not required to be satisfied as to the title before upgrading. Lastly, if the proprietor of a registered estate or a charge acted in good faith but relied on a forged document, then he shall be treated as if he had suffered loss because the register was rectified so as to be entitled to indemnity. Otherwise it could be argued that no loss had been suffered as legal title did not pass to him as a result of the forged document.
Mines and minerals
280.Paragraph 2 There is one qualification to the right of indemnity set out in paragraph 1. Paragraph 2 provides that no indemnity is payable on account of any mines or minerals, or the existence of any right to work or get mines or minerals, unless it is noted in the register of title that the registered estate includes mines and minerals. This replicates the existing position, which arose because of the difficulty of establishing on first registration if the mines or minerals were included in a title. Indemnity is only available when there is an entry in the register confirming that the mines and minerals are included. The existence of the entry indicates that the registrar was satisfied after careful investigation that the mines and minerals were not disposed of at an earlier date, or that the lord of the manor’s rights to mines and minerals was not preserved in relation to land that was formerly copyhold.
Costs
281.Paragraphs 3 and 4Paragraph 3 sets out the general principle that a claimant is entitled to recover by way of indemnity costs or expenses in relation to the matter only if they were reasonably incurred by him or her with the consent of the registrar. An insurer cannot be expected to settle a claim for costs incurred without his prior consent. That principle is not applied in three cases: (1) where the costs or expenses must be incurred urgently and it is not reasonably practicable to apply for consent in advance; (2) where the registrar subsequently consents to costs which have already been incurred; and (3) where the claimant incurs costs of going to court for a determination of their entitlement to indemnity or to determine the amount of indemnity due (in relation to court applications, see paragraph 7(2)). Even if indemnity is not awarded, the registrar can, for the first time, pay costs and expenses incurred with his consent. If his consent was not obtained in advance he may still award costs if those costs and expenses were incurred urgently (so that it was not possible to get his consent) or where the costs and expenses were subsequently approved by him. This new provision enables a person to recover their costs if there appears to have been a mistake by the registrar but after expending money on further investigations, this proves not to be the case.
Claimant’s fraud or lack of care
282.Paragraph 5 replicates the principle of contributory negligence introduced by the Land Registration Act 1997. No indemnity is payable if the loss was suffered as a result wholly or partly of the claimant’s own fraud. If however the loss was suffered as a result of the claimant’s lack of proper care, then the indemnity payable is reduced to the extent that it is fair having regard to the claimant’s share of the responsibility for the loss. Indemnity will not be payable when the claimant’s lack of proper care is solely responsible for the loss. Additionally, the paragraph provides that, unless the claimant paid for the interest noted in the register or the registered estate in respect of which the loss was suffered, the claimant will be treated as if the loss caused by the fraud or lack of proper care of a person from whom the claimant has acquired the interest was his own fraudulent act or careless action.
Valuation of estates etc.
283.Paragraph 6 There is no restriction on the type of loss that is recoverable by a claimant. This means that a claimant can recover any loss flowing from the particular circumstance whether that loss is direct (for example, the value of land lost) or consequential (the loss of a valuable contract). If indemnity is sought for the loss of an estate, interest or charge, however, paragraph 6 puts a maximum value on the figure for that indemnity. This provision replicates the current position, which sets out two different bases for assessing the maximum sum allowed. If indemnity is payable because the claimant has suffered the loss by reason of rectification, the maximum sum is the value of the estate, charge or interest immediately before rectification of the register of title, but as if there were to be no rectification. By contrast, if the claimant has suffered the loss because of a mistake but where the register was not rectified, the maximum sum is the value of the estate, interest or charge at the time when the mistake which caused the loss was made. Where the valuation is taken at the date that the mistake was made, however, it will be possible for interest to be paid from the date of the mistake (see paragraph 9). The payment of the maximum sum permitted for the direct cost of the interest lost does not prevent the claimant recovering consequential loss.
Determination of indemnity by court
284.Paragraph 7 sets out the entitlement of a person to apply to the court to determine if indemnity is payable, and if so, how much. There is no need to obtain the registrar’s prior consent to the costs of the court action (see paragraph 3 above).
Time limits
285.Paragraph 8 A claim for indemnity will be barred by lapse of time. Paragraph 8 states that for the purposes of the Limitation Act 1980, the liability to pay indemnity is a simple contract debt. The claim will therefore be barred six years after the cause of action arose. The cause of action arises at the time when the claimant knew, or but for his or her own default might have known, of the existence of his or her claim.
Interest
286.Paragraph 9 makes provision for the payment of interest, which is not found expressly in existing legislation. Rules can be made to deal with the circumstances in which interest is payable, and the period and rates of interest that are to be paid. It is likely that the rules will provide for the payment of interest from the date of a mistake where the maximum sum recovered in respect of the loss of an estate, interest or charge is taken to be its value at the date when the mistake was made (see paragraph 6).
Recovery of indemnity by registrar
287.Paragraph 10 replicates the current position, which is to enable the registrar in three circumstances to recover from a third party the amount of any indemnity (plus interest) paid to the claimant. The first situation is when that person caused or substantially contributed to the loss by fraud. There is no requirement that the recipient of the indemnity payment could have sued the perpetrator of the fraud, although it is likely that he or she would have been able to do so. Secondly, akin to an insurer’s right of subrogation, the registrar may enforce any right of action whatsoever that the claimant would have been entitled to enforce had the indemnity not been paid. Lastly, where the register has been rectified, the registrar may enforce any right of action whatsoever which the persons in whose favour the register was rectified would have been entitled to enforce if the register had not been rectified. The third right of recourse goes beyond the insurer’s right of subrogation. These rights are given to the registrar in addition to any other rights and remedies that he has otherwise.