Knockman Community Company v McCort

The applicants sought a finding based on the omission of certain declarations from the disposition effecting a transfer of lands in which they had registered an interest to purchase. They contended that the effect of the omission was that the transfer was not entitled to be regarded as an exempt transfer. After much procedure the applicants discovered that the original disposition had been changed informally to include the required declaration. The transfer had been accepted by the Keeper on that basis. They withdrew their application. The respondents seek expenses including the expense of instructing counsel. We have decided that in the whole circumstances of this case it is not appropriate to make any such award.

The application to the Tribunal was quite sharply focused. It started with a “Submission” in the following terms:

“This is an application … requesting a determination … that the owners of Boreland Forest … have acted in breach of a prohibition under s. 40(1) of the [Land Reform (Scotland) Act 2003] Act”

Under the heading “Action in Breach” it was said that:

The owners “acted in breach of a prohibition under s. 40(1), in that, at a date not earlier than 24th November 2011 and not later than 24 July 2012 they took action with a view to the transfer of the land. The transfer was effected by the grant by the owners of a Disposition in favour of Gillian Janet McCort and Alan Matthew Wilson as Trustees within mentioned, dated 3rd July 2012 and presented to the Land Register on 24 July 2012. … The transfer was not in accordance with the Act in that although the transfer bore to be a transfer otherwise than for value (s. 40(4)(a)), no declarations were contained in the Disposition effecting the transfer, as required by s. 43(1) and s. 43(2)”

The application went on to spell out the terms of sec 43 and in particular the need for an explicit declaration. It was expressly averred that the Disposition had been neither amended nor withdrawn from the Register. There can be no doubt that this reflected their genuine belief. The application set out some “Background” and referred to the terms of sec 50. However, nothing in the background detracted from the clear labelling of the alleged action in breach and the detail set out above.

The issue perceived by the applicants and on which they sought a ruling from the Tribunal could hardly have been made clearer. However, the Answers made no reference to that issue. They made no reference to the terms of the Disposition. They did not deal with the express assertion that the Disposition did not include the appropriate declaration. They did not answer the express assertion that the Disposition had been neither amended nor withdrawn. Instead, they commented, at great length, on some of the points which the applicants had set out as background.

The Tribunal clerk wrote to the parties on 17 September 2013 saying that there appeared to be no dispute about the facts. He attempted to set out the undisputed facts. One was: “The disposition was said to be for no consideration but it did not expressly include the declarations set out in sec 43(2). The applicants contend that this means that the transfer cannot be treated as an exempt transfer”.

The letter went on to say that if the respondents were to submit that they had complied with sec 43 or that their failure to do so could be ignored, it would be helpful if they provided submissions dealing explicitly with these points. However, their solicitor’s reply made no attempt to do so. It raised questions about expenses. It did not assert that there was any error in relation to the fundamental issue that as matter of fact the disposition did not include the relevant declarations. It did not say that any change had been made.

It subsequently transpired that although the applicants were quite correct to assert that the Disposition of 3 July did not include the relevant declaration, a subsequent document had been tendered to the Keeper which purported to have effect as a Disposition of the same subjects executed on the same date but including the required declaration. The Keeper registered the new title, apparently on the basis of the combined effects of that and the original document.

When the applicants realised that the Keeper had accepted a new document with the relevant declaration included, they decided to withdraw the application to the Tribunal. There was sound practical sense in that decision. The basis upon which they originally sought a decision had been superseded by actings of which they had had no knowledge. Had their application been met by a candid acknowledgment of the error and an assertion that the Disposition had been changed much time and trouble would probably have been saved for all involved.

Although the Keeper’s purposes may have been served by the new document, the fact remains that the owners, Mr and Mrs McCort, had granted a conveyance of the land which did not include the necessary statutory declaration. As was said in our letter of 27 November 2013 there were several possible explanations for the existence of two dispositions of the same subjects by the same granters to the same grantees on the same day. The most likely explanation was that the second was a false deed. It was one which was either executed at a later date than the date shown or, more probably, never executed at all.

The solicitor’s letter in reply provided no explanation. It ignored the point. It raised only the question of how the Tribunal would deal with expenses. In answer, it was made clear that the Tribunal would consider expenses in light of any response to the substantive assertions in the letter of 27 November.

No such response was ever expressly made. The respondents’ solicitors wrote by letter of 8 January 2014 under reference to a letter from the applicants. They have made no substantive attempt to respond to the assertion that, essentially, a false deed had been tendered to cover up the omission in the original disposition. They have never dealt with the issues raised by the applicants of the shortcomings in the original transfer. Instead they asserted that “the Respondents’ agent’s dealings with the Keeper prior to [the issue of the land certificate] are irrelevant”.

We accordingly have a situation where the respondents granted a disposition of land for no consideration but without the necessary declarations for the purposes of sec 43. There came into existence a document purporting to be a disposition granted by the respondents on 3 July 2012 including such a declaration. The obvious inference was that this was a false document. Either the respondents executed it on a different date or never executed it at all. The probability is that Mr and Mrs McCort had no part to play in the creation of the document in which they are shown as declaring that subsection (4)(a) of Section 40 operates. We do not have the benefit of any comment by the respondents’ agent on this situation.

As we have stressed, the substantive point made by the applicants and upon which they sought a finding by the Tribunal was that a Disposition without such declaration did not comply with the statutory provisions. This was effectively acknowledged by the very fact that a false document came to be tendered to the Keeper.

Although the respondents’ agents have made no attempt to rebut the assertion that they ultimately presented a false document, we have given more detailed consideration to the papers and see that it is suggested by a representative of the Registers of Scotland that the respondents’ agents had corrected the disposition by sending in a new page to the Keeper and a member of staff had simply exchanged it for the original. This seems extremely surprising to us but as we have no idea of the procedures and policies of the Keeper in this respect it is impossible to comment fairly. The fact remains that the substitute document is false and misleading. It complies with sec 43 when the genuine document did not. We think the attitude of the respondents’ agent can, at best, be described as “cavalier”. This has been apparent at various stages most notably in his failure to deal with the explicit assertion that he was party to a false document. We do not suggest personal impropriety but we would have expected much greater care to be taken to ensure that where the terms of a probative deed were to be changed everything was openly disclosed and communicated. The present case seems to us to show a considerable weakness in the system of authentication of formal documents.

It may be thought wrong to describe a document as “false” when the change from the original is genuinely thought to be innocuous. But that sort of value judgment is not a sound basis for distinguishing the genuine from the false. In any event the new version was put forward for a practical purpose. It must have been done to meet the criticism by the applicants. The failure to inform them of the change has given rise to considerable unnecessary expense.

In all the circumstances of this case we are not prepared to make any award in favour of the respondents. It may be added that we would not have certified the case as suitable for the employment of counsel. The point in question was a very short one. It was clearly focused. But, instead of meeting the point, the answers – like the letters from the respondents personally –appear to us simply to address the wrong issues. They failed to deal with the critical issues of fact. They made no attempt to deal with the legal implications of the original omission. The expense occasioned to the respondents was caused by their legal advisers failing to deal with the substantive issue upon which the application was clearly based. The applicants unfortunately are left to carry their own expense.

Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 24 January 2014

Neil M Tainsh – Clerk to the Tribunal