I beg to move amendment No. 1, in page 6, line 20, at end insert—
(2A) An order under subsection (1)(a) for the transfer of heritable property from one spouse to the other which is made by the court shall have no effect in relation to third parties transacting with the spouse against whom the order has been made unless it is registered in the Register of Inhibitions and Adjudications within fourteen days from the date on which it is made.'•
(4A) An order under subsection (2)(d) which is made by the court shall not affect dealings relating to the former matrimonial home by the non-applicant spouse with third parties acting in good faith unless such order is registered in the Register of Inhibitions and Adjudications within fourteen days from the date on which it is made.'•
We come to what is on the face of it a fairly dry piece of law reform. I am not sure that I shall do anything to dispel that impression in the next 10 minutes or so. I am equally confident that the Solicitor-General will rise to a similar high standard when it is his turn to speak. This is a matter of some importance. I approach it with a good deal of caution because, although I am occasionally given to flamboyant claims of my expertise and virtue, I have never prided myself upon my knowledge of conveyancing law. A few obscure fragments are lodged in my memory. They have something to do with a mysterious Act which reached the statute book in—
Yes. The sight of the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) and I discussing conveyancing must be quaint and strange.
These two amendments to comparatively simple matters in terms of principle, although the complexities would puzzle someone with a great deal more expertise than myself. We are considering clause 8. Most hon. Members will be aware that clause 8(1)(a) deals with the transfer of property between spouses. That is when, in an action for divorce, there is an application to the court for an order to transfer property.
Clause 8(1)(c) relates to an incidental order. It is defined, as hon. Members will be aware, in clause 14. Clause 14(2)(d) and (e) refer to incidental orders which, among other things, may regulate occupancy rights or outgoings of the former matrimonial home. This is an unashamedly difficult subject for me and somewhat confused.
The first problem is that there has been some sort of clash or competition between an incidental order under clause 14 and occupancy rights which are awarded under section 3 of the Matrimonial Homes (Family Protection) (Scotland) Act 1981. That will to some extent be clarified by Government amendment No. 5. I had tabled amendments to the same end, but I shall give way to the Government's formulation. I am grateful to the Solicitor-General for having listened to the arguments that came largely from the Law Society of Scotland and the professions and which were reflected by my hon. Friend the Member for Falkirk, East (Mr. Ewing), who raised the matter in Committee.
I understand that once the Government amendment has been incorporated there will be a fairly neat demarcation, and occupancy rights under the 1981 Act will run to the point of divorce and will then, to use the fashionable terra, fly off. If there is any need for the enforcement of occupancy rights thereafter, it will have to be pursued through an incidental order under clause 14. That will arise only at or after the point of divorce. I hope that that is clear to those who are following the debate.
I know that my hon. Friend is an honest trier and is not usually terribly discouraged by failing to understand what is happening. I look forward to one or more of his rumbustious speeches during the course of our exchanges.
I turn now to the real issue behind the amendment, which is directed to how the new provisions will work. I am not clear about the way in which they will operate and their operation has not been explained to me by any of those learned in the law whom I have consulted. It is as plain as the nose on my face—it could not be much plainer than that—that the courts can make an order enforcing a transfer between the spouses. The timing is referred to in clause 12. The court can order that the transfer takes place on the granting of a decree of divorce or
within such period as the court on granting decree of divorce may specify.
Even taking into account the provisions in clause 12, I presume that there will have to be a disposition. I presume that a formal document will be signed by the spouses transferring the property, which ultimately will give a good title that will be recorded in the register of sasines. I do not know how long it takes these days successfully to record a deed in the register, but I am told that it takes many months. I have been told that there can be a time lag of as long as nine months. I was rather surprised when I was told—this shows how much I am out of touch—— that the delay when land registration is involved can be as long as 18 months. That period can elapse before the new title is properly registered and, therefore, available for public inspection, or at least to the eye of a searcher who may be carrying out an examination on behalf of a prospective purchaser.
If there is such a substantial gap between application and registration it has been suggested to me that a dishonest spouse may try to defeat the transfer by selling to a third party. How can the third party be expected to be aware of the fact that there is an order under clause 8(1)(a) in existence, which will presumably prevent the third party from getting a good title?
The amendment suggests that when an order is made by the court under clause 8(1)(a) there should be a duty upon the parties — presumably upon the grantee, the person who will receive the property—within 14 days to register the order in the register of inhibitions and adjudications. If the grantee fails to do so, the theory is —I hope that it holds good in practice—that the third party sale would go ahead and would not be affected adversely by the existence of a section 8(1)(a) order.
I hope that this issue has been explained reasonably clearly. I an sure that the Solicitor-General for Scotland follows it. Indeed, there has been some correspondence between us on these issues prior to the debate.
Obviously, the Bill complicates conveyancing, but complication will undoubtedly abound in this matter. That is the fault of the House. For sufficiently good reasons we try to get more sensible property laws on the break-up of a marriage, and in so doing we complicate the life of a conveyancer in Scottish legal practice. if, for example, a wife were to get the transfer of the house, her legal adviser failed to register the order in the register of inhibitions and adjudications, alienation took place and a third party bought in good faith because there had been no registration in the register of inhibitions and adjudications, the third party sale could not be overturned, and presumably there would be a nice action for professional negligence against the solicitor. Perhaps I should not be laying up such a store of trouble for my colleagues, and who knows what the future holds for me?
There is common sense in the proposal, and great danger in leaving the position in the somewhat unsatisfactory state in which a clause 8(1)(a) order may be made, the complicated and laborious conveyancing process may be in hand, and there is an apparent transaction with a third party, such as I have described. That is the simple part of the story.
Amendment No. 6 deals with the same sort of point in connection with incidental orders, to which I referred earlier. They are the orders made under clause 8(l)(c) and further defined in clause 14. Clause 15(3) states:
Neither an incidental order, nor any rights conferred by such an order, shall prejudice any rights of any third party insofar as those rights existed immediately before the making of the order.
That seems to be conclusive, but I am not entirely sure that it is. I hope that the Minister can help me on that.
If an incidental order confers on one spouse occupancy rights and the entitled spouse sells the property to a bona fide third party and, therefore, there is competition about which occupancy rights take precedence and are preferred, what is the position?
Some time ago the Minister wrote me a complicated letter—I do not complain about that—which to some extent deals with the problem. It would be convenient if he would summarise the letter and incorporate it in his speech. He stated:
The Bill as introduced sought to protect the right to occupy a matrimonial home under a court order by providing that provisions of sections 6, 7 and 8 of the 1981 Act should apply. That would have meant that the right to occupy would automatically prevail over the rights of third parties who acquired right to the property.
That was the position in the Bill as originally drafted. Sections 6, 7 and 8 of the 1981 legislation were imported into the Bill. That made it clear that in those circumstances an incidental order would prevail over a sale to a third party.
I thank my hon. Friend the Member for East Lothian (Mr. Home Robertson). The point, before I lose my thread, is that the position as outlined was perfectly clear as the Bill was originally drafted.
However, the Minister goes on, fairly, to point out that sections 6, 7 and 8 are no longer imported into the Bill because there were amendments. Therefore, the clear position that there will be an automatic preference over the rights of third parties is presumably undermined. The Minister makes that point, but goes on to say:
This does not of course mean that the person who is given the right to occupy is left without protection. The court in a divorce action could be asked in advance by the spouse to protect her right to occupy against adverse dealings in addition to its common law powers and the specific power to interdict avoidance transactions under clause 18 the court has a very wide power under clause 14(2)(k) to make any ancillary order which is expedient to give effect to its orders. Thus the court could, having regard to these various powers, interdict the former husband from disposing of, or otherwise dealing with, the house while the right to occupy lasts.
As I understand what the Minister is saying—I hope that we have this clear in our minds—it means that as the Bill was originally drafted, it was quite clear that an incidental order regulating occupancy rights took precedence over any sale of a property to a bona fide third party. The situation has now been thrown into the melting pot, but that preference for the occupancy rights could still be re-established if an application were made to the courts to use their powers to interdict the husband from disposing or otherwise dealing in the property, thus settling the matter by that specific court order and provision.
That may be satisfactory enough, but there may be many occasions when the court is not invited—perhaps through inadvertence or because it was not thought necessary—to use those additional powers to make that specific order. The question still arises about what would happen in that situation, where the powers under clause 14(2)(k) have not been called into play. It seems to me that we are left with a somewhat doubtful query, where the clear superiority of the incidental order no longer automatically prevails and where that position has not been put right by some specific and special order of the court.
In that situation, amendment No. 6 comes into play and commends itself, at least to me, as a perfectly sensible idea. The House will remember that amendment No. 6 states that unless there is a registration of the incidental order
in the Register of Inhibitions and Adjudications within fourteen days",
the preference in any competition of occupancy rights will go to the third party who has purported to buy in good faith. That is sensible and clarifies the situation. Although the Minister has rejected the argument in his letter, I hope that he will be prepared to look at the matter again.
One of our difficulties—I say this with regret, but there is nothing we can do about it — is that the Bill began its journey in another place. Therefore, it is now at the end of its parliamentary passage. So often in this House we are able to say, "Ah, but the Government can take this away, think about it and put it right later." On this occasion we must put it right tonight. There is no doubt that there is great anxiety, particularly among the legal profession. That was eloquently expressed by Mr.
Graham, president of the Law Society of Scotland, who corresponded with the Secretary of State about the Bill. He said in a letter dated 16 May:
The Council is convinced that unless the Bill is radically amended in relation to certain of its provisions, it is likely to have the effect of bringing the conveyancing process in relation to domestic property to a virtual standstill.
In fairness, I ought to say that part of the Law Society's anxiety has been met by the neat demarcation which will be put into the Bill via Government amendment No. 5. Therefore, I do not suggest that the amendments I am proposing are essentially what is referred to in Mr. Graham's serious suggestion. I know from my personal contact with the Law Society that it feels strongly that my amendments will sensibly clarify the position. I hope that, even at this late stage, the Minister will be prepared to turn his mind seriously to them rather than accepting the fait accompli and saying that there is no room for further movement.
I recognise that I have spoken at some length on this matter and that I may have confused myself and the House. However, I have tried to make a serious point and to put across a genuine difficulty, as it is seen by many people who have to deal on a daily basis with our conveyancing system. I hope that the Minister will be prepared to look at what has been said, and the arguments that have been advanced.
I do not intend to follow the hon. Member for Glasgow, Garscadden (Mr. Dewar) through the maze in which he took us, although we were all impressed by his ability to steer us into it. Whether he got us out of it is another matter. I do not intend to show my ignorance of these matters. It is many years since I did conveyancing and I shall not pretend that my knowledge is sufficient to allow me to speak with expertise.
As the hon. Member for Garscadden elaborated his case, certain memories of what happened during the formulation of the Matrimonial Homes (Family Protection) (Scotland) Act 1981 came back. The notice of warning to conveyancers and their clients first emerged then. Court orders that might have an effect on the heritable property were granted. However, nothing was available to warn everybody of what might be happening. I take it that this is what the hon. Member for Garscadden has been developing in the debate on this Bill.
During the proceedings on the 1981 legislation, the Government had the opportunity to consider amendments that sought to make greater use of the register of inhibitions and adjudications, but turned down that solution on cost grounds. My readings of outpourings thereafter in various legal journals showed me that the profession was concerned that the Government, by bypassing the register, had made life more complicated. The great advantage of the register is that it gives an immediate warning of what might be happening. It is not subject to the delays that can be encountered in the register of sasines.
I was struck by what the hon. Member for Garscadden said about delays. He spoke about nine months for a return of deeds duly recorded, and suggested that that might become worse under the new land registration procedures. In the days when I practised, six months was considered to be excessive, but it takes that length of time before any property can show up on the searches. During that period, many difficulties in the transfer of the property can occur.
In view of the complexity about which we have been talking, the fact that a greater number of people own their houses than did so a few years ago and the existence of the register of inhibitions and adjudications, why have the Government not thought of making better use of that register? It could be used to give fairly speedy notice to third parties and others that a problem might emerge. The register can give a reply quickly and it does not involve the technicality of registering deeds in the register of sasines. It always seemed strange that the Government should introduce new matrimonial provisions concerning the disposal of property in the most complicated way.
If there is a simple way, we should try to follow it. Regardless of the argument powerfully deplored by the hon. Member for Garscadden — who knows his stuff, because none of us could follow it—would it not be desirable to try to make life as simple as possible? If these registers exist, they should be utilised. I do not believe that the cost would be all that great. In view of this amendment and thinking back to the 1981 Act, I recommend to the Minister that greater use should be made of those registers.
Although both amendments cover much the same ground, the hon. Member for Glasgow, Garscadden (Mr. Dewar) will appreciate that in one sense they cover rather different areas although the remedies proposed by them are similar.
The Government have sympathy with the objective of securing sufficient protection in the Bill against the disposal by the defender of property which is the subject of an order for transfer under clause 8. In the light of the representations received from the Law Society, we have considered carefully how far such additional protection is necessary or readily practicable.
It is necessary to be clear about the nature of an order for the transfer of property. As the Bill stands, this is simply a personal order against one party requiring him or her to convey that property to another party. In itself, such an order cannot affect the rights of third parties. It is only after the property has been conveyed that the transferee acquires a real right to it. Therefore, there is no need for a specific provision that the order shall not affect the rights of third parties.
The real question is whether there is sufficient provision to protect the interests of the person to whom it is proposed the property should be transferred against dealings with a third party before it is conveyed. It is my view that the existing powers available to the court under the Bill and at common law should be adequate and that it would not be justifiable to provide in addition a specific statutory requirement for the registration of orders for the transfer of property.
Given the careful way in which the hon. Member for Garscadden advanced his argument, it might be helpful if I explained these powers.
A defender who disposed of property in defiance of a court order for transfer could be punished for contempt of court. Under clause 14(2)(k), or clause 18, he could also be expressly interdicted from disposing of the property and punished for his breach of interdict. Most importantly, the transferor could be inhibited from disposing of the property. Clause 19 would enable a person applying for a transfer order, whether pursuer or defender in the divorce action, to obtain "on cause shown" warrant for inhibition on the dependence of the action, and such inhibition would remain in force until the order for transfer was implemented. If a party had not obtained inhibition on the dependence of the action, he could still obtain warrant for inhibition at common law once the order for transfer of property had been made. Thus, by using the normal machinery of inhibition, the transferee could obtain the effects sought by the amendment, namely, publication to third parties and the setting aside of adverse dealings with such parties.
Given this array of powers available to the court, both at common law and under the Bill, I am not persuaded that there is a clear need for additional protection against avoidance transactions in the form of a statutory scheme of registration. There is also the consideration that a statutory registration requirement would impose consider-able additional costs upon the Department of the Registers and would also increase the cost of searches in the register of inhibitions and adjudications and hence increase the cost of conveyancing generally. The delay in Scotland is no small consideration. To require additional work when there is sufficient remedy is undesirable. The Government's view is that it would not be justifiable to provide for the registration of orders for the transfer of property. On that basis, I ask the House to reject the amendment.
Amendment No. 6 deals with circumstances in which there is what I might, in shorthand, call an occupancy order. It is important that a person who is given the right to occupy the former matrimonial home should be able to protect that right against dealings with third parties. It is also important that third parties who acquire the right to property should not have their rights prejudiced by finding that the property is subject to a right to occupy under a court order of which they have had no opportunity to learn.
The Bill tried originally to protect the right to occupy a matrimonial home under a court order by providing that sections 6, 7 and 8 of the Matrimonial Homes (Family Protection) (Scotland) Act 1981 should apply. That would have ensured that the right to occupy would automatically prevail over the rights of third parties who acquired the right to property. The Law Society and the Department of the Registers have represented that that would impose an extremely heavy burden on conveyancers and the keepers of registers. In every transaction concerning residential property they would have to investigate whether a right to occupy under a court order existed. We have concluded that that would be difficult to justify, as there are only a limited number of cases, and other reasonable safeguards are available. On that basis, in Committee we deleted provision for including sections 6,7 and 8 of the 1981 Act.
The result of that deletion is that court orders regulating the right to occupy the matrimonial home will have effect between the parties to the marriage, but there is no question of their having effect against third parties who acquire right to property in the absence of specific provision to that effect. Thus, third parties will acquire their right to the property free of the right to occupy. They will accordingly need no notice of the protection against that right.
The question is whether the person who is given the right to occupy has the necessary protection. The hon. Member for Garscadden answered the question to some extent. The court in a divorce action could be asked in advance by a spouse to protect his or her right to occupy against adverse dealings. In addition to its common law powers and a specific power to interdict avoidance transactions under clause 18, a court has wide power under clause 14(2)(k) to make any ancillary order which is expedient to give effect to its orders.
The court could, having regard to those powers, interdict a husband from disposing of, or otherwise dealing with, the house while the right to occupy lasts. The ex-spouse would be liable to punishment for contempt of court if he or she breached such an interdict. The court could, in appropriate cases, circumvent this problem by ordering the property to be transferred into the joint names of both spouses or into the names of trustees. I refer the hon. Member for Garscadden to the power given in clause 14(2)(g). The Scottish Law Commission mentioned that possibility in its report. I am satisfied that the court has adequate powers to protect the interests of the person who is given the right to occupy.
In Committee I also stated that we would consider strengthening these powers by giving the court power to grant a warrant for inhibition in respect of property which is subject to a court order granting the right to occupy. We have given this matter serious consideration, but have come to the conclusion that it is not desirable to amend the Bill in this respect. Inhibition is a remedy normally available against a creditor in an obligation to pay money or to transfer property against the debtor in that obligation. In this type of case there is no creditor, no debtor and no such obligation. We would thus for the first time be seeking to apply inhibition in a situation where it has not been applied before. It is uncertain how it would apply in these circumstances, and to provide adequately for its application could be extremely complicated.
Another important consideration for those hon. Members who have been so concerned about this long-awaited report on diligence is that we hope it will be soon available. In these circumstances, it would be premature to extend inhibition to an entirely new area in advance of consideration of that report. The hon. Members for Dundee, East (Mr. Wilson) and for Garscadden referred somewhat tentatively to their experience of this law. I am sure that they recollect all too vividly their university lectures on the problems of future debts in such an area. It is important that on this point we should await the deliberations of the Scottish Law Commission.
My recollection of warrants for inhibition on the dependence in a consistorial action is that one had to have allegations of the dependence being either vergens ad inopiam or in meditatione fugae. Clause 19 says:
the court shall have power, on cause shown, to grant warrant for inhibition … on the dependence.
Is the Solicitor-General satisfied that the words "on cause shown" extend to causes which might be used to justify such a warrant for inhibition on the dependence beyond the narrow grounds upon which it is currently allowed by the courts?
I compliment the hon. Member for Orkney and Shetland (Mr. Wallace) on his recollection of the Latin tags that have been put on these matters and, indeed, on the warrant which he doubtless put on many summonses during his practice in the courts. I concede that the phrase "on cause shown" is potentially wider than either the prospect of vergens ad inopiam or in meditatione fugae. Nevertheless, on his more fundamental point, the application of inhibition to future debts is a matter which would be such an innovation in the law of Scotland that at this time its introduction would be undesirable.
The amendment provides that an order giving the right to occupy may be registered in the register of inhibitions and adjudications and that unless it is so registered within 14 days the order shall not affect dealings with third parties. The amendment is not necessary or appropriate, since, as I have sought to explain, under the Bill as drafted the right to occupy would not affect the dealings with third parties. There is therefore no need for a system of publication to give notice of such a right to third parties.
I should add that we have examined in considerable detail whether a system of registration of such orders is desirable. We have come to the conclusion that it is not. To provide adequately for such a system would require quite complex and detailed provision, quite out of proportion to any advantage arising from it. Such a system might also prove too rigid. It would prevent any dealings with the property, although in some cases the court might consider that dealings such as the grant of a security or the sale of surplus ground attaching to the property were reasonable. The arguments against allowing inhibition that I have mentioned would apply also to such a system if its effect were to place inhibition upon the dealings with the property.
For those reasons, which I accept are somewhat complicated and specialised in the law of Scotland, I ask the House to reject this amendment as well as the first amendment.
I do not know whether my colleagues will be satisfied with that reply. Perhaps I watch "Weekend World" too much, but I have got into the habit of recapitulating an argument to make sure that I understand it. I am tempted to do so now, but I am sure that it would show my inadequacies and I shy away from the prospect. Besides, it might try the patience of my hon. Friends.
I understand the Solicitor-General's point about the distinction between the two areas with which the amendments deal. The first is the section 8 order for the transfer of the property between spouses. If there is such an order and the spouse who is transferring decides to sell in defience of the order—one would hope that happens only rarely—he can be punished if there is an inhibition or an interdict to stop that. But assuming that there is not, and an order has been made simpliciter, if he then goes to a third party and says, "If you want a nice house, I will let you have it cheap," and the third party goes to his solicitor who proceeds to buy it in good faith, I wish to be clear about what will happen. Presumably, the sale is invalid because there is a court order. I did not understand the answer to that simple question. Perhaps the Minister will explain it.
The example that the hon. Gentleman gave shows his difficulty. If he has in mind, to adopt the bankruptcy law provisions, a confident and conjunct person, clause 18 deals with orders relating to avoidance transactions, and, in general, the position that he postulates would be covered by the clause.
However, if the court has ordered that the house should be transferred from the husband to the wife, one assumes that, in the ordinary course of events, it will be advertised and there will be an opportunity for potential purchasers to inspect the property. I was trying to explain to the hon. Gentleman that, before the order was granted, the request for inhibition would have been within the action itself. Alternatively, if, subsequent to the decree of divorce, it comes to the attention of the spouse in favour of whom the order has been made that that is what is intended, under common law he or she would have the right to request inhibition from the court. In those circumstances, the hon. Gentleman's anxiety is misplaced, because the opportun-ity, which exists now, of using the common law powers of inhibition, would be available.
I am grateful to the Minister. It may be that I am making a mountain out of a molehill. I was thinking of the unlikely circumstances in which an order is made under which the husband is bound to transfer the property to the wife, who intends to live in the ex-matrimonial home and bring up the family there. The husband, perhaps cheesed off with the hardness of his fate, may decide to live on the Costa del Sol. He may therefore say to a third party, "I am going to Spain and I want to get rid of the house in a hurry. I will sell it to you." The purchaser then goes to his solicitor and says, "I have arranged to buy the house." Binding arrangements are then entered into, and the transaction goes ahead. However, unbeknown to the purchaser, there is a court order which says that the house must be transferred to the wife.
Of course, if the wife was lucky enough, she could get her hands on the proceeds of the sale, if they were not already in Spain. However, she may not want the money; she may want to live in the house. I am simply asking the Minister what would happen then. Does the third party have a good title, or is the uncompleted order enough to defeat him in his attempts to buy?
It is always difficult to deal with incomplete examples, but it seems that the more that the hon. Member for Glasgow, Garscadden (Mr. Dewar) elaborates, the closer he gets to a situation in which the provisions of clause 18 would apply.
If it is anticipated on behalf of the pursuer spouse that the correct way to dispose of the property on divorce is a transfer of property order, it will be appropriate to seek for inhibition then. If that were not done at that stage, it would be appropriate, subsequent to the decree of divorce, to use the approach that is available under common law to seek for letters of inhibition.
I shall retreat. We shall have an opportunity to read what the Solicitor-General has said, and no doubt those with a particular interest in these matters will do so. I do not know whether they will be consoled.
I do not wish to trespass on the time of the House by dwelling on the second amendment. It is clear that, with the Bill in its present form, the incidental order would not prevail and the third party's rights would be paramount. The question would be: what redress is open to the dispossessed spouse? I am not sure whether such situations will arise. Perhaps the best course is to hope that they will not.
The Solicitor-General for Scotland has looked at the issues closely and I know that he has been pressed hard on them behind the scenes. If he is sure that registration and a register of inhibitions and adjudications would be unnecessary, I must let the matter rest there. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.