Scottish Court of Session Decisions

The Titles to Land Consolidation (Scotland) Act 1868 (31 and 32 Vict. c. 101), sec. 119, as re-enacted by section 7 of the amending Act of 1869 (32 and 33 Vict. cap. 116), gives the import of the clauses in a bond and disposition in security in the form in the schedule to the Act; and it provides that the clause giving power of sale shall import that on the failure of the borrower to make payment it shall be in the power of the bondholder, after the requisite procedure, “to sell and dispose, in whole or in lots, of the said lands and others … and for that end to enter into articles of roup, to grant dispositions containing all usual and necessary clauses, and in particular a clause binding the grantor of the said bond and disposition in security in absolute warrandice of such dispositions, and obliging him to corroborate and confirm the same, and to grant all other deeds and securities requisite and necessary by the laws of Scotland for rendering such sale or sales effectual, in the same manner and as amply in every respect as the grantor could do himself, and as if it had been thereby further provided and declared that the said proceedings should all be valid and effectual, whether the debtor in the said bond and disposition in security for the time should be of full age or in pupilarity or minority, or although he should be subject to any legal incapacity, and that such sale or sales should be equally good to the purchaser or purchasers as if the grantor himself had made them …; and as if the grantor had bound and obliged himself to ratify, approve of, and confirm any sale or sales that should be made in consequence thereof, and to grant absolute and irredeemable dispositions of the lands and others so to be sold to the purchaser, and to execute and deliver all other deeds and writings necessary for rendering their rights complete.”

Two cases dealing with the same subject-matter, viz., the liability for feu-duty of one of two lots of property, the two lots having been created by a bondholder out of a subject (undivided so far as the original feu-charter was concerned) disponed to him in a bond and disposition in security, were taken and decided together by the Court. The leading case, though not the earlier, was Johnston v. The Standard Property Investment Company, and the earlier case, Weatherhead v. Johnston. For a narrative of the facts out of which the cases arose see the first portion of the Lord President's opinion, infra.

I. Weatherhead v. Johnston—In October 1907 David Weatherhead, house factor, Edinburgh, raised an action in the Sheriff Court at Edinburgh against Charles Johnston, tea merchant, Edinburgh, in which he sought decree for £42, 19s. 6d. Pursuer averred that that sum was the just proportion of the feu-duty from Martinmas 1904 to Whitsunday 1907 effeiring to a certain piece of ground purchased by Johnston, being one out of two lots put up for sale by the Standard Property Investment Company, Limited, in virtue of a bond and disposition in their favour, and that he (Weatherhead) as owner of the other lot had paid the said sum to avoid an irritancy of the feu.

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The disposition from the Standard Property Investment Company, Limited, to Johnston contained this clause—“Declaring that the said subjects hereby disponed shall not be liable for payment of any part or portion of the feu-duty created by the foresaid feu charter first above mentioned, but the same shall be payable from the tenement adjoining erected on the stance at the corner of Albion Road and Easter Road, and in the event of our said disponees or his successors in said subjects being called on or having to pay the said feu-duty at any time hereafter, they shall have right of relief against the proprietor for the time being of the said adjoining tenement and the said tenement itself: With entry at Whitsunday 1901: And we assign the writs conform to inventory thereof annexed and subscribed by us as relative hereto, but in respect the same relate to other subjects of greater value than those hereby disponed, the same are not delivered, but we hereby bind ourselves to make the same forth coming to our said disponees and their foresaids on all necessary occasions upon a receipt and obligation to re-deliver the same within a reasonable time, and under a suitable penalty; and we hereby bind ourselves to take the party or parties to whom the same or any of them may he ultimately delivered, hound in a like manner and under a like penalty: And we assign to our said disponees all right competent to us to demand delivery of the prior writs: And we assign the feu and blench duties and casualties of superiority or duplicands of the feu-duties of the area or piece of ground second above described: And we also assign the rents of the dominium utile of the whole subjects hereby disponed: And we bind ourselves to free and relieve our said disponees and their foresaids of all feu-duties, casualties, and public burdens: And we bind ourselves and our successors in the remaining portion of the subjects first above described to allocate or apportion, in the disposition to be granted by us or our successors to the purchasers of the said remaining portion, the whole feu-duty of £37 and corresponding duplicands payable under said feu charter.”

The defender pleaded, inter alia—“(3) In the circumstances set forth the defender's liability for the feu-duties sued for having been judicially negatived in proceedings which are res judicata in a question with the present pursuer, the defender should be assoilzied, with expenses. (4) The pursuer's averments being irrelevant to support the prayer of the petition the action should be dismissed, with expenses.”

On 18th December 1907 the Sheriff-Substitute ( Gardner Millar) sustained the fourth plea-in-law for the defender.

The pursuer appealed.

II. Johnston v. The Standard Property Investment Company, Limited—On 29th January 1908 Charles Johnston raised an action against (1) the Standard Property Investment Company, Limited; (2) James Campbell Irons, S.S.C.; and (3) David Weatherhead, in which he sought declarator (1) of the contents of the articles and conditions of roup under which he had purchased his lot, and in particular that the lot was advertised as free of feu-duty; (2) of the contents of the disposition of said lot; (3) that the whole of the feu-duty, viz., £37, payable on the whole ground under the original feu-charter, formed a real burden upon the other lot; and (4) that the various defenders “are bound each in any disposition to he granted by them or him respectively to any purchaser, or singular successor of them or him in the said subjects hereinbefore described as forming Nos. 190, 192, and 194 Easter Road, and Nos. 1, 3, 5, and 7 Albion Road, Edinburgh, or of the ground on which said tenements are erected, or in any such disposition of said subjects to which they or he may be a party, to allocate or apportion in such disposition the whole of the said feu-duty of £37 sterling and corresponding duplications payable under the said feu-charter, in such manner that the whole of said feu-duty and duplications shall be allocated upon and payable out of and made a real burden upon the said subjects last mentioned, and that to the effect of freeing and relieving the subjects hereinbefore described as belonging to the pursuer from any liability, as in a question with the owners for the time being of the subjects upon which the said feu-duty and others fall to be allocated, for payment of any portion thereof.” [In the action as originally laid, in the event of it, appearing that Weatherhead, in respect of being a singular successor, was not bound to insert clauses to the effect aforesaid, and that the other defenders were unable to procure their insertion, damages were sought against the other defenders jointly and severally, or otherwise against the Standard Property Investment Company, Limited.]

On 17th July 1908 the Lord Ordinary ( Dundas) found it unnecessary to dispose of the first and second conclusions of the summons, dismissed the same, and decerned: Found with regard to the third conclusion that the whole feu-duty of £37 did not form a real burden upon the subjects and others upon which had been erected that corner tenement of shops and dwelling-houses forming Nos. 190, 192, and 194 Easter Road, and Nos. 1, 3, 5, and 7 Albion Road, Edinburgh, described in said third conclusion of the summons, and dismissed the said conclusion and decerned: Found and declared and decerned in terms of the fourth conclusion of the summons and relative conclusion thereof for decerniture against the defenders James Campbell Irons and David Weatherhead, but dismissed it so far as regarded the Standard Property Investment Company, Limited; and also dismissed the conclusions for damages.

Opinion.—“The pursuer is proprietor of some tenement property in Albion Road, Edinburgh, which he purchased in 1901 from the defenders the Standard Property Investment Company, Limited. The company sold the subjects under the power of sale conferred upon them by a bond of cash

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credit and disposition in security in their favour, which, though it was in fact granted by one Slater, was treated in the argument as having been for the purposes of this case truly granted by the defender Mr Irons, for whose behoof Slater admittedly held the property. At and prior to the date of this sale Mr Irons (or Slater on his behalf) was vested in the radical right of the said subjects, and also of certain adjoining property in Easter Road and Albion Road, which was included in the security subjects conveyed by the bond. The title to the last-mentioned subjects is now in the defender Mr Weatherhead, conform to disposition by Mr Irons in his favour; but it is conceded that the case must be decided as if Mr Irons himself still stood vested in them. The said bond was granted in April 1899 in security of an advance by the Standard Company not exceeding £11,000. About January 1900 Mr Irons became bankrupt and his estates were sequestrated. The company accordingly proceeded to call up their bond by the necessary forms of notarial intimation, requisition, and protest, and advertised the security subjects for sale. The subjects were burdened with a cumulo feu-duty of £37. The advertisement bore that they would be sold by public roup in two specified lots, the first of which was stated to be under burden of a feu-duty of £37, while of the second it was announced ‘there is no feu-duty.’ The articles of roup contained, inter alia, clause ( septimo), which provides that lot 1 was to be sold subject to a feu-duty of £37, but that the exposers were not to be bound to obtain any allocation from the superiors. The security subjects were exposed for sale, when the company failed to sell lot 1, but lot 2 was purchased by the pursuer, and the price applied by the company in reduction pro tanto of the debt due to them by Mr Irons under the bond. The disposition of lot 2 by the company to the pursuer, dated 15th and recorded 16th May 1901, contained, inter alia, a declaration to the effect that the subjects disponed should not be liable for payment of any part of the feu-duty created by the feu charter of 1899 therein referred to, but the same should be payable from the tenement adjoining, i.e., lot 1, and that in the event of the disponee or his successors in lot 2 being called on or having to pay the said feu-duty at any time thereafter, they should have right of relief against the proprietor for the time being of lot 1 and the tenement itself. The dis-poners assigned the writs conform to inventory annexed, and bound themselves to make the same forthcoming to the disponee and his successors on all necessary occasions; and they bound themselves and their successors in lot 1 to allocate or apportion in the disposition to be granted by them or their successor to the purchaser thereof the whole feu-duty of £37. The Standard Company, so long as they remained in possession of lot 1, paid the whole feu-duty to the superior. In 1902 Mr Irons came to an arrangement with his creditors which, inter alia, provided that he should be reinvested in the unrealised portion of his estate. He obtained from the trustee in Slater's sequestration a conveyance of, inter alia, the subjects contained in the said cash-credit bond and disposition in security, excepting therefrom such parts as the company might have sold in virtue of their powers of sale. Mr Irons paid the company the balance of his debt and received from them a discharge dated 23rd April 1904, by which they declared, inter alia, lot 1 to be redeemed and disburdened of the said bond and in-feftment following thereon. In 1905 Mr Irons brought a petitory action in this Court against the present pursuer for payment of a sum said to represent the proportion effeiring to lot 2 of the feu-duty which Mr Irons had had to pay the superiors. On 21st November 1905 I dismissed the action, holding that Mr Irons had no title to sue, and finding it unnecessary to decide whether, as his counsel argued, the imposition of the whole feu-duty upon lot 1 was ultra vires of the Standard Company. I refer to the opinion I delivered when pronouncing my interlocutor, which has long since become final.

“The present action was raised on 29th. January 1908 by Mr Johnston, the disponee of lot 2, against the Standard Company, Mr Irons, and Mr Weatherhead. The summons is bulky, but its gist may be summarised as follows—The first two declaratory conclusions are, I think, really ancillary to the succeeding ones and need not be separately considered. The third conclusion asks for declarator that the whole feu-duty of £37 is payable out of and forms a real burden upon lot 1. The fourth conclusion is alternative to the third, and craves declarator that the defenders are bound each in any disposition to be granted by them or him respectively to any purchaser or singular successor in lot 1 to allocate or apportion in such disposition the whole feu-duty of £37 in such manner that it shall be allocated upon and payable out of and made a real burden upon lot 1, so as to free and relieve lot 2 from any liability in respect thereof, and also to take their or his disponees bound to make the writs enumerated in the inventory annexed to the disposition of lot 2 by the Standard Company to the pursuer forthcoming to him and his foresaids on all necessary occasions; and a conclusion for decerniture follows. There are also two conclusions for damages, but the first of these was given up at the debate in consequence of the admission that Mr Weatherhead is not truly a singular successor of Mr Irons, and the second, directed against the Standard Company alone, appears to me to be irrelevant.

As already observed, I think the first and second conclusions may be dismissed, in respect it is not necessary to dispose of them specifically. The third conclusion in my judgment fails. I do not think that, as matters stand, the whole feu-duty is a real burden on lot 1 in a question with the proprietor of lot 2. The disposition of lot 2 to the pursuer does not effect that result; and there is nothing in the titles of lot 1 that can do so. The fourth conclusion

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raises a point of more difficulty. At the root of it lies the question, which was argued but not decided in the action by Mr Irons against the present pursuer, whether or not it was ultra vires of the Standard Company to allocate the whole feu-duty upon lot 1, as in a question between the owners of the two lots. I formerly indicated an impression to a negative effect, and further argument confirms me in that view. The property embraced in the bond being subject to a cumulo feu-duty, and the bondholders having statutory power to sell in lots, it seems to me to follow, as a matter of practical necessity from an ordinary business point of view, that the sellers must have some power to allocate the shares in which the lots should bear the burden inter se. I know of no legal principle or authority to bind the bondholder in making such allocation to have regard to the proportionate areas or values of the lots respectively; and I see nothing to prevent him from making the allocation as he thinks best with a view to good marketing of the security subject. Of course, if he proposed to allocate in a capricious or unbusinesslike manner, the granter of the bond could apply for interdict; but nothing of that sort is suggested in the present case. If, then, the Standard Company had followed up their disposition of lot 2 to the pursuer by disponing to someone else lot 1 burdened with the whole feu-duty, as contemplated by the articles of roup, I think the two transactions would have been intra vires and effectual. If I am right in so thinking, I cannot regard the first of them, standing by itself, as ultra vires. In my opinion, the declaration in the pursuer's disposition, though ineffectual to constitute the whole feu-duty a real burden on lot 1, was quite a competent term of the contract of sale between the Standard Company and him. The obligation undertaken by the company never actually came into play, for there has been no subsequent sale or purchase of lot 1. If they had sold that lot to a third party, and omitted to allocate the whole feu-duty upon it, a different position would have arisen, and they might well have been liable in damages for their failure to do so. But Mr Irons is really still in possession of lot 1,—for Mr Weatherhead is not a singular successor,—and he is, in my judgment, bound by the contract of sale by the bondholders to the pursuer of lot 2, and to grant any other deeds or writings necessary to render the latter's rights complete. The concluding words of section 119 of the Titles to Land Consolidation (Scotland) Act, 1868, as reenacted by section 7 of the amending Act of 1869, seem to me to be in terms applicable to the present case. The obligation thus, in my view, imposed upon Slater, the actual granter of the bond, passed to his trustee in bankruptcy, and from him to Mr Irons. The result is that the pursuer is, in my opinion, entitled to decree substantially in terms of the fourth declaratory conclusion of the summons and the relative conclusion for decerniture against Mr Irons and Mr Weatherhead, but not against the Standard Company, who are by force of circumstances unable to grant further writings or to deliver writs as craved. The conclusions for damages will be dismissed.”

James Campbell Irons reclaimed.

Both Cases—Argued for Irons and Weatherhead—A bondholder who was selling the subjects bonded could only sell them as they were, whether he sold them as a whole or in lots. He had no authority to create new burdens or to arrange the imposition of existing burdens between the parts, if sold in lots, even so as to be binding on the lots or the owners of the lots inter se. His mandate, if mandate it could be called, was peculiar, in that it followed the bond through the hands of successive holders and was limited to a power of selling the security subjects. The obligation in section 119 of the 1868 Act on the proprietor to “grant all other deeds … necessary for rendering such sale effectual” did not here help the purchaser, for it presupposed that the sale was of the subjects as existing. (2) As to the argument that the proprietor not having objected to the conditions of the sale and having benefited thereby must abide by them: If the purchaser thought the selling bondholder had power to allocate a burden and was by the disposition allocating or burdening, and in consequence paid an enhanced price, that was his own fault. At most the bondholders bound themselves to “allocate” amongst themselves only.

Argued for Charles Johnston—The seller under a bond was really a mandatary of the owner and sold as his agent, the power to sell being of the nature of a commission from the debtor, Juridical Styles, vol. i, 1826 edition, p. 309–310. The only ground on which an owner could interdict a sale, not ultra vires, was where the sale was being carried out in such a way that the security subjects would sell for too low a price— Howard & Wyndham v. Richmond's Trustees, June 20, 1890, 17 R. 990, 27 S.L.R. 800—but otherwise the bondholders had the same power of sale as the proprietor, who was bound to grant all deeds necessary for rendering the sale effectual. The sale here was not ultra vires. The rights of bondholders were regulated by sections 119 and 121 of the Titles to Land Consolidation Act 1868, and were considered in Nicholson's Trustees v. M'Laughlin, November 4, 1891, 19 R. 49, 29 S.L.R. 68 (Lord M'Laren's opinion). They had the power to sell in lots, and this necessarily involved the power to allocate, not in its strict sense as binding the superior, but as amongst the purchasers inter se. Forms applicable to such allocations were to be found in Burns, Conveyancing Practice, p. 250, 251, 253. (2) Assuming that the allocation was not binding on the owner, he should have interdicted the sale if he repudiated its conditions which were intimated to him, but while the disposition stood and he retained the benefit of the enhanced price paid because of the supposed freedom from feu-duty he could not repudiate the allocation. (3) In any case

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as regards the appeal the matter was res judicata, as the dismissal of the first action by Lord Dundas sustaining the plea of no title to sue was really an absolvitor.

Counsel for the Standard Property Investment Company, Limited, intimated that as the conclusions for damages against these defenders had been withdrawn they were merely watching the case.

At advising—