Scottish Court of Session Decisions

In or about June 1996 the pursuer became interested in acquiring for development purposes an area of ground in the vicinity of Carrick Drive, Mount Vernon, Glasgow. Enquiries made by him and on his behalf suggested that the owners might be the defenders, who held title to certain land at Mount Vernon. Ultimately missives of sale were entered into between the defenders and the pursuer. The purchase price was £10,000. In furtherance of those missives the defenders on 8 April 1997 executed a disposition in favour of the pursuer of the relative area of ground. On 23 April 1997 in exchange for the purchase price they delivered that disposition to the pursuer. It contained a warrandice clause in the terms "and we grant warrandice".

It has subsequently emerged that the defenders did not in fact own the particular area of ground bearing to be disponed by the disposition. The Keeper of the Land Register has rejected the pursuer's application for a land certificate to cover the subjects comprised in that disposition, his investigations having revealed competing titles. In this action the pursuer seeks damages from the defenders for what, though not so expressed, is in effect breach of warrandice.

The principal response by the defenders is in the form of a counterclaim by which they seek rectification of the disposition by deletion of the words "and we grant warrandice" and substitution of the words "and we grant simple warrandice only". In that counterclaim they refer to the missives and to other correspondence (also referred to as "exchanges") passing between the parties' respective solicitors prior to the delivery of the disposition. They aver:

In their defences to the principal action, in addition to relying on the counterclaim, the defenders aver:

The case was heard by me at debate. Mr Kennedy for the pursuer moved me to dismiss the counterclaim as irrelevant. He also moved me to repel the defences insofar as directed to the merits and to allow proof restricted to the quantum of damages. Mr Bowen for the defenders sought a proof before answer both in the principal action and in the counterclaim, under exclusion of two sentences (which he maintained were irrelevant) in the pursuer's answers to the counterclaim.

The missives opened with a formal offer to purchase dated 19 October 1996 addressed by the pursuer's solicitors to the defenders' solicitors. There was annexed to that offer a Schedule of Conditions certain of which, namely, those numbered 2, 3, 4, 5, 6, 7, 8, 9, 12 and 17 were, by condition 3 of the offer, declared to be incorporated in and to form part of that offer. Scheduled condition 8 provided:

There followed sub-clauses identifying various documents to be delivered or exhibited, including "clear searches in the Property Register ... [for the prescriptive period] which will not disclose anything adverse to the seller's right to grant a valid marketable title in favour of the purchaser ..." and "a valid marketable prescriptive progress of titles".

By a formal qualified acceptance dated 13 December 1996 addressed by the defenders' solicitors to the pursuer's solicitors the defenders accepted the pursuer's offer subject to certain qualifications. Qualification 5 was in the following terms:

The missives were concluded by a formal acceptance (dated 20 January 1997 from the pursuer's solicitors) of that qualified acceptance.

As the defenders also seek to rely upon earlier non-formal correspondence passing between the parties' solicitors, it is appropriate to narrate the material parts of it. The correspondence opens with a letter dated 19 July 1996 from the pursuer's solicitors who had learned that the defenders might be the proprietors of the ground in which the pursuer was interested and that a particular firm of solicitors might be their agents. The letter dated 19 July enquired whether a title could be produced to confirm the defenders' ownership. The defenders' solicitors responded by letter dated 25 July confirming their agency but explaining that, while their clients owned heritable property in the area "our clients' Title is such that it would be almost impossible to pinpoint exactly our clients' areas of ownership ...". They continued that they were seeking instructions from their clients and invited the pursuer's solicitors to let them have his proposals for consideration. By a letter dated 31 July the pursuer's solicitors enquired whether it would be possible for the defenders' solicitors to instruct (ie. apply for) a "Form 10 Report" (a preregistration report from the Keeper as to the state of the title). The defenders' solicitors responded by a letter dated 4 August observing that until they received instructions to proceed they were not keen to incur expense but could see no reason for the pursuer's solicitors not to instruct the appropriate Report. They continued:

On 12 August the pursuer's solicitors wrote to the defenders' solicitors enclosing a Form 10 Report which they had obtained from the Keeper. Its terms had confirmed the pursuer's solicitors' belief that the defenders were the owners of the area of ground in which the pursuer was interested. On 27 August the defenders' solicitors responded stating:

(In the correspondence and in the subsequent missives the area of ground was referred to as at Kenmure Avenue while the disposition ultimately granted described the ground as ""lying generally to the southwest of Carrick Drive", a street adjacent to Kenmure Avenue; but nothing material turns, in my view, on that variance). Correspondence then followed in which an informal proposal was made on behalf of the pursuer which the defenders indicated would be acceptable. There was some correspondence about the exact boundaries of the subjects. However, none of the correspondence passing after 27 August touched on the question of the defenders' right and title to the subjects of proposed sale, other than that on 30 December the defenders' solicitors, in response to a request by the pursuer's solicitors to inspect the defenders' title, sent to the pursuer's solicitors "a copy of our clients' principal title". That copy title was a copy of a Notice of Title of 1966 relative to "ALL and WHOLE the lands and estate of Drumpellier, Mount Vernon and Others" under exception of certain lands earlier sold or excambed. No specific reference was made in that deed to the area of ground referred to in the missives. Subsequent enquiries by the Keeper have now disclosed that that area had, in various parcels and at various times prior to 1996, been conveyed to third parties by the defenders or their predecessors in title.

Certain matters are not in dispute. The warrandice granted in terms of the disposition was unqualified and so implied absolute warrandice as regards the lands (Titles to Land Consolidation (Scotland) Act 1868, Section 8). Accordingly, unless the defenders have a relevant case for rectification of the disposition in that respect or have on some other ground relevantly averred that the pursuer is not entitled to rely on the warrandice contained in the disposition, they have no answer to the merits of the pursuer's claim.

The defenders seek, in respect of the warrandice clause, the remedy of rectification provided by Section 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 which, insofar as material, provides:

Mr Bowen submitted that the disposition was a document intended to give effect to an agreement between the parties and that it had failed, in so far as concerned the warrandice clause, to express accurately the common intention of the parties to the agreement at the date when it was made. The defenders, he stated, did not require to seek rectification of the missives because the agreement they relied on was to be found in the correspondence which preceded them and in the actings of the parties in their formation, particular reliance in the latter regard being placed on the accepted deletion in the course of negotiation of the missives of condition 8 of the scheduled conditions. The test to be satisfied was that identified by Lord McCluskey in McClymont v McCubbin 1995 S.L.T. 1248 at p.1252C-F. It was necessary in this case to go behind the disposition and to discover the real facts; the missives might be important evidence but they were not the whole competent evidence (Anderson v Lambie 1954 SC (HL) 43, per Lord Reid at p.62). Lord Reid's observations, though made in the context of an action of reduction, were applicable also to rectification (Aberdeen Rubber Ltd v Knowles & Sons (Fruiterers) Ltd 1994 S.C. 440). Reference was also made to George Thompson Services Ltd v Moore 1993 S.L.T. 634. If the whole circumstances were regarded, the proper inference was that the parties had agreed that the defenders were not guaranteeing that they had a good title to the subjects of sale. An agreement to that effect was not inconsistent with the missives and was not superseded by them. The effect was that a term which might in other circumstances be implied in missives, namely, that the seller was warranting his title to the subjects of sale, was not, against the actings of the parties in this case, properly to be implied.

The general rule is that there is implied in missives for the sale of heritage a term to the effect that the seller warrants that he owns the property and is in a position to confer ownership on the purchaser. In McDonald - Conveyancing Manual (3^rd ed.) at p.253 it is put thus:

Reference may also be made to Stair Encyclopaedia, Vol.18, paras. 701-3 and 708 and Gretton & Reid - Conveyancing at pp.52, 91-2 and 94-6. In discussing at pp.254-5 the ways in which the obligation as to marketable title may be varied or qualified, Professor McDonald, referring to the "tantum et tale" clause, states:

These quotations are from the third edition of Professor McDonald's work (cited by Mr Kennedy); for equivalent statements in the current (sixth) edition, see pp.380-2 thereof.

The type of contractual provision referred to by Professor Burns (a style of which is given in Burns - Conveyancing Practice (4^th ed.) at pp.192-3) involves comprehensive exclusions in respect of the existence and validity of the seller's title. It is unnecessary in this case to decide whether Professor McDonald's doubt as to the efficacy of such provision is well founded. Mr Bowen did not argue that the terms of the second and third paragraphs of qualification 5 of the defenders' qualified acceptance of 13 December 1996 were themselves sufficient to exclude contractually an implied warranty that the defenders owned the subjects of sale. Those paragraphs are no more limiting, and arguably less limiting, so far as concerns the seller's obligations than the tantum et tale clause discussed in Carter v Lornie (1890) 18 R. 353. In that case Lord Adam stated at p.360:

The other judges, with a qualification immaterial for present purposes, agreed with Lord Adam.

Accordingly, if the defenders are to found a relevant case that the parties agreed that the defenders were not warranting that they owned the area of ground, they must base it on something other than an express exclusion to that effect in the missives. I assume, without deciding, that something short of an express exclusion could validly constitute such a basis. The defenders rely essentially on two elements - - (1) the terms of the prior correspondence and (2) the fact that in negotiating the missives the defenders deleted scheduled condition 8 and the pursuer accepted such deletion.

In relation to element (1), although Mr Bowen referred in the course of his submissions to section 8(2) of the 1985 Act and his motion was for a proof before answer, I did not understand him to suggest that in the circumstances of this case oral testimony could usefully add to or explain the correspondence; the defenders have indeed no averments on this aspect other than a reference to the written correspondence. Accordingly, conclusions can appropriately be drawn from the terms of those written communings. In my view, the correspondence reveals no more than, first, that it was known that the title which the defenders held to land at Mount Vernon was a general estate title which neither specifically included nor specifically excluded the area of ground which the pursuer was interested in purchasing and, secondly, that the pursuer's solicitors believed, and that the defenders themselves may also have come to believe, that that title embraced as at 1996 that area of ground. That belief was engendered or fortified by the terms of the Report which had been received from the Keeper. The existence of such knowledge and belief went, however, no way, in my view, towards an agreement or even a common understanding that the defenders would, if they contracted to sell the ground for a consideration, be relieved of the obligation, otherwise incumbent on them, of warranty of good title. The position may be contrasted with that discussed in McClymont v McCubbin where it appears that an important matter (the location of the new boundary) was not included in the missives (per Lord McCluskey at p.1253 D-H); in these circumstances the prior informal agreement relative to the boundary was part of "the real facts", as were the pre-missives communings as to the extent of the subjects of sale in Anderson v Lambie. In the present case "the real facts" do not, in my view, assist the defenders.

In relation to element (2), when the missives came to be negotiated, a conventional express provision of good and marketable title proposed by the pursuer was deleted by the defenders and qualification 5 of their qualified acceptance was in effect substituted; the pursuer's acceptance of 20 January 1997 had the effect of accepting both the deletion and the substitution. I have serious doubts about the admissibility for present purposes of reference to what happened by way of negotiation of the missives. Mr Bowen's submission, although it took a number of forms, came in substance to be that, against the circumstances upon which he relied, the missives properly interpreted did not include an implied warranty of good title. In these circumstances he found it unnecessary to seek rectification of the missives. There is high authority to the effect that for the purposes of interpretation of a contract it is not legitimate to refer to deleted terms (Inglis v Buttery & Co (1878) 5 R. (H.L.) 87); there may be an exception where the matter deleted is in a standard form prepared by a third party (Taylor v John Lewis Ltd 1927 S.C. 891) but that specialty does not arise here. However, even on the assumption that regard may be had to the fact and terms of the deletion, that does not, in my view, assist the defenders. There was in effect substituted for scheduled condition 8 the terms of qualification 5 of the qualified acceptance. As earlier noted, it was not argued that these terms were in themselves wide enough to exclude a warranty that the defenders owned the subjects of sale. There is, in my view, no incompatibility between those express terms and the implication by law of a term that the defenders warranted their ownership.

In these circumstances there would, as in Aberdeen Rubber Ltd v Knowles & Sons (Fruiterers) Ltd, be no purpose to be served by an inquiry. The defenders' averments in support of their counterclaim are, in my view, irrelevant and the counterclaim falls to be dismissed.

I should add that Mr Kennedy submitted that, in the event of the court finding there to be any ambiguity in the missives as to whether warranty of title was to be implied, that ambiguity fell to be resolved in the pursuer's favour by the terms in which the defenders had granted the disposition. He cited Turner v Macmillan-Douglas 1989 S.L.T. 293 where Lord Cowie, relying on a statement in Gloag on Contract (2^nd ed.) at pp.376-7, held at p.295 that in the construction of a written contract it was competent to prove intention by reference to a subsequent writ of the opposing party. It appears from a brief report of the case that Lord Marnoch may have adopted a similar approach in Hall v McWilliam [1993] G.W.D. 23-1457. However, the principal authority cited by Professor Gloag for his statement is Stewart v Clark (1871) 9 Macph. 616, which seems hardly to support it. I have not found it necessary for the purposes of this case to rely on that line (which may be difficult to reconcile with other authority) and I reserve my opinion on it.

In their defences to the principal action the defenders plead not only their counterclaim but personal bar. Averment in support of the latter is restricted to the single sentence earlier quoted. Mr Bowen in support of this defence cited the well known description of personal bar given by Lord Birkenhead, L.C. in Gatty v Maclaine 1921 S.C. (H.L.) 1 at p.7. Mr Kennedy submitted that the quoted sentence was wholly lacking in necessary specification to support a relevant case of personal bar. I accept Mr Kennedy's submission on this matter. There is nothing in the correspondence to support the proposition that, at the time when the transaction (whether the missives or the disposition) was entered into, the pursuer knew that the defenders were unable to provide a good title in the material sense, namely, that they did not have ownership of the ground. Nor is there anything in that correspondence to suggest that the price agreed on reflected, to the knowledge of the pursuer, any such state of affairs. The defenders do not offer to prove any facts and circumstances other than the correspondence in support of the quoted sentence. While a bargain on the basis that both parties knew that the purported seller was not the owner of the subjects (so that any disposition by the latter would inevitably be one granted a non domino) is conceivable, there is no relevant basis averred for any such arrangement here. Moreover, while the 1966 Notice of Title was a general estate title, there is nothing in the correspondence or on averment to support even the proposition that, to the pursuer's knowledge, there was serious doubt about the defenders' title and that the price reflected that doubt. In these circumstances there is no relevant material against which the requirements of personal bar can begin to be considered. I shall accordingly repel the defences insofar as so based.

Mr Bowen in a short submission challenged the relevancy of two sentences in the pursuer's answers to the counterclaim. In view of my decision on the counterclaim, it is unnecessary to discuss this challenge.

In the whole circumstances I shall sustain the pursuer's first plea-in-law in the answers to the counterclaim and dismiss the counterclaim. In the principal action I shall sustain the pursuer's first plea-in-law to the effect of repelling the defenders' fourth and fifth pleas-in-law and allowing a proof before answer restricted to quantum of damages. The case will be put out By Order for discussion of further procedure.