Scottish Court of Session Decisions

[1] This appeal and another relating to a different property in Aberdeen (which was heard immediately afterwards) raise a question of interpretation of regulation 4 of the Council Tax (Alteration of Lists and Appeals) (Scotland) Regulations 1993 (S.I. 1993 No. 355). The relevant facts may be stated shortly.

[2] By disposition dated 14 and recorded in the Division of the General Register of Sasines for the County of Aberdeen on 16 November 1990 the executors of the late Mrs Helen Macdonald conveyed to her sons Gordon John Macdonald and Colin Bonnar Macdonald heritable subjects at 59 Braeside Avenue, Aberdeen. The dispositive clause was in the terms -

The subjects are a "dwelling" within the meaning of section 72(2) of the Local Government Finance Act 1992, Part II of which introduced council tax to Scotland.

[3] On 11 June 1998 these disponees executed a disposition of the subjects in the following terms -

A Land Certificate was subsequently issued under section 5(2) of the Land Registration (Scotland) Act 1979.

[4] The context in which that disposition was granted was that Mr Colin Macdonald had become engaged to be married to Miss Carr and the dwelling at 59 Braeside Avenue was to become their matrimonial home. It was agreed with Mr Gordon Macdonald that his interest in the subjects would be acquired for a consideration of £35,000. That consideration may also have included an obligation to take over Mr Gordon Macdonald's responsibilities in respect of a heritable debt. The consideration was paid to Mr Gordon Macdonald either by Miss Carr or by her and Mr Colin Macdonald together.

[5] Immediately prior to these events in 1998 the dwelling had been shown in band E in the valuation list maintained by the Assessor. Following those events the Assessor altered the list so as to show the dwelling in band F. An appeal against that alteration was taken by Mr Colin Macdonald to the Aberdeen City Valuation Committee which allowed the appeal and restored the dwelling to band E. The Assessor has appealed to this court against that determination.

[6] The 1993 Regulations were made by the Secretary of State under powers conferred by section 87 of the 1992 Act. Section 87, insofar as material, is in the following terms -

[7] Regulation 4(1) provides -

The Regulations do not repeat the definitions found in the Act, the relative expressions having the same meaning as they bear in the Act (Interpretation Act 1978, section 11).

[8] Section 72(2) of the Act provides that in Part II "dwelling" -

Section 73(1) excludes wholly residential subjects from the valuation roll as from the financial year 1993-94.

[9] It is not disputed that since valuation band E was first shown in the list applicable to the dwelling at 59 Braeside Avenue there has (as a result of an extension to it) been a material increase in its value. Nor is it disputed that, if an alteration to the banding may properly be made, the appropriate band is band F. What is in issue is whether, since valuation band E was first shown as applicable, "[the dwelling], or any part of it, has subsequently been sold". Only if that is so, was the Assessor entitled to alter the banding.

[10] Mr Anderson for the Assessor submitted that what in law had occurred was that the dwelling had been transferred in property from Mr Gordon Macdonald and Mr Colin Macdonald as pro indiviso proprietors to Mr Colin Macdonald and Miss Carr as pro indiviso proprietors and that such transfer had been effected for a price. In these circumstances, he argued, the dwelling had been sold within the meaning of regulation 4(1)(a)(i). It was as a matter of fact and law wrong for the Committee to describe, as it had, the transaction as being that "the new Mrs Macdonald purchased from Mr Macdonald's brother the brother's one-half pro indiviso share in the house for £35,000". The defining characteristic of pro indiviso ownership was that a single thing was held by two or more people as an undivided whole and without particular physical parts of the thing being individually attributed (Stair Memorial Encyclopaedia Vol. 18, para. 17; reference was also made to paras. 20 and 22). Thus, before the transaction Gordon Macdonald and Colin Macdonald each had an equal interest in the whole undivided dwelling; after the transaction Colin Macdonald and Miss Carr each had an equal interest in the same. The common proprietors of the dwelling before and after were different. The transaction had been effected for a price. Although it was not what had occurred in this case, the same legal analysis would apply if there had been a disposition for a price by Mr Gordon Macdonald of his one-half pro indiviso interest to Miss Carr. It was not necessary in the present case to address (as the Committee had) what was meant by "any part of (the dwelling)". But, even if it was, the Committee was in error in concluding that "any part" was restricted to any physical part of the dwelling. Where "part" was used in the parenthesis in each of the definitions of "material increase" and "material reduction" in section 87(1), it related to the increase or reduction being partially caused by particular events. The reference to "any part" in the phrase "demolition of any part of the dwelling" clearly related to a physical part but that did not assist in the interpretation of "any part of (the dwelling)" in section 87(4) or in regulation 4(1)(a)(i). The appeal should be allowed.

[11] Mr Colin Macdonald, who appeared on his own behalf, accepted that there had been a sale but, he argued, only of the share of the property hitherto owned by his brother. There had been no sale of the share held by himself, which he had not disposed of nor received any consideration for. Where heritable property was held pro indiviso each proprietor was entitled to dispose of his own share. The form of the narrative in the present disposition was consistent with consideration having been given only for the half share held by Gordon Macdonald (Gretton and Reid - Conveyancing (First Edition) p. 170). This was what had in fact happened, as the Committee had found. No person could enter a contract with himself (Clydesdale Bank v Davidson 1998 S.C. (H.L.) 51, per Lord Clyde at p. 58). The form of conveyance had been adopted in order to ensure that the special destination to the survivor in the prior disposition was duly evacuated. It was material to distinguish between a sale on the one hand and a transfer of property on the other (reference was made to the Stair Memorial Encyclopaedia Vol. 18, para. 640). There could not be a sale "of (the dwelling)" within the meaning of regulation 4(1)(a)(i) unless both half shares were disposed of for value. Insofar as concerned "or part of it" in regulation 4(1)(a)(i), the Committee's approach (namely, that this referred to a physical part) was correct.

[12] It is clear that Parliament in enacting section 87(4) of the Act envisaged that regulations made under it would restrict in particular ways the circumstances in which alterations might be made to the banding of a dwelling once entered in the valuation list. The regulations subsequently made imposed such restrictions. In particular, a material increase in the value of a dwelling would not of itself warrant the application of a higher band; in addition, the dwelling or a part of it had, subsequent to the initial listing, to have been sold. The word "dwelling", in its ordinary sense and as defined in section 72(2), suggests, primarily at least, a physical subject. "The dwelling" suggests the whole of the physical subject and "any part of it" any part of that physical subject. Where a physical subject is "sold" it is no doubt in a sense the substantive proprietorial rights in that corporeal property which are the subject of that sale but where the physical subject is described as sold, that will involve, at least ordinarily, the sale of the whole substantive proprietorial rights in that subject. Specialties might no doubt arise where the subject is sold under reservation of certain rights; but no such specialty arises here. Scots law recognises the concept of common property under which more than one person can contemporaneously hold proprietorial rights in a single item of property, including heritable property. The item is owned pro indiviso (undivided) so that no particular physical parts of it are attributed to any of the common proprietors. Each co-owner has, however, a severable proprietorial share which, at least at common law, he may dispose of inter vivos as he chooses. The sale of such a share would not, in any ordinary sense, be considered a sale of the property itself or indeed of any part of it; it would be considered a sale of that share in the property.

[13] In the present case the item of property is a dwelling, as defined. That item would not, on a sound construction of section 87(4) or of regulation 4(1)(a)(i), in my view properly be described as "sold" if all that had happened was that one of the co-proprietors had for a price disposed of his own pro indiviso share. Thus, if the conveyance in the present case had taken the form of a disposition by Mr Gordon Macdonald to Miss Carr of the former's half pro indiviso share in the dwelling, then notwithstanding that the pair as such of common proprietors prior to the transaction was different from the pair as such afterwards, that would not, in my view, have constituted a sale of the dwelling within the meaning of those statutory provisions. In the event the conveyance in this case took a different form, namely, a conveyance by Mr Gordon Macdonald and Mr Colin Macdonald to Mr Colin Macdonald and Miss Carr. That was no doubt to avoid the well recognised trap in relation to special destinations of survivorship warned against in Gretton and Reid - Conveyancing (Second Edition) at para. 26.14. But, apart from the evacuation of that destination, the legal effect was in substance the same, namely, Mr Colin Macdonald retained a one-half pro indiviso share and Mr Gordon Macdonald transferred his one-half pro indiviso share to Miss Carr. The description in the disposition of the consideration passing is wholly consistent (as are the established facts) with it being in respect solely of the interest passing from Mr Gordon Macdonald to Miss Carr. The transaction did not, in my view, constitute a sale of the dwelling (that is, of the whole dwelling) within the meaning of the Regulations.

[14] Nor did it constitute, in my view, a sale of "any part of it" within the meaning of those statutory provisions, which are consistent with a statutory intention to deal with a situation where some physical part of a dwelling (as defined) is sold - such as on a subdivision or on the disposal of garden ground for development. I agree with the Committee that some assistance can be derived in this connection from the definition in section 87(10) of "material reduction", where "part" is in the context of demolition clearly referable to a physical part. While not conclusive for the purposes of the interpretation of "part of it" in section 87(4) or in regulation 4(1)(a)(i), that subsection supports the conclusion which would naturally be drawn that "part of it" relates, ordinarily at least, to a physical part of the dwelling and not to a pro indiviso share in it.

[15] In my view the Committee reached the correct conclusion in law and the appeal must be refused.