Scottish Court of Session Decisions

"would continue until the first defender did not need a mortgage for his own purposes or until the pursuer wished to obtain the title in his own name."

Mr McNeill pointed out that, in his answers, the first defender avers that

"no express agreement was reached as to what would happen when the first defender needed a mortgage for his own purposes, other than that the arrangement would come to an end. The first defender assumed, as he was entitled to do, that on that event occurring, the pursuer would make arrangements for the title to be transferred to his own name or that he would make such other arrangement as suited his circumstances at the time. The only agreement in this regard was that the title would be taken out of the first defender's name to allow him to obtain his own mortgage."

In answer to those averments, the pursuer admitted

"that no express agreement was reached as to what would happen when the first defender needed a mortgage for his own purposes other than that the arrangement would come to an end [and] that the title would be taken out of the first defender's name to allow him to obtain his own mortgage [and] that the assumption made by the first defender was an assumption he was entitled to make [and that] it was accurately made."

Mr McNeill said that the question was: what is the obligation in terms of title which rests with the first defender upon termination of the arrangement by reason of his needing his own mortgage? He submitted that the pursuer did not set up any implied agreement but simply concluded that there was an obligation on the first defender to convey the property to the pursuer. He analysed the position in this way. The first defender agreed to take title to the property. He was under an obligation to retain title in the property until one of the "trigger events" occurred. But he did not agree any obligation as to what would happen when one or other of those events occurred. He accepted that the pursuer would probably arrange to put the property into his own name and that, in that event, the first defender would co-operate in any conveyancing that was necessary. But he drew a distinction between an expectation that that was what would happen and a legally binding obligation to do that. I asked him, during the course of his submissions, why it would not be possible to imply a term to cover this. He answered by saying that if there was an implied term, in terms of which the first defender was under an obligation to convey the property to the pursuer in the event of his requiring his own mortgage, a number of questions arose on which the pursuer required to make averments. What precisely was the implied term? Within what time would the conveyancing be required to be done? If it was to be done within a reasonable time, what was that reasonable time? When did that reasonable time begin to run? He put it in this way: the pursuer would have to aver that the trigger event happened on a particular date; that by reason of the implied term the conveyance should have been affected by some specified later date; and that before then, whilst he was still under an obligation to convey the property to the pursuer, the defender sold to a third party.

"...the theory of the record is that the twenty-two [members of the club] bought the property with their own money, and became owners of the bowling-green, for themselves beneficially, and all the right ascribed to the club is a right to demand a conveyance of the property if and when the club raised the money and tendered it. Unless and until this happened, the twenty-two were owners of the property, and their right was only qualified by this obligation to sell in a certain event. In the present case, therefore, the land was not the club's, nor was the money that bought it the club's, and the only right relating to the bowling-green which the club is said to have had was an obligation granted by the twenty-two to sell to the club if and when they tendered the price."

Lord Adam and Lord M'Laren each advanced a similar analysis. In that case, therefore, it is easy to see why the pursuer's averments did not relevantly instruct a case based on trust. The present case, on the pursuer's averments, differs in this respect, that it was the pursuer who purchased the interest in Knowehead and made all relevant payments. It was recognised from the beginning that the first defender held title for the pursuer. The occurrence of the "trigger events" dictated not whether the first defender should transfer title to the pursuer but when. It was a question of timing. The first defender was at no time free to deal with the property as if it were his own. On that analysis I am satisfied that the pursuer has made sufficient averments to allow the case based on trust to go to proof.

"A real right granted in breach of a pre-existing contract or other obligation is voidable at the instance of the creditor in that obligation if the grantee knew of the obligation or if the grant was not of value."

The rule finds its most recent authoritative expression in the Rodger (Builders) case and it is from the Opinion of the Lord Justice-Clerk (Thomson) that its popular name derives. Mr Barne's fourth submission was that if there was no prior obligation on the first defender to convey property to the pursuer - and he accepted that it would make no difference whether the obligation was in trust or based simply on a contract - then his clients were not caught by this rule. Since I have found that there is a relevant case pled that there was such an obligation, this part of his argument fails. However, his fifth submission was that the pursuer had not set out any sufficient averments of knowledge or bad faith to bring the rule into play.

"So far as bad faith is concerned, Stair required of the grantee 'certain knowledge, by intimation, citation, or the like, inducing malam fidem, whereby any prior disposition or assignation made to another party is certainly known'. It is thought that this is still the law, and that a grantee is in bad faith only where he has clear knowledge, at least in general terms, of the antecedent prohibition of the grant... Once a party knows of an antecedent prohibition, he is not entitled to assume without enquiry that it is no longer in force nor is he entitled to rely on the assurances of the grantor."

The authors go on to say in that paragraph that a failure to take for value has the same effect as taking in bad faith; and that this may also apply where, despite the payment of some consideration, the price paid by the grantee is materially below the true value of the property.