OUTER HOUSE, COURT OF SESSION [2008] CSOH 160 |
|
A467/07 |
OPINION OF LORD BRODIE in the cause KHALID PARVAIZ Pursuer; against THRESHER WINES ACQUISITIONS LIMITED Defender: ________________ |
Pursuer: Stewart; Drummond Miller LLP
Defender: Connal QC; McGrigors LLP
[2] The
action came before me on
[3] In
developing his submissions Mr Connal began by emphasising the context. The pursuer had purchased a particular title
at an auction sale. The nature of an
auction is that an item is exposed. The
potential buyers make such enquiries as they wish. Once a bid is accepted the successful bidder
goes away with the item. The auctioneer
gives no guarantee whatsoever. The
situation is one of caveat emptor. It is for the purchaser to have made enquiry
before he "raises his paddle". Because
it is for the purchaser to enquire, he cannot complain if he gets something
other than what it is that he wants.
[4] Mr
Connal then drew my attention to the central documents. Number 7/1 of process was Land Certificate
GLA82702. It was what was carried by
that title that the pursuer had agreed to purchase. Number 7/2 of process was the Articles of
Roup which incorporated by reference the Minute of Preference and Enactment,
the General Conditions and the Special Conditions. Number 7/3 of process was the Minute of
Preference and Enactment of Sale which had been executed by the pursuer and the
judge of the roup on the pursuer's bid of £262,000 having been accepted. Again that incorporated the General
Conditions of Sale and the Special Conditions of Sale. Number 7/4 of process was the General
Conditions of Sale. Mr Connal drew my
particular attention to conditions 12 and 13.
It was Mr Connal's submission that the effect of condition 12 which
included the statement that "the subjects are sold tantum et tale as they exist with no warranty as to descriptions,
extents, boundaries..." threw onto the purchaser the risk of the title being in
any way insufficient to carry the subjects.
Number 7/5 of process was the Special Conditions of Sale. Mr Connal drew my particular attention
to condition 18 which provided that all statements made in any particulars of
sale are made without responsibility on the part of the seller and that any
purchaser should be deemed to have satisfied himself by inspection or otherwise
as to the correctness of each statement contained in the Particulars. In Mr Connal's submission the whole
structure of the contract which was constituted in terms of these documents was
that the purchaser contracted to acquire title number GLA82702, whatever that
might comprise.
[5] Mr
Connal then considered the pursuer's averments with a view to identifying what
was his case. Notwithstanding the terms
of the contract that he had entered into, the pursuer was seeking reduction and
repayment of the deposit on the basis that the defender had no title to the
toilet area which had been occupied by it.
The nub of the pursuer's case was to be found at page 11C to D of the
Closed Record. There it was averred:
"The pursuer
entered into the purchase of the subjects under essential error as to the
extent of the subjects. From his
inspection of them he reasonably believed that the toilets formed part of the
subjects and that the defender had heritable title thereto. The pursuer reasonably believed that the
defender was selling the subjects with heritable title to the full extent of
the subjects occupied. Neither of these
has proved to be the case. The contract
of sale of the subjects is voidable at the pursuer's instance and he is
therefore under the necessity of seeking reduction of the Minute of Preference
and Enactment of Sale dated
What the pursuer sought, submitted Mr Connal, was precisely what he could not do. He had received the Particulars before the auction. The Particulars referred him to the Conditions on which the subjects were to be sold. Accordingly the basis upon which the roup was conducted was known before the sale and in terms of the Conditions the pursuer is taken to have known everything about the subjects and the title to them in advance. There was accordingly no relevantly averred error. The pursuer's unilateral uninduced error took him nowhere.
[6] Mr
Connal then turned to what he submitted were the relevant authorities. As was
demonstrated by Carruthers v Stott (1825) 4S 34, the effect of
articles of roup in terms such as the Articles of Roup in the present case was
to put the purchaser on guard with the result that he had no remedy if things
did not turn out well. Mr Connal
accepted that the decision in
[7] In
conclusion, Mr Connal submitted that here the pursuer got exactly what he knew
he would get and exactly what he had contracted for. This was not a case where there was material
error. Rather, the pursuer had made
certain assumptions. This was clearly a
case of uninduced unilateral error. The
seller, for its part, specifically did not offer to give more than was set out
in the title. It intended to dispose of
the subjects on these terms. It was not
in error. The sufficiency of the title
or extent of the property were not matters with which it had to concern
itself. Mr Connal confirmed that his
argument did not depend on any speciality to do with auctions but in the
auction cases it had been pointed out that the purchaser has the opportunity to
inform himself of what is of importance to him.
Certainty was of importance in property transactions: Cobb v Yeoman's Row Management Ltd [2008] 1 WLR 1752 at 1775E.
[9] Mr
Stewart turned to consider the law. The
kind of error which is relevant here was error as to identity of subjects
sold. For the reasons given by McBryde
in the Law of Contract in Scotland
paragraph 15-02 there are difficulties in explaining the Scots law on
consensual error. There is inherent
difficulty in the subject. As Grotius
said, de pacto errantis perplexa satis
tractatio est. Mr Stewart accepted
McBryde's characterisation of the present law of error as requiring "error
plus" in order to found a reduction, that is error with some other factor:
McBryde supra paragraphs 15-23 and
15-34. The effect of error, in Mr
Stewart's submission, was that there was no contract by reason of absence of
consensus. In other words the contract
was void ab initio. In determining whether there had been
relevant error one has to have regard to the whole circumstances which here
would include the fact of the auction sale as well as the terms of the
Particulars of Sale and the state of occupation of the subjects when they were
viewed. When the facts had been
established this might turn out to be a case of mutual error but Mr Stewart did
not commit himself to that alternative only.
He was presenting the case as being either one of mutual error or one of
unilateral error. He relied on
[11] Now, it was clear from parties' submissions and the authorities
to which I was referred that, whatever may be the theory, what I have referred
to as the principle founded on by the pursuer would not translate into an
accurate rule of Scots law without considerable refinement: see e.g. Steel's Tr v Bradley Homes 1972 SC 48 at
56. That said, I did not see it as a matter of controversy between the parties
that there are circumstances where in the event of material error in respect of
something essential, Scots law allows the remedy of reduction of what on the
face of it is a concluded contract. If a rule of thumb were required it would
be difficult to improve on Professor McBryde's suggestion that for error to be
relevant there must be some other factor in addition. Professor McBryde
describes this as "error plus": McBryde supra
paragraph 15-23. Mr Connal's attack on the relevancy of the pursuer's pleadings
was less to do with the effect of error (or "error plus") as a matter of generality than with the fact of
error in the present case or, which was to look at the same thing slightly
differently, the effect of the Articles of Roup as contracting out of what
would otherwise be the effect of error. It was his submission that the pursuer
simply could not assert that he (and Mr Connal's approach was that the case was
only concerned with the pursuer's belief) had entered into the contract under
error as to the physical extent of the subjects. The pursuer did not aver that
he was not to be held to be aware of the terms of the defender's General
Conditions and Special Conditions. This was a contract for a specified title.
That is what the pursuer must be taken to have intended to acquire. That is
what he had contracted for and that is what he was offered in implement of the
contract. The pursuer took the risk of the title not being sufficient to cover
what he wished to acquire. In the language of Lord President Hope in Carruthers v Stott supra at 37: "[the articles of roup] required purchasers to satisfy
themselves not only as to the validity of the titles, but also as to the right
to the property; and therefore they were put fully on their guard." Mr Connal's
argument was not unpersuasive. Competing with the underlying theory that a
contract requires a true consensus between the parties is the consideration
expressed by Lord Dunpark in Steel's Tr v
Bradley Homes supra at 57: "it is
essential for business efficacy that the ordinary rule should be that an
onerous contract reduced to writing in plain terms should bind the parties
thereto." However, I have come to the conclusion that Mr Connal's argument does
not survive a review of the authorities to which my attention was drawn. On the contrary, it is Mr Stewart's
analysis that is supported by the case-law and it is Mr Stewart's motion to
which I intend to give effect.
"It would, no doubt be different, if the titles referred to another estate, from which that had been exposed for sale - to that of B, instead of A. But here the objection was not that the estate was different from that which had been exposed for sale, but merely that a mid couple of the titles was wanting, which might be supplied."
Now it may be that the Lord
President had in mind a more significant difference between the subjects
exposed and the subjects to which the seller offered a title than the absence
of a toilet area, but the materiality of such a difference is a matter of fact
and degree for assessment after proof and not for determination at the stage of
consideration of relevancy. Here I consider that there is enough averred to
allow it be concluded that the distinction between a shop with the specified
toilet area and a shop without that area is a difference which may be so
material as to bear on the identity of what was exposed.
[13] Mr Connal conceded that
"I think the
pursuer was in error as to the identity of the subjects which were the matter
of this transaction. I cannot hold that an error as to one-fourth of one-fifth
part of the whole building was not a material error particularly considering
the nature of the subject. As to the purchaser satisfying himself as to the
extent of the subject, I think that if the measurement had turned out to be
thirty-four ells, instead of thirty-five ells, as he may have supposed it to
be, or if there had been some such difference between the actual and the
supposed extent, the articles of roup would have covered a case of that kind.
But the issues before us is not as to an error in mensuration, but as to the
identity of the subject. I am therefore of the opinion that the interlocutor of
the Lord Ordinary is right."
According to Lord Deas, "[this] is
the clearest case of essential error I have ever seen. The clause in the
articles of roup was never intended to cover a case of this kind." Now, it may
be that the members of the Inner House did not consider it necessary to provide
elaborated reasoning. That is because, to their minds, the averred facts so
clearly pointed to a case of essential error as to the identity of what was
being sold which in turn opened the remedy of reduction. Elaboration was
unnecessary. The articles of roup were
"never intended" to exclude the remedy of reduction where there was
essential error (cf Halliday supra at
paragraph 30-175). I agree with Mr Connal on this:
[14] I do not find Morton v
Smith, on which Mr Connal founded, to be inconsistent with
[15] As Mr Connal recognised, Davidson
v Dalziel was a case about a real burden or, rather, a case where the Lord
Justice-Clerk considered that there was no real burden and Lords Young and
Craighill considered that that was not a question which could be answered as
between the parties to the bill of suspension. It was not a case of error as to
the identity of the subjects of sale. Nor was it maintained that the contract
was void. The sixth head of the articles of roup had provided that the subjects
were purchased under the "burdens, conditions, provisions, restrictions,
reservations, and declarations specified and contained or referred to herein,
or in the title-deeds thereof". As the will creating what was said to be the
burden had been exhibited the Lord Ordinary had held that the purchaser had
purchased under the burden, if it was a burden, and therefore could not
withhold the price until the title was cleared. It was in that context that
Lord Justice-Clerk Moncrieff observed, supra
at 994:
"Now, there is
no doubt that a man may expose his property for sale under any condition that
he pleases, provided that condition is legal and clearly expressed, and if a
purchaser purchases on the footing on which the exposure is made, he is bound,
and cannot complain. If property was exposed on the express condition that the
purchaser shall take his chance of the title, I am not prepared to say that
that would not be a legal stipulation. But then it must be clearly expressed."
As Lord Moncrieff did not find
there to be a real burden his decision that there was no ground for the
suspension brought by the purchaser did not depend on the sixth head of the
articles of roup. Lords Young and Craighill, on the other hand, proceeded on
the basis that there may have been a real burden and decided the case similarly
to the way it had been dealt with by the Lord Ordinary: the purchaser had
bought with express notice of the will and its contents, "and that with
whatever burdens it saddled the property"; he had accordingly taken "the risk
of such burdens as there might be as a
condition of his bargain" (Lord Young supra
at 995). Notwithstanding the difficulty over determining whether there was in
fact a real burden, Davidson is
simply about construction of the contract constituted by the articles of roup,
it being open to a seller to contract for the sale of a property subject to
such burdens as may be imposed by the disclosed title. The relevant contractual
provision must of course be clearly expressed if the seller is to exclude what
would otherwise be his obligation to grant a title free from onerous burdens
but there is no question but that the obligation can be qualified or excluded.
Contracting out of material error is another matter. I took it to be Mr
Stewart's position that this was simply not possible. Lord Jerviswoode would
seem to have expressed a different opinion in
[16] Young v McKellar was an action for breach of
warrandice. The property to which the purchaser was granted title was 25 square
yards less than the 383 square yards that had been referred to in the
disposition in his favour and the pursuer accordingly sought damages. Reversing
the Lord Ordinary, the Inner House held that the disposition had not superseded
the full terms of the articles of roup. The articles provided that the
purchaser was taken to have satisfied himself "with respect to the extent,
condition, and description of the subjects." Lord Low, with whom the other
members of the court concurred, held that the pursuer must be held to be barred
from founding on the fact that there was an error in the alleged extent of the
ground. As it appears to me, the key to understanding the distinction between Young and
"It was said that the object of such conditions in articles of roup was merely to prevent the purchaser throwing up his bargain on account of immaterial inaccuracies of description or measurement. I think that is the case to this extent, that if the inaccuracies are not material the purchaser will be barred from founding upon them to any effect, The conditions here (and they are very much in the usual form) are quite general in their terms and make no distinction between inaccuracies which are material and those which are not. Its seems to me that it really comes to be a question of remedy. If the inaccuracy was small and immaterial, I think that the conditions would bar the purchaser from taking objection in any form, but if the inaccuracy were material, and if there was anything of the nature of deliberate misrepresentations on the seller's part, or if the inaccuracy were of a kind which the purchaser could not reasonably be expected to discover, or if the parties had been under mutual error in regard to the subjects, the conditions of roup would not prevent the purchaser from reducing the sale, and it may be also claiming damages, But if the purchaser elects to abide by his purchase, I think that he must also be held to the conditions upon which the purchase was made."
Thus, a party suing on a contract must take into account all the terms of the contract and it may be that these terms, properly construed, will exclude his claim (or not, as the case may be). However, the party who seeks to have the contract reduced on the ground of material error as to the essentials and who can establish circumstances in which the remedy of reduction will be granted, will not be barred by an exclusion provision in the contract which, ex hypothesi, was never intended for such a purpose and which, in any event, it is proposed should be set aside together with everything else in the contract.
[17] Independent of his argument that the pursuer's claims for
reduction and repetition were barred by the terms of the Articles of Roup was
Mr Connal's contention that this was a case of unilateral error and that Scots
law did not permit the remedy of reduction in a case of the uninduced error of
one party alone.
[18] Before looking at the two recent cases which were cited in
support of the proposition that unilateral error was irrelevant except in the
most exceptional of circumstances, Steel's
Trustee v Bradley Homes (Scotland)
Ltd supra and Royal Bank of Scotland
Plc v Purvis, it is convenient to
return to McBryde's formulation of "error plus" (McBryde supra at paragraph 15-23). What I understand by that formulation is
that McBryde is talking about material error as to the essentials of the
contract (of which the subject matter of a contract of sale would be one) and
that he takes as a starting point the proposition that one party's error, even
if material and essential, will not allow that party to reduce the contract.
There must also be something else. A
clear example of "something else" is that the other party was also in error as
to the same matter, in other words that there was mutual error. McBryde points
out that there is difficulty in determining exactly what situations are
comprehended by the expression mutual error: supra paragraph 15-34, but I do not understand there to be any
doubt but that a situation where both parties erroneously thought that the
seller had title to property of extent A and was offering to sell all of that
property whereas the reality was that all he had title to and therefore all he
had to sell was A - B is properly described as a situation of mutual error and
that in that situation the purchaser can seek to reduce the contract. That was
the factual situation in Hamilton v
Western Bank and in Young v McKellar mutual error in regard to the
subjects is one of the examples given by Lord Low as to where a purchaser might
reduce a sale. McBryde supra at
paragraph 15-34 quotes Lord Trayner in Dornan
v Allan & Son (1900) 3 F 112 at 117:
"Mutual error may be pleaded in support of the contention that there is no contract binding on the parties in respect that by reason of their mutual error they were never agreed in idem."
and at paragraph 15-35 he quotes Lord Moncrieff in Sutherland v Bremner's Trs (1903) 10 SLT 565 at 568:
"Pure cases of
mutual or common error in essentials are rare. The only cases in which the plea
is sustained are those in which the error goes to the root of and destroys the
contract, such as a mistake as to the identity of the subject sold (Hamilton v Western Bank 23 D 1033)."
In the present case I accept that enough is averred, if proved, to allow the inference that what is said to have been the pursuer's error was shared by the defender and that therefore this was a case of mutual error as to the subjects of sale (cf the analysis of Earl of Wemyss v Campbell (1858) 20 D 1090 by Lord Dunpark in Steel's Tr v Bradley Homes supra at 58). As Mr Stewart pointed out, the defender has not answered the call at page 10D of the Record to aver whether the defender was aware that it had no heritable title to the toilet area. Accordingly the possibilities seem to be that either the defender and its solicitors were not aware of the problem in the title until after the auction and that therefore this was a case of mutual error or that the defender and its solicitors were aware before the auction that the defender's title did not cover the toilets and yet did nothing whatsoever to draw that to the pursuer's attention or otherwise put him on notice.
[19] I recognise that there is a question over the materiality of
the error founded on here but, having regard to the authorities mentioned
above, I would see the pursuer's case in its first alternative, mutual error as
to the extent of the subjects, to be relevant for enquiry. However, Mr Stewart
also puts his case on the alternative basis of unilateral error on the part of
the pursuer. That raises the question as to whether uninduced unilateral error,
even where material and in relation to an essential matter, can ever provide
the basis for reduction of an onerous contract.
[20] In Steel's Tr v