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Scottish Sheriff Court Decisions
You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Nabb & Ors c. Kirkby & Anor [2006] ScotSC 94 (02 November 2006)
URL: http://www.bailii.org/scot/cases/ScotSC/2006/94.html
Cite as: [2006] ScotSC 94, 2007 SCLR 65
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SHERIFFDOM OF SOUTH STRATHCLYDE DUMFRIES
AND GALLOWAY
A169/01
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JUDGMENT OF SHERIFF PRINCIPAL B A
LOCKHART |
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in the cause |
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MRS
LUCILLE MARY NABB, STEWART DOUGLAS AND MRS HELEN SMITH NABB |
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Pursuers and Appellants |
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against |
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PAUL
WILLIAM KIRKBY AND MRS JAYNE
LOUISE KIRKBY |
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Defenders and Respondents |
Act: Mr Brown, Advocate, instructed by Messrs Ferguson & Co
Alt: Mr Spier, Advocate, instructed by Messrs McAndrew & Co
STRANRAER:
The
Sheriff Principal, having resumed consideration of the appeal against the
Sheriff's interlocutor of 24 February 2006, sustains the appeal insofar as
it is directed against the Sheriff sustaining the defenders and respondents
first plea in law to the extent of the deleting the pursuers and appellants'
averments in condescendence 4 as irrelevant and lacking in specification;
by deletion of the pursuers and appellants' first crave, and by repelling the
pursuers and appellants' third and fourth pleas in law; quoad ultra refuses the appeal; remits the cause to the Sheriff to
deal with outstanding questions of expenses and to determine further procedure;
finds the pursuers and appellants liable to the defenders and respondents in
the expenses of the appeal and allows an account thereof to be given in and remits
same when lodged to the Auditor of Court to tax and to report; certifies the
appeal as suitable for the employment of counsel.
NOTE:
Background to the appeal
1.
When the action was raised in December 2001 the appellants'
sought payment of the sum of £60,000, being the balance of the purchase price
due to be paid to them on
2. The appellants' case for payment in terms of the missives was met, in substance, by the respondents' counterclaim for damages for breach of contract based on fraudulent et separatim negligent misrepresentations. That case remained on Record.
3.
By amendment allowed on
4. In response to the appellants' new case seeking rectification in terms of the 1979 Act, the respondents introduced (by way of a precautionary measure) an esto case for repetition of the purchase price. The appellants subsequently introduced the crave for violent profits.
5.
The Sheriff heard counsel for both parties in debate in
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A The Sheriff allowed a proof before answer in respect of the appellants' crave for rectification of the Land Register in terms of section 9 of the 1979 Act, and refused the motion made on behalf of the appellants that the defences being irrelevant, decree de plano should be granted ordaining rectification as craved. B The
Sheriff held as irrelevant and lacking in specification the appellants' case
for violent profits in respect that the respondents had occupied the premises
in mala fides. C The
Sheriff refused to dismiss as irrelevant the respondents' counterclaim for
£150,000 in respect of losses said to have been sustained by the respondent
as a result of the alleged fraudulent et
separatim negligent misrepresentations of the appellants. |
6.
Against these three
findings the appellants now appeal.
It should be noted that the Sheriff further allowed, of consent, a proof
before answer in respect of the respondents' esto case for repetition of the sum of £150,000 which had been sent
by the respondents' solicitors to the appellants' solicitors on
7. I propose to deal with each ground of appeal separately. In respect of each ground of appeal I shall record the submissions of first the appellant, secondly those of the respondents, and I shall then give my decision on that ground of appeal before moving on to the next one.
A. Whether
the Sheriff erred in allowing a proof before answer in respect of the
appellants crave for rectification of the Land Register rather than sustaining
the appellants second plea in law and granting decree de
Submissions for the pursuers and appellants
8. In this case the appellants sought the remedy of rectification of the Land Register in terms of section 9 of the 1979 Act on the basis that the dispositions from which the respondents derived their purported title had never been delivered. No right could flow from a disposition unless it has been delivered. That was the central point of the appeal.
9.
This case involves a contract for the purchase and sale
of Knocknassie Hotel and ancillary accommodation. The contract was reduced to writing in
missives which are 5/1 to 5/5 inclusive of process. They were incorporated into the pleadings. The basic structure of the transaction was
that the price of £210,000 was to be paid in two instalments. £150,000 was to be paid at entry and in
return for which entry was to be given.
The balance was to be paid no later than
10.
The Sheriff had certain concerns about the terms of the
missives and in particular as to whether there was consensus ad idem. While
there was no doubt that the missives could have been more happily framed,
neither party had urged that conclusion on the Sheriff. Both parties had addressed the case on the
basis that there was a bargain. The
offer of
11. It was submitted on behalf of the appellants that the parties had, by the conclusion of the missives, agreed (a) that the price was £210,000 (b) that it was to be paid in two instalments, £150,000 at entry and £60,000 no later than 30 September 2001 and (c) that the second instalment was to be secured by a security to rank behind a security by the purchasers in favour of the Royal Bank.
12.
The first question which arose was, as a matter of
construction of the missives, the identification of the obligations imposed on
each party. It was submitted that, in
the simplest transactions for heritable property, this was straightforward. The purchasers paid the price and the sellers
obtain a duly executed disposition and any other documents agreed. Settlement was thereby effected. In this case completion was on an instalment
basis. However, it was submitted that
the only conceivable construction of the missives was that the postponed
security fell to be delivered at settlement - the only purpose of the postponed
security was to protect the sellers against the prospect of default by the purchasers
on the second instalment. On the payment
of the second instalment, the sellers would be obliged to grant a discharge as
there would be nothing left to be secured.
To suggest that the security fell to be delivered at any other time than
settlement defied commonsense and led to absurdity. I was referred to The Bank of
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"For
my part, however, in the present case I am content to follow Lord Steyn's
general guidance that in interpreting a commercial document of this kind the
court should apply the "commercially sensible construction" of the condition
in question." And at 661G: "...
The inquiry will start, and usually finish, by asking what is the ordinary
meaning of the words used. I begin
therefore, not by enquiring into the state of knowledge of the parties to the
contract, but by asking myself what is the ordinary meaning of the words "in
connection with" in condition 3." |
13. It was suggested that the court should take a pragmatic commonsense approach to the facts of the case. That would lead to the conclusion that the postponed security fell to be delivered at settlement. The security had no value to the sellers unless and until it was delivered. The gap which it was intended to plug was a six week or so interregnum between payment of the first instalment and the balance. The security could not plug that gap unless it had been delivered at settlement. Against the background of that construction, counsel turned to the events at entry. It was submitted that what happened at entry was that the cheque for the first instalment of £150,000 was sent to the sellers' solicitor but the postponed security and ranking agreement with the Royal Bank were not sent. There followed what, it was submitted, was the key event in the history of the case, namely the sending of a letter dated 17 August 2001 (7/5 of process) by the sellers' solicitor to the purchasers' solicitor. It was in the following terms:
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"Thank
you for your letter of We
are presenting this to the bank today on the basis that it was only this
morning ( In
that connection we are pleased to enclose herewith the following:- 1.
Title deeds following to be delivered 2.
Two executed dispositions (a
number of other deeds were then identified) Please
acknowledge safe receipt of the enclosures which should be held by you as
undelivered pending your confirmation that you hold the executed standard
security in favour of our client and pending return to us of the completed
Minute of Agreement." What in fact followed was
that neither the second security nor the ranking agreement was ever
delivered, nor was the second instalment ever paid. On |
14. Counsel submitted that the core of the case same down to the simple proposition that these dispositions had never been delivered and the respondents could derive no right from them.
15. I was referred to various cases regarding the significance of delivery:
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i. Gibson and Hunter
Home Designs Ltd 1976 SC 23 - this was a special case presented for the
opinion of the court. Gibson bought a
home from developers who were a limited company. He paid the price and was given entry. The building company executed a disposition
in his favour but did not deliver it.
There was some delay concerning the requirement of the builder to have
a security they had granted in favour of a lender restricted. Whilst this was going on, the builder was
placed in liquidation. Gibson had paid
his money, received the keys and taken entry, but a disposition had not been
delivered. The liquidator of the
company took the position that the disposition not having been delivered, the
house remained the property of the building company and fell to the
creditors. Lord President Emslie said
at page 27: "Although I have every
sympathy with the purchaser in the events which happened, I have not the
slightest doubt that his first argument is without substance. In the law of |
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It was submitted that the law could not be clearer. Delivery was what gave rise to the right and nothing else would do. In this case, as the dispositions had not been delivered, nothing flew from them and the respondents were in no better position than if they had stolen or forged the dispositions. It was suggested that at this point one of the difficulties of the case arose, because the focus from the respondents had been very much on whether or not the appellants were entitled to delivery. The Sheriff seemed to have gone along with that analysis. It was submitted for the appellants that this was the wrong question. The correct question was whether the appellants, rightly or wrongly, withheld delivery. It was clear from Lord Emslie's dicta in the case of Gibson that, if delivery was wrongly withheld, the remedy is to sue and demand delivery. In
this case the appellants' position on The respondents had made much of the fact that there was no express provision in the missives for delivery to be withheld. It was submitted that that did not matter. The starting point was the construction of the contract. It was plain the obligation to deliver the second standard security had not been obtempered. I was referred to the principle of mutuality of contract. It was submitted that in a bilateral contract the parties obligations are the counterpart of each other. Where one party does not perform his obligations, the other party is entitled to withhold performance. |
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ii. Purac v Byzak 2005 SLT 37. This case involved a building contract of some complexity involving interim payments. One of the defences tabled was that there has been a breach by the appellants of their obligations and therefore the respondents were entitled to withhold payment of the price. Lord Drummond-Young said at page 40: |
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"The
right of retention is a defence to a claim for enforcement of a contract, and
arises if the party seeking enforcement is itself a material breach of
contract. In such a case, the party
who is not in breach of contract may withhold performance of his own
contractual obligations until such time as the other party performs its
obligations. The right of retention
applies generally to mutual contracts containing interdependent obligations." He continued: "Four
features of the right of retention call for comment. First, the right only arises if the two
obligations are themselves interdependent or, as is sometimes said are
counterparts of each other ... Secondly
the right only arises when one party is in material breach of the contract
... Thirdly the function of the right is
to provide a party to a contract with a form of security for performance by
the other party of its outstanding obligations ... fourthly, in spite of a
suggestion to the contrary by Lord Benholme ... that the right of retention
might not apply to building contracts, it is now accepted that building
contracts of all sorts are in no different a position from other contracts ..." When the first three
features of that analysis was applied to the present case (the fourth not
being applicable) it was quite clear that the appellants were entitled to
withhold the delivery. On any view the
respondents had failed to produce the postponed security and this threatened
the future performance of the contract since the whole purpose of the
postponed security was to protect the second instalment. |
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iii. Hawke v Mathers 1995 SCLR 1004. In that case no completion certificate was produced by the sellers and there was a clause in the missives that all necessary building warrants and relative completion certificates would be exhibited prior to settlement. It was held that this was a material breach of contract and that the purchasers were not accordingly bound to obtemper their side of the contract. In that case the provision of a completion certificate went to the essence of the contract. In this case it was suggested that the postponed security for the balance of the purchase price for £60,000 went to the root of the contract. |
16. It was submitted that the court could test the proposition by posing a hypothetical scenario. I was asked to imagine an old fashioned settlement meeting with the purchasers' solicitor going to the sellers' solicitor's office. If the purchasers' solicitor said "Here is £150,000 but you are not getting the security" - in such a situation could the purchasers' solicitor have demanded the dispositions? It was suggested that the answer was plainly in the negative. Taking the example a step further and assuming that the sellers' solicitor did not part with the dispositions, could the purchasers' solicitor have raised an action seeking specific implement of the contract by delivery of the disposition while themselves refusing to deliver the postponed security. The answer to that, it was submitted, was in the negative. In short counsel for the appellants submitted that whether the appellants were entitled to withhold delivery was to ask the wrong question. Nevertheless the correct answer to such a question was that they were entitled to withhold delivery as the purchasers had not delivered the standard security.
17. However the appellants' main point was that the correct question was a more direct one - was there or was there not delivery regardless of who was entitled to do what? It was submitted that it was plain that there had not been delivery. The practice of settling conveyancing transactions in the manner chosen in this case accorded with modern practice. Although there were no decided cases criticising the practice of sending items to be held as undelivered, there were a number of textbook references to which I was referred:
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(a) McBryde on Contract para 4.09: "It is
thought that there are at least three factors which have produced this
adherence of the court to the need for delivery: i.
the requirement of delivery is in the interest of the granter ... ii.
the requirement of delivery is a protection for the granter's creditors
and heirs. iii.
to suspend the operation of a deed until delivery assists the settlement
of transactions. The solicitor for the
grantor can have the deed executed.
That can be a lengthy business where there are several grantors and
consenters, the parties are distant, and the deed is to be witnessed. The executed deed is held by the solicitor
and is inoperative until delivery at settlement. To have any other rule would be
inconvenient. and at 4.10 "Delivery
requires proof of both intention to deliver and the fact of delivery." Dealing with intention to deliver, the learned author states at 4.13: "The
question is what was intended rather than what was done in form, and so a
simulated delivery will be ineffectual as when a deed was handed to the
grantee and then handed back to the granter.
It follows that a document may be shown to have been handed over, not
as "delivered" documents, but for another limited purpose. This is relied upon when conveyancers are
settling a transaction by post and delivery of a deed is to take place in
exchange for the price. The granter's
agent may send the deed to the grantee's agent expressly under the condition
that the deed is to be held as undelivered until the granter's agent receives
the price." |
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(b) Halliday,
Conveyancing Law and Practice para 38.57: "The
cheque should be sent to be held as undelivered, pending, in exchange,
receipt by the purchaser of the settlement documents." |
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(c) Professor McDonald,
Conveyancing Manual, seventh edition, para 4.1: "The
fact of physical handing over, coupled with intention to make the deed
operative, is of itself sufficient delivery.
Similarly, a deed is not delivered by physical handing over of a deed
if accompanied by a covering letter, which said: "You are to told the
accompanying deed as undelivered." This is quite a commonplace qualification
when physically parting with the deed." |
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(d) Gretton &
Reid, Conveyancing, third edition, para 2.10: "Settlement
traditionally took place at the office of the selling solicitors. Nowadays it is usually done through DX,
legal post or courier. In a footnote
the learned authors state: "The
covering letters will state that the contents are to be held as undelivered
and then mutual delivery is agreed by telephone and confirmed by letter." (e) Professor John
Sinclair's handbook of Conveyancing Practice, fourth edition, para 11.2: "To
get round the difficulty of the cheque or the deed reaching the other
solicitor before the other part is returned, and being misused, the sender of
the cheque or disposition writes a short letter to the other solicitor saying
"We enclose the cheque/disposition and settlement papers, which please hold
as undelivered until you despatch the disposition and settlement
papers/cheque to us." This is a
request that mirrors the obligation in missives and must be adhered to, as
delivery is postponed until the event happens." |
18. It was submitted that there was unanimity among the conveyancing textbook authors that practice now allows documents to be held as undelivered pending an event occurring. Until that event had occurred, the documents were not delivered.
19.
Turning to the facts of the present case, it was
submitted that there clearly had been no delivery. The dispositions were sent with the sellers'
solicitor letter of
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"...
Please acknowledge safe receipt of the enclosures which should be held by you
as undelivered pending your confirmation that you hold the executed standard
security in favour of our client and pending return to us of the completed
Minute of Agreement." There had been no
purification of the suspended condition.
It was submitted that in these circumstances there had not been
delivery and the respondents and purchasers could obtain no title from these
dispositions. It was noticeable that
nowhere in the pleadings do the respondents aver that the dispositions in
fact were delivered. There were
averments about who was entitled to do what and that the solicitors were
entitled to treat the dispositions as delivered, but the averments went no
further than that. It was submitted that the respondents had to prove
delivery and this they could not do in light of the terms of the letter of |
20. Turning to the Sheriff's note counsel indicated that the first few pages contained factual narrative with quotations from the missives. At the second full paragraph at page 5 the Sheriff stated:
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"As I
have allowed a Proof Before Answer I am reluctant at this point to express
any view either provisional or concluded about the construction which should
be placed upon the contract thus concluded in writing in terms of the
missives. However it is plain that
seeds for future confusion have been sewn." It
was submitted that neither party to the action took the position that there
was anything other than a concluded bargain.
It was submitted that the meaning was plain from a fair reading of the
missives. The Sheriff went on to say
in the final paragraph of page 5: |
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"One
then requires to turn to the pleadings to determine what the parties say
happened next. And here a factual
dispute is revealed. As well as a
dispute as to the construction to be put on the missives." and then at page 7, para
1: "The
defenders' agent considered that the transaction had settled notwithstanding
the terms of said letter dated The Sheriff then said at
para 2 of page 7: "Thus
whether the cheque was sent on the terms stated becomes a matter of factual
dispute. The resolution is central to
the case." |
21.
It was submitted that the Sheriff fell into error in
taking this approach to the matter. The
correct question to ask was "Was there delivery". It was submitted in terms of the letter of
22. Having summarised the parties' positions, the Sheriff went on at page 11:
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"In my
opinion neither submissions can be sustained or repelled without proof taking
place before answer. First there is a
factual dispute to be resolved as to what happened in connection with
settlement of the transaction after missives had been concluded." It was submitted for the appellants
that there was no factual dispute that the dispositions had been sent under
cover of the letter of |
23. In para 2 of page 11:
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"In the
present case the transaction proceeded to settlement following conclusion of
the contract established by the missives.
But what actually happened?
Whatever it was it is clear that in some way the practice relied upon
by conveyancers in providing that documents exchanged between them should be
"held as undelivered" resorted to there appears to be limited authority
bearing on this practice. The Sheriff went on at
page 12 after quoting a section in McBryde regarding the practice of
holding documents as undelivered: "That
is how I understand the practice to operate.
It may also apply to the cheque for the purchase price. Until that moment they merely have custody
of the documents. But at the instant
of settlement that changes to possession.
And each may intromit with what they hold. But whatever may be revealed by the
evidence that did not happen here. The
reverse happened." It was submitted that the
Sheriff was wrong in this paragraph.
Delivery of the postponed security was an integral part of the
contract. That had not taken place, so
there was no delivery of the disposition. |
24. The Sheriff concluded at page 12:
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"But
whether they were right or wrong or fraudulent or careless depends upon proof
of what actually happened which allowed this situation to arise. That is my first reason for allowing a
Proof Before Answer." |
25. Counsel submitted that whether the appellants were right or wrong was an irrelevant consideration. The correct question was whether they did or did not deliver. He also submitted that whether they were right or wrong can be answered without evidence because the materiality of the postponed security was clear and the court ought readily to be satisfied, without evidence, on the undisputed facts that the appellants were entitled to withhold delivery. These were the submissions in respect of the Sheriff's first reason for allowing a proof before answer.
26. The Sheriff then dealt with his second reason for allowing a proof before answer. He stated at page 12:
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"The
second relates to the terms of the contract itself. Given the contradictory provisions in the
missives in regard to price and payment, one view might be that the contract
purportedly established by the missives is void ab initio. That was a view
which neither party urged me to take.
Thus I do not. But that then
requires a view to be taken as to the terms of the contract thus
established." The Sheriff's second
reason for allowing a proof was that he perceived a need for evidence to be
led before the contract be construed and in particular before he could answer
the question of whether the respondents were bound to deliver a standard
security. It was suggested in this the
Sheriff fell into error. Neither party
had any pleadings directed at establishing any term of the contract not
contained in the missives. Since both
parties were agreed that there was a concluded bargain, it was submitted that
the task of the court was to construe that bargain. What was agreed was to be found within the
four corners of the missives. |
27.
The third reason for allowing proof related to the
terms of the Land Registration (
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"(1) Subject to subsection (3) below,
the Keeper may, whether on being so requested or not, and shall, on being so
ordered by the court or the Lands Tribunal of Scotland, rectify any
inaccuracy in the Register by inserting, amending or cancelling anything
therein. ... (3) Subject to subsection (3)(b)
below, if rectification under subsection (1) above would prejudice a
proprietor in possession ... (a) the Keeper may exercise his power to
rectify only where ... (iii) the inaccuracy has been caused wholly or
substantially by the fraud or carelessness of the proprietor in possession." It was necessary for there
to be fraud or carelessness on the part of the proprietor in possession
before the Keeper of the Register could be required to rectify the Register. The Sheriff said there needed to be proof
as to whether there was fraud or carelessness. It was submitted that, on a proper
understanding of the legislation, there was no need for proof. The matter was capable of being determined
at debate. It was submitted that there
were two possibilities in this case: (a) The respondents' solicitor knew and
fully appreciated that the dispositions had not been delivered, but proceeded
nevertheless to present an application to the Keeper without disclosing that
knowledge. In that situation his
actings were fraudulent. or (b) The respondents'
solicitor either failed to appreciate the significance of delivery or
considered that delivery subject to a letter was effective delivery. In either event, there was an inescapable
inference of carelessness. There was
accordingly no need for proof. The
facts indicated either fraud or carelessness.
It was either the one or the other.
There was no necessity to prove which one. |
28. I was referred to the case of Stevenson-Hamilton's Executors v McStay (No 2) 2001 SLT 694. This case concerned a gap site in Carluke. The respondents obtained a registered title. The appellants claimed the respondents were not entitled to registration as the appellants were the true owners and the respondents did not have the necessary degree of possession for prescription. The appellants sought rectification of the Register. I was referred to page 695 where the Temporary Judge stated:
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"Thereafter
they contend that the defenders did not enjoy possession openly, peacefully
and without judicial interruption for the prescriptive period. They sought an order for registration on
the basis that the registration was obtained by the fraud of the defenders
(the statements made by them as to prescriptive possession being to their
knowledge false) or on the basis that they were made carelessly." It was held in that case
that the respondents responses to questions in the application for
registration relating to peaceable possession were either false or at least
careless; had they exercised the type of possession claimed they would have
been aware that the appellants had excavated part of the site, and responses
by their law agent, who must have been aware of other deeds and documents
relative to title, were also inadequate and careless. ... and decree granted. |
29. I was referred to article 3 of condescendence for the appellants:
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"The
principle that a disposition is ineffective unless and until delivered has
been conclusively established in Scots Law for many years ... The pursuers do not know and have no means
of ascertaining whether or not as at September 2001 the defender's solicitors
knew that a disposition was ineffective unless delivered. ... The pursuer does not accordingly know, and
have no means of ascertaining whether or not the defender's solicitors
genuinely believed that the dispositions had been effectively delivered. In the event that the defender's solicitors
genuinely believed that the disposition had been effectively delivered, their
actions in ignoring the plain terms of the letter of 17 August 2001 and
in disregarding the well known legal principle which applied amounted to
carelessness ... The error in the
Register was caused either by fraud or carelessness on the part of the
defender, acting through their agents.
These are the only two possible causes of the error." |
30.
As to the form of rectification, it was said that the appellants
would prefer a Land Certificate in their name.
The Keeper had come into this process as a third party minuter and had
lodged answers. The Keeper had later
withdrawn from the process but it was understood that crave 2 followed a
form approved by the Keeper.
Crave 2 was in four parts.
The first two parts were (a) deleting from the Register the standard
security granted by the respondents over the subjects in favour of the Royal
Bank of Scotland (b) closing title sheet WGN2673 (the respondents' title). The remaining two parts related to opening a
new title in the name of the appellants under title sheet no WGN2673 involving
the hotel and proprietor's bungalow which were subject of two separate dispositions. It was accepted by counsel for the appellants
that rectification in terms of section 1(1) perhaps only involved removal
from the record of the respondents' title and would not go so far as to create
a new Land Certificate in favour of the appellants, whose title had been
originally recorded in the General Register of Sasines. Counsel for the appellants conceded that, if
the court took this view, he would be happy with decree de
Submissions for defenders and respondents
Issues of fact and law in the pleadings
31. It was suggested that the following issues require determination:
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(1) the question whether, in terms of the missives, the standard security provided for therein fell to be delivered at the date of entry; (2) the extent to which settlement of the transaction took place and on what basis, in particular the consequences and legal effect of the appellants cashing the respondents cheque for the part of the purchase price that fell due at the date of entry (£150,000). Although clearly a matter within the appellants' knowledge these averments are not responded to in condescendence 3 beyond a blanket denial. (3) the question required to be determined
whether the request at the conclusion of the appellants' letter dated "Please
acknowledge safe receipt of the enclosures which should be held by you as
undelivered pending your confirmation that you hold an executed standard
security in favour of our client and pending return to us of the completed
Minute of Agreement." had any legal effect. (4) in the event that the appellants
were entitled to withhold consent to delivery (notwithstanding the fact of
physical delivery) did they subsequently lose that right by operation of
either personal bar or waiver; (Answer 3 lines 17-24 and please in
law 7 and 8 not responded to in condescendence 3 of pleas in law for the
appellants). (5) is there presently an
inaccuracy in the Land Register in relation to the subjects disponed by the appellants
to the respondents and if so what is that inaccuracy? (6) was any such
inaccuracy caused wholly or substantially by the fraud of the respondents or
their agents, Messrs A F & C D Smith?
If so what was the nature of the fraud? (7) was any such
inaccuracy caused wholly or substantially by the carelessness of the respondents
or their agents, Messrs A F & C D Smith?
If so, what was the nature of the carelessness; (8) if there is an
inaccuracy in the Land Register caused by the fraud or carelessness of the respondents
or their agents how should that inaccuracy be rectified; |
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It
was submitted that the appellants did not state a relevant legal basis for
their second crave for rectification.
The crave purports to be supported by averments made in the third
article of condescendence in relation to the alleged fraud et separatim carelessness of the respondents
or their then agents in failing to hold the dispositions signed by the appellants
in favour of the respondents as undelivered and disclosing same to the Keeper
of the Registers. The appellants did
not specify any relevant legal basis for any such obligation. The appellants purport to rely upon the
terms of their own agents' letter dated Even
if said letter of It was said that the entry on the Land Register in favour of the respondents for said subjects at Knocknassie House Hotel was a first registration. The appellants did not aver that title of said subjects should be disponed to them or that the dispositions in favour of the respondents should be reduced. The appellants did not aver any relevant basis for a first registration of the subjects in their favour. Although
at debate the respondents had sought dismissal on the basis that the appellants
principal case for rectification was irrelevant, it was accepted that for the
purposes of the appeal the Sheriff was correct to allow a proof before answer
for the reasons given by him, which in substance reflected the factual
dispute described in issues 1 to 3 above. |
Why did the Sheriff allow a proof before
answer rather than determine the principal issues on the basis of the pleadings
and submissions
32. The Sheriff held that issues (1) to (3) namely (1) terms of the missives, in particular whether the standard security required to be delivered at the date of entry, (2) the extent to which settlement of the transaction had taken place, in particular the consequences and legal effect of the appellants cashing the respondents' cheque for part of the purchase price that fell due at entry (£150,000) and (3) the legal effect of the appellants' letter of 17 August 2001 requesting the enclosures to be held as undelivered, could not be determined in the absence of evidence.
33.
He further held that the determination of whether fraud
or carelessness had occurred in this case required evidence. It was submitted that the appellants, to
succeed in their application for rectification, required a discrete finding in
fact that the inaccuracy (if there was one) was caused by fraud or carelessness. It was submitted there could not be a
composite finding in fact of one or the other.
I was referred to the case of
|
"... It
would, in our opinion, be essential for a party who alleged negligence within
the meaning of s 9 on the part of the current proprietor in possession
to spell out when that carelessness occurred, what it consisted in and
precisely who perpetrated - the latter being of vital importance given that
it is the carelessness of the proprietor in possession that matters for the
purposes of s 9(3)(a)(iii)." |
34. It was suggested that the reason why very specific averments were required was to give fair notice of the line of evidence and if that evidence was accepted, to allow discrete findings in fact to be made. It was submitted that the appellants' pleadings remained woefully short of what was required in this regard but the respondents were content to reserve that argument (and any objections to evidence) to the proof before answer.
Critique of the grounds of appeal as
developed in submission
35.
It had been submitted on behalf of the appellants that
the only conceivable construction of the missives was that the postponed
standard security fell to be delivered at settlement. It was submitted for the respondents that the
missives did not contain an express term specifying any period in which the
standard security required to be delivered and in particular they did not
specify such delivery as a pre-condition of settlement. It was submitted that there was no basis for
the construction urged by the appellants.
It was said that the dicta in
the case of Bank of
36.
It was further said that the appellants did not aver
that such a term should be implied. In
any event such a term did not necessarily require to be implied to give the
contract business efficacy. The appellants
received the bulk of the purchase price at settlement and were entitled to
interest on any delay in payment of the balance after
37.
It had been submitted that the only possible construction
of the letter of
38. It was submitted, as the Sheriff had noted, that the averments do not reflect what the letter actually says - in particular the letter did not contain a requirement for delivery. It was suggested that appellants had not put forward any legal basis for the creation of such a unilaterally imposed condition.
39. It was said that notwithstanding the grounds of appeal and the foregoing averments, counsel for the appellants did not seek to argue the case on the basis of the imposition of a condition. It was rather his submission that where the sellers had specifically intimated that they wished the disposition to be held as undelivered then delivery had not and could not take place. That was so even where there had been payment of the purchase price. The remedy of the purchasers, the appellants maintained was to raise an action for delivery. Simply to take delivery in return for the payment of £150,000, in the teeth of the request that the disposition be held as undelivered, was said to be unlawful or as he put it "the respondents were in no better position as if they had stolen or forged the document".
40. It was said on behalf of the respondents that the foregoing proposition was not supported by any relevant authority and was unsound. What ever may be the conveyancing practice in relation to the effect of a disposition tendered to be "held as undelivered", such a practice does not constitute a rule of substantive law. It was submitted that the various text books referred to do not refer to what the appropriate practice or remedy would be in the circumstances of the present case.
41. It was submitted that delivery, and the intention to delivery, had to be determined as a question of fact and circumstance. The principle of mutuality of contract operates in the present case to allow the inference to be made that if the sellers had taken the purchase price (which they had been requested to hold as undelivered) the purchasers were entitled to the real right of title. It was submitted that the Sheriff's analysis of the consequences of not doing so at pages 11 and 12 of his judgment was pertinent and correct.
42. It was submitted that, in any event, even if the appellants' submission had merit and the court was prepared to determine that there had been no delivery because the intention to deliver was absent, this was not the case advanced on Record. The premise of the case on Record was that there had been no purification of a suspensive condition. It was submitted it was the appellants who offered to prove that they imposed the "suspensive condition" which was not purified. That was disputed. That was what the Sheriff had in mind.
43. It was further submitted that there was no discrete ground of appeal criticising the Sheriff's opinion that proof was also required in relation to whether, even if there had been no delivery of the disposition as contended, the fact of presenting the deed for registration amounted to fraud or carelessness. It was said in submission that on a proper understanding of the legislation and undisputed circumstances, there is no need for proof and the matter was capable of being determined at debate. It was submitted that this was a submission without merit or substance. The appellants' pleadings were of doubtful relevancy and even if proved could not entitle them to decree as craved. It was suggested the pleadings do not proper or relevantly address the issues set out in issues 4 to 7 in para 33 above. It was pointed out that during submission counsel for the appellants appeared to submit that he was only insisting on craves 2(a) and 2(b).
44.
It was submitted that in any event, contrary to what
appeared to be the submission on the appellants, this issue could not be
determined at debate on the basis of the appellants' pleadings. For decree de
Decision
45. From a consideration of the missives, it would appear to me that the parties agreed in respect of the purchase and sale of Knocknassie Hotel (a) that the price was £210,000 (b) that it was to be paid by two instalments, £150,000 at entry and £60,000 no later than 30 September 2001 after which interest would be payable and (c) that the second instalment was to be secured by a standard security to rank behind a security by the purchasers in favour of the Royal Bank of Scotland. I accept the submission made on behalf of the appellants that, on a proper construction of the missives, the standard security in respect of the outstanding balance fell to be delivered at settlement when the dispositions were handed over. The whole raison d'etre of the standard security was to protect the sellers against the prospect of default by the purchasers of the second instalment.
46. Counsel for the appellants asked me to imagine an old fashioned settlement meeting with the purchasers' solicitor going to the sellers' solicitor office. He imagined the purchasers' solicitor saying "here is £150,00 but you are not getting the security". He suggested that in such a situation the purchasers' solicitor would not have delivered the dispositions as he had not received the standard security. It was suggested that in that situation the purchasers could not have sued for delivery of the disposition as he has not obtempered his obligation at settlement to deliver the standard security.
47. However, in the scenario imagined by counsel for the appellants, he omitted to analyse the question of the cheque for £150,000. If, at the imaginary meeting where settlement was taking place and the solicitor for the sellers refused to deliver the disposition as he had not received the standard security, the solicitor for the purchasers might well have refused to hand over the cheque for £150,000. This was a mutual contract. On the one hand, the purchasers were obliged to deliver at settlement the cheque for £150,000 and the standard security for the balance of £60,000 with the relative Minute of Agreement both duly executed by the purchasers. On the other hand, the sellers were obliged to deliver the executed dispositions and the other titles falling to be delivered at settlement.
48. This was not a settlement at a solicitor's office. There was correspondence to which reference has been made. The question arises as to the effect of the cashing of the cheque of £150,000 by the sellers' solicitor. Answer 3 of condescendence for the respondents indicates:
|
"On As
has already been noted that letter of "Please
acknowledge safe receipt of the enclosures which should be held by you as
undelivered pending your confirmation that you hold the executed standard
security in favour of our client and pending return to us of the completed
Minute of Agreement." Accordingly, on one view,
the cheque sent by the purchasers' solicitor to the sellers' solicitor should
not have been treated as delivered as the event which required to occur
before it could be treated as delivered, namely the delivery of the dispositions,
had not occurred. The event which was
required to trigger the delivery of the cheque was delivery of the
dispositions. If there was no delivery
of the dispositions, there was no
delivery of the cheque. However, that
is only one possible view of what took place after the contract had been
concluded. I consider, before the issue
can be determined, there requires to be evidence. |
49. I merely set out above one analysis of what might be said to have taken place, taking one step forward the analysis presented to me by counsel for the appellants regarding delivery of the disposition. Moreover, it seems to me that issues of personal bar and waiver come into play in the situation which arose. It is averred by the respondents in Answer 3:
|
"The
pursuers presented said cheque to the bank on In
this connection I was referred to production 5/6 for the appellants,
being a letter by their solicitors dated "Settlement
of this transaction took place a considerable period of time ago." It was submitted this was
inconsistent with the appellants' position that there was no delivery and
there had been no settlement. |
50. As far as the questions of personal bar and waiver are concerned, the respondents aver
|
"by
opting to settle and take the £150,000 the pursuers are barred from objecting
to delivery and in terms of the parties subsequent correspondence have waived
any right to object to delivery" There is also the matter referred to in the background section of this note that the appellants' original case was for payment of the balance of the purchase price of £60,000 with interest and for delivery of the standard security. That might be said to be inconsistent with the position of non-delivery of the dispositions and settlement not having taken place. There requires to be evidence before the questions of personal bar and waiver can be determined. |
51. Moreover before the issue of whether the appellants have the right to have the Land Register rectified as craved can be determined, in my view there requires to be evidence regarding whether there has been fraud or carelessness on the part of the respondents or their solicitors. It may be, as a result of all that took place following the completion of missives, that evidence will reveal there has been neither fraud nor carelessness. I consider that evidence requires to be led before the court can consider this issue.
52. In my opinion there requires to be evidence before the court can consider (a) the effect of the cheque of £150,00 being sent as undelivered, as averred by the respondents, in terms of a letter of 15 August 2001 (b) the effect of the dispositions being said to be held as undelivered in terms of the letter of 17 August 2001 (c) the effect of subsequent correspondence and actings by the parties and their solicitors (d) the question of whether the respondents pleas of personal bar and waiver can be sustained and (e) whether at present there is an inaccuracy in the Land Register and, if so, the nature of that inaccuracy and (f) whether there has been fraud or carelessness or neither on the part of the respondents and their solicitors.
53. For the reasons I have set out I agree with the Sheriff's conclusion that the crave for rectification can only be dealt with after proof. I do not accept the submission by counsel for the appellants that the registration in the Land Register of the dispositions in favour of the purchasers necessarily involves fraud or carelessness on the part of the proprietors in possession or their agents.
54. I am accordingly clear that the crave for rectification can only be dealt with after proof and in particular after the questions of personal bar or waiver in terms of the respondents' pleas in law 8 and 9 have been determined.
55. I would only add that, had I been with the appellants in respect of their motion for decree de plano, I would have only be prepared to grant decree in terms of craves 2(a) and (b). The Land Register would be rectified by the striking therefrom of the deeds involving the purchasers, which should not have been sent for rectification.
56. I accordingly refuse the appeal under this head.
B. The
Sheriff's decision to sustain the defenders and respondents first plea in law
to the extent of deleting the pursuers and appellants' case for violent profits
Submissions for the pursuers and appellants
57. Sheriff dismissed the appellants' claim for violent profits. The appellants case was that, if rectification was ordered, they claimed violent profits of £80,000 per annum for five years, being the period during which the respondents had been in possession of the property without a title. It was accepted that the Sheriff had identified the applicable principles. At page 15 of his note, referring to Gloag and Henderson eleventh edition, paras 40.11 and 40.12, he concluded:
|
"It is
a possessor in bad faith who is liable for violent profits. A bona
fide possessor is not so liable. A bona fide possessor is one who
though not in fact proprietor believes himself proprietor on probable grounds
and with a good conscience. It is
necessary that the possession should have been on a colourable title and in bona fide ...An effect of bona
fide possession is that there is no liability for violent profits ..." It was the appellants'
position that the respondents had occupied the subjects since "The defenders purported to register the dispositions in
their favour on |
58. Having set out their averments of mala fides the appellants continued in article 4 of condescendence:
|
"The measure of violent
profits is accordingly the greatest profits the pursuers could have generated
had they had possession of the subjects.
The pursuers reasonably estimate this at about £80,000 per annum. The
wrongful occupation commenced on It was said by counsel for
the appellants that these averments, albeit brief, gave fair notice of both
the nature of the mala fides
entitling his clients to violent profits, and there was adequate
specification of what the appellants estimated these profits to be. |
59. The Sheriff recorded the submission of the respondents as follows:
|
"The submission being
that whatever view was taken of the case the defenders were bona fide possessors. They were the holders of the Land
Certificate. They had paid £150,000
which the pursuers retained. The
pursuers had yet to vindicate the rights which they asserted. The defenders had taken entry in terms of
the contract between the parties. They
were the proprietors in possession in fact and law. Further the quantification of the claim was
lacking in specification to a gross degree.
... There was no foundation in
the pleadings to allow the averments to go to proof." |
60. Having set out the submission on behalf of the respondents the Sheriff concluded:
|
"I have
to say that counsel for the pursuers really advanced no argument in answer to
this submission - other than the averments should be allowed to go to proof,
if a proof before answer was to be allowed anyway. In my opinion the submission made on behalf
of the defenders falls to receive effect, and the averments are deleted." |
61. It was submitted by counsel for the appellants that the test was whether possession was in good or bad faith. The Sheriff, it was submitted, had erred to accept the respondents' submission that there was no relevant averments of bad faith. It was submitted that the averments in article 4 of condescendence for the appellants which are set out above entitled the appellants to a proof.
62. Counsel for the appellants indicated that he did not submit that the appellants were bound to succeed in this claim, but it could not be said that they were bound to fail which was the test for dismissal. In particular the appellants offered to prove that the respondents had told the bank that the second security was not proceeding and at the same time continued to represent to the appellants that they were waiting for revisals from the bank. That, if proved, was the very essence of bad faith. As to the arguments made for the respondents that they sought to vindicate their title and assert that they are entitled to the subjects, and that the possession was pending resolution of the litigation and could not be in bad faith, the appellants said that this would depend on the circumstances. In the first place, the court would know how it came to be that the dispositions came to be registered, whether fraudulently or carelessly. Secondly, the respondents could not simply hide behind legal advice. If it was wildly erroneous, then that would affect the question of whether their possession was in good or bad faith. It was submitted that this was one of the parts of the case that required evidence and those averments should be left standing.
63. As far as the averments of quantum for violent profits are concerned. It was submitted that violent profits are not concerned with actual loss. They were concerned with the greatest amount which could be achieved i.e. the greatest profits which could be generated. This involved, inevitably, a notional amount. What the appellants' aver is a notional greatest profit figure from the subjects of £80,000 per annum for five years. It was submitted that this met the requirement of fair notice. The court was dealing with a notional figure for what could be described as punitive damages in other jurisdictions. The appellants were entitled to lead evidence of the maximum profit they could have generated from the subjects during that period. It was submitted that the appellants were not bound to fail on this claim and the matter should be left for a proof before answer.
Submissions for the defenders and respondents
64. The appellants' pleadings were set out in condescendence 4. The appellants suggested that it could not be said in advance of proof that these averments were bound to fail. No attempt had been made to suggest that the Sheriff was wrong in law. As far as specification is concerned, as the Sheriff said, it was submitted there was none. Counsel for the respondents contented himself with agreeing with the Sheriff's analysis regarding the violent profits claim in pages 14 and 15 of his note.
Decision
65. I set out in my summary of the submissions for the appellants under this head and the averments in condescendence 4 on which they seek to rely. In particular the appellants aver:
|
"The
defenders could not reasonably have supposed that they were entitled to
occupy the subjects without implementing the contractual obligations in terms
of which they were allowed entry. They
were not candid with the pursuers, and continued to maintain to the pursuers
that there was only a delay in delivery of the security, when the true
position was that they had determined not to deliver it. There occupation is accordingly in mala fides. They are accordingly liable to the pursuers
in violent profits in respect of their wrongful occupation of the subjects." It
seems to me that this is just enough to allow the respondents the opportunity
to prove bad faith to the extent they have set out in the above
sentences. Their specification of the
grounds of mala fides is, on their
own admission, brief indeed. It was
conceded by counsel for the appellants that it was not his submission that
the appellants were bound to succeed on this claim, but he suggested that it
could not be said that they were bound to fail which was the test for
dismissal. |
66. As far as specification of the quantum for violent profits was concerned, I accept their submission that violent profits are not concerned with actual loss, but with the greatest amount which could be achieved i.e. the greatest profits that could be generated. It would be up to the appellants to lead evidence at a proof of their notional greatest profit per annum for the subjects. A figure of £80,000 per annum was suggested. Whether it would succeed either at that figure or at a lower figure is, I consider, a matter for evidence.
67. While I do so with some hesitation in view of the brevity of the averments, I cannot reach the conclusion that they are not entitled, before answer to a proof of this claim. I accordingly uphold the appeal to this limited extent.
C. Whether
the Sheriff erred in not dismissing as irrelevant the defenders and
respondents' counterclaim
Submissions for pursuers and appellants
68. It was averred that the appellants enticed the respondents to enter the contract by fraud. The structure of the claim was that there were fraudulent or negligent misrepresentations about the level of business which induced the respondents to enter the contract. The critical averment began at line 8:
|
"Has
the defenders known the true position in relation to the winter shooting
trade they would not have purchased said hotel for said purchase price of
£210,000. They would not have
proceeded with said purchase or would have offered substantially less money
for the subjects." They did not say they
would have achieved a purchase at a lower price and they did not aver that a
lesser sum would have been acceptable to the appellants. The respondents went on to say: "By the
time the defenders discovered the said misrepresentations were untrue they
were locked into said business. They
had to carry on trading albeit at a loss.
They have suffered anxiety, stress and inconvenience. In the circumstances the sum sued for is a
reasonable estimate of the defenders' loss, injury and damage." It was submitted that
these averments were completely lacking in specification. There was nothing by which one could
accurately measure the question of loss.
There was no specification of "trading at a loss" and no specification
of "anxiety, stress and inconvenience".
|
69.
In addition the representations on which the respondents relied were said
to relate to historical business. It was
said various representations were made about business for the forthcoming year
in a telephone call. There was
insufficient in the pleadings to say that there was a solid factual foundation
on which to proceed e.g. it was said:
|
"He
represented that possibly 120 duck shooters would stay." What did that mean? It was said that the appellants represented
"that substantial winter shooting trade would continue". The question was posed as to whether this
was absolute warranty of future trade or an expression of opinion. It was not said that any of the historic
information was inaccurate. It was
said that there required to be specification as to what was said and when. |
Submissions for defenders and respondents
70. It was submitted that, although the Sheriff was criticised for not dismissing the respondents' counterclaim for damages on the grounds of relevancy and specification, this point was not fully argued before the Sheriff and should not be entertained at this stage. The Sheriff had not been required to deal with it in his note. The relevancy of the merits of the counterclaim had not been argued. Even in submission on appeal the extent of the criticism appeared to be one of specification of what the representations were. It was suggested the respondents' pleadings were quite clear in this regard and give fair notice. In particular, prior to settlement of the transaction in August 2001 Mr Nabb represented that certain bookings existed for September 2001 through January 2002, being the first six months of the respondents' trading. The respondents subsequently discovered that those bookings did not exist. No claim of lack of fair notice was raised in the appellants' pleadings. In the answers to the counterclaim the appellants offered to prove that no representations were made. As far as the appellants' criticism of the legal basis of the respondents' claim for damages was concerned, it was submitted the correct measure of loss is all the damage flowing from direct acts of fraudulent or negligent misrepresentations. While in the usual case that would be the difference between the price paid and the true value that was not an invariable rule. I was referred to Barry v Sutherland 2002 SLT 413 at 416L to 417L. It was submitted there was sufficient fair notice of the respondents' claim for damages. They offered to prove that they would have offered less for the subjects than they paid for them; once locked into the business they sustained trading losses; and they had suffered anxiety, stress and inconvenience. The assessment of damages in these circumstances, particularly in relation to the final element of the claim, would be on a broad basis and not a narrow question of arithmetical calculation.
Decision
71. It is quite clear that this point was not argued by the Sheriff as he has not referred to it at all in his note. In my opinion there is no merit in the submissions which have been made on behalf of the appellants. I reject this ground of appeal.
Conclusion
72. In the event, on the principal issue of this debate, namely whether the Sheriff was correct to allow a proof before answer in respect of crave 2, I refuse the appeal and adhere to the Sheriff's interlocutor. With some hesitation and perhaps weighed by considerations of fairness, I have upheld the appeal as far as the crave for violent profits is concerned, and I have refused the appeal as far as the attack on the counterclaim is concerned. I remit the matter to the Sheriff to deal with outstanding questions of expenses and to determine further procedure.
73. The discussion on the appellants' crave for violent profits represented a very small part indeed of the arguments which I heard on appeal over two days. The respondents have obtained substantial success in the appeal and I award the expenses of the appeal to them. I certify the appeal as suitable for the employment of junior counsel.