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Can it be said that a challenge which is sufficient to interrupt the running of the prescription let us say, on the day before the prescriptive period expires will be sufficient to give force and effect to the obligation of warrandice? Ratio |
As section 4(1) puts it, the interruption occurs when any person having a proper interest to do so makes a claim which challenges the possession in question. Ratio |
As David Johnston, Prescription and Limitation of Actions (1999) points out at p 296, there is nothing in the section to say that it matters who challenges possession, so long as he has a proper interest to do so. Ratio |
In Scammell v Scottish Sports Council 1983 SLT 462 Lord McDonald said that, had it been necessary for him to do so, he would have accepted that the challenger must put forward a competing right to possess by showing that he or someone else had a better title than the possessor. Ratio |
But Johnston suggests at p 296 that this was a rather narrow construction of the sorts of actions which amount to challenges of the required sort, and that it may be that it should not be treated as a universal requirement. Ratio |
I would be reluctant to accept, without further argument, that it is enough for there to be a valid threat for the purposes of the obligation of warrandice that the person who makes the threat should simply be able to assert in some general way that he has a proper interest to do so. Ratio |
But Lord McDonalds narrower construction of the expression in the statute, which Johnston is inclined to reject, has more to commend it. Ratio |
The paradigm case for the purposes of the law of warrandice is a judicial eviction. Ratio |
It is hard to conceive of a case where an eviction would be ordered unless the party by whom the proceedings were brought was able to show that he or someone else had a better title than the grantee, and it is hard to conceive of a case that was brought on the basis that the better title was vested in someone else unle... |
But proof of the possession of an undoubted personal right which was immediately enforceable against the party with the real right in the subjects would seem to satisfy this requirement: see MRS Hamilton Ltd v Baxter 1998 SLT 1075, 1079C-D. Ratio |
On that approach it could be said that there was a measure of harmony between what I would hold was sufficient on the facts of this case to enable the pursuer to claim under the warrandice and what would have been sufficient for JCL to interrupt the running of prescription in the pursuers favour had appropriate proceed... |
Conclusion Ratio |
I would hold that the pursuer will be entitled to the remedy he seeks if he can prove that, when RDL yielded to the threat, JCL would have been immediately able to secure title to the disputed part in its favour by calling upon Mr Lynch to transfer the title that was vested in him and that no proceedings would have bee... |
That is what he now offers to prove to make good his case that RDL would have had no defence to an action for its eviction (see para 9, above) and, assuming that the necessary amendment is made, I think that he is entitled to the opportunity of doing so. Ratio |
For these reasons and those given by Lord Reed I would allow the appeal, recall the Extra Divisions interlocutor, restore the temporary judges interlocutor and remit the case to the Outer House for the hearing of a proof before answer. RPC |
One of the usual terms of a contract of sale of heritable property in Scotland, implied if not expressed, is a warranty against defects in the sellers title to the property sold. Ratio |
Such a warranty is normally contained in a warrandice clause in the disposition of the property. Ratio |
Usually, as in the present case, the clause is what is known as an absolute warrandice, that is to say a warranty against all defects in title which existed when the disposition was delivered. Ratio |
Like other contractual terms, the warrandice clause creates a personal obligation. Ratio |
The obligation is one of indemnity: the seller is obliged to indemnify the purchaser in respect of any loss which he may suffer. Ratio |
The obligation continues until the possibility of adverse claims against the purchaser has been extinguished by prescription (Welsh v Russell (1894) 21 R 769, 773 per Lord McLaren). Ratio |
Contrary to what might be expected, it has long been accepted that a defect in the sellers title to the property is not in itself a breach of the warrandice: no claim arises against the seller unless the purchaser is evicted from the property. Ratio |
The obligation to indemnify created by warrandice is therefore contingent upon eviction. Ratio |
The term eviction is used in this context in a special sense: actual ejection or removal from the property is not required. Ratio |
As Lord McLaren explained in Welsh v Russell (p 773), the obligation is designed to indemnify the purchaser not only against the consequences of complete eviction, but against the loss of the most inconsiderable fraction of the estate, or its diminution in value by reason of the establishment of a burden of any kind. R... |
It is because eviction, in this expanded sense, ceases to be possible once a purchaser with an ex facie valid title has enjoyed uninterrupted possession for the prescriptive period that the obligation continues for that period. Ratio |
This approach to the obligations arising under a contract of sale can be traced back to Roman law, under which the primary obligation of the seller was to deliver possession of the property sold. Ratio |
Provided the purchaser remained in undisturbed possession, any defect in his title could be cured by prescription. Ratio |
Putting the matter broadly, the purchaser therefore had no remedy for a lack of title, if the seller had acted in good faith, unless and until he was evicted in whole or in part by the true owner or, without actual eviction, lost the value of his purchase by reason of a defect in title: if, for example, he had to buy o... |
Some modern civilian systems, such as German law, have departed from this approach and impose an obligation to convey ownership; but Scots law, like French law, adheres to the older tradition, except in relation to the sale of goods, where a different rule, derived from English law, was introduced by statute. Ratio |
The circumstances of the present case have been fully set out by Lord Hope. PRE |
Put briefly, Mr Morris offers in his pleadings to prove that RDL purchased the property in question from Mrs Rae in 2004. PRE |
RDL were subsequently threatened with eviction from the property by JCL, the threat being initially made in 2005. PRE |
The real right to the property was at that time held by Mr Lynch, but his title was voidable at the instance of JCL, the property having been conveyed to him by JCL in 1991 by mistake. PRE |
In order to avoid eviction, RDL paid JCL 70,000, and JCL procured the grant of a disposition by Mr Lynch to RDL in 2006, which was then registered. PRE |
Mr Morris brings these proceedings as the assignee of RDLs claim against Mrs Rae. PRE |
On those assumed facts, a majority of an Extra Division of the Inner House considered that the action must be dismissed, on the basis that the threat of eviction must be made by a person who, at the time the threat is made, has an unquestionable title to the property, entitling him to demand immediate possession: Morri... |
Lord Bonomy dissented on the basis that JCLs threat of eviction could not have been resisted successfully: it would have been a waste of time of time and expense to have resisted eviction when JCL was ultimately bound to succeed (para 17). PRE |
In the course of the present appeal Mr Morris has provided further information as to the facts, in order to avoid any misunderstanding which might otherwise arise from the pleadings. Ratio |
It appears that JCL granted a disposition of the property to RDL in March 2006, in return for the payment of 70,000. Ratio |
In about May 2006 Mrs Rae informed RDL, in her defences to the present action, that the title was held by Mr Lynch. Ratio |
JCL then contacted Mr Lynch, who acknowledged that the property had been conveyed to him in error and in July 2006 granted the disposition to RDL. Ratio |
I would observe that, if JCL had not procured the grant of that disposition (or a disposition by Mr Lynch to themselves, so as to cure by accretion the defect in their title to grant the March 2006 disposition), RDL would have been entitled to recover the 70,000. Ratio |
It would therefore be an over-simplification to say that RDL paid for a worthless disposition by JCL. Ratio |
In effect, there was a tripartite arrangement under which JCL, who had a right to the title to the property and were threatening RDL with eviction, procured the grant of a disposition to RDL by Mr Lynch, who held the title but was bound to divest himself of it when called upon to do so by JCL, in return for RDLs allowi... |
This further information does not appear to me to alter the fundamental features of the case as pleaded. Ratio |
Mrs Rae disputes Mr Morriss version of events, and has also put forward some additional information in the course of the appeal. Ratio |
The question however is whether Mr Morris is bound to fail on the assumed facts which he offers in his pleadings to prove. Ratio |
The fact that his averments are disputed is not germane to that question. Ratio |
The critical question in the appeal, therefore, is this: what characteristics does the law insist on for a threat of eviction, to which the purchaser accedes by buying off the threat, to trigger the sellers liability to indemnify the purchaser under the warrandice? In particular, is it essential that the threat of evic... |
In reaching the conclusion which they did, the majority of the Extra Division relied upon dicta in Clark v Lindale Homes Ltd 1994 SC 210. PRE |
In that case, Lord President Hope concluded (p 220) that since the pursuer did not aver that any action had been taken against her by the party with the competing title, the action should be dismissed; and Lord Morison said (p 224) that a threat of eviction could only come as a result of a demand from the competing tit... |
These dicta must however be read in their context. PRE |
The issue with which the court was concerned was whether the seller could be liable under the warrandice where a defect in title had been identified by the Keeper of the Registers but there had been no action whatsoever taken against the pursuer in consequence of the defect. PRE |
The court was not concerned with the precise interest which had to be held by the competing title-holder, nor with the question whether there might be circumstances in which a person who currently had no title to the property might nevertheless be able to challenge the purchasers title. PRE |
As there does not appear to be any judicial authority directly in point, it is appropriate to begin by considering the relevant principles. Ratio |
Stair states in his Institutions of the Law of Scotland, II.iii.46: The effect of warrandice is, the up-making of what is warranted, in so far as it is evicted, and the ordinary procedure in it is, when any suit is moved whereon eviction may follow, intimation is made to the warrender of the plea, that he may defend; a... |
Also it is effectual for decerning the warrender to free the thing warranted of that which will undoubtedly infer a distress, though it hath not actually done it Yea, warrandice will take effect where there is an unquestionable ground of distress, though the fiar transacted voluntarily to prevent the distress. Ratio |
And though no intimation be made of the plea inferring distress, yet the warrandice taketh effect, unless the warrender had a relevant defence, and could instruct the same. Ratio |
The second sentence in this passage indicates that the sellers liability under the warrandice can be enforced in advance of actual distress, where a defect in title has emerged which will undoubtedly infer a distress. Ratio |
The last two sentences indicate that the seller will be liable under the warrandice where the purchaser buys off the threat of eviction, provided there is an unquestionable ground of distress. Ratio |
The purchasers failure to inform the seller will not prevent recovery under the warrandice unless the seller had a relevant defence to the threatened eviction. Ratio |
These principles have been applied in numerous cases. Ratio |
Two examples can be given. Ratio |
In Downie v Campbell, 31 January 1815, FC, the pursuer had been granted a lease to commence at a future date, with absolute warrandice, by an heir of entail. PRE |
The heir of entail having subsequently forfeited his right to the estate before the commencement of the lease, the next heir declined to implement the lease. PRE |
The pursuer did not contest the threat of eviction and did not intimate the threat to the granter of the warrandice, but was held entitled to recover. PRE |
Lord Meadowbank, with whom the other members of the court agreed, said that the idea that the pursuer should have maintained her title was quite untenable. PRE |
In Menzies v Queensberry Executors (1832) 11S 18, a tenant was held to be entitled to be indemnified under his landlords warrandice after the lease of another tenant, in identical circumstances, had been set aside in a test case. PRE |
The fact that no proceedings had been taken against him, and that he had not intimated the threat to the landlord, was not a bar to recovery. PRE |
Lord Cringletie observed (p 20) that it is clear that any one may abandon a subject where the right is indefensible, and it is not necessary to entitle him to damages as for eviction, that he shall have given intimation, unless the granter could show that he could have defended successfully. PRE |
It is also relevant to note what was said on this subject by Pothier, whose legal writings influenced the development of the Scots law of obligations during the eighteenth and nineteenth centuries. Ratio |
His Trait du Contrat de Vente (1762), in particular, was extensively cited in Mungo Browns A Treatise on the Law of Sale (Edinburgh, 1821). Ratio |
In his treatise, Pothier states at para 84 that if a buyer pays a sum in order to prevent the loss of the estate, which he would otherwise be unable to preserve, he is entitled to recover the amount which he paid from the seller. Ratio |
Pothier also states at para 95 (as translated by L S Cushing, Pothiers Treatises on Contracts, Boston, 1839, Vol 1, p 55): An abandonment of the thing sold by the buyer, though without sentence [ie without a judicial decision], to a third person, who, at the time of the contract, was the owner of it, or, who, at that t... |
Pothier explains the rationale of this approach as follows (para 96): The equity of this maxim is evident. Ratio |
Though the term eviction, in its proper sense, is applicable only to the abandonment, which one is condemned to make, by a sentence of the judge; yet, when it is proved, that the party, to whom the buyer without any sentence makes an abandonment of the thing, has a right to compel it, and that it is made only for the p... |
These various sources agree that the ground of challenge to the purchasers title must be unquestionable, or looking at the other side of the coin that the purchasers right must be untenable or indefensible. Ratio |
Counsel for Mrs Rae argued that this requirement should be interpreted as meaning that there must be no stateable defence to proceedings against the purchaser. ARG |
In support of that contention, reliance was placed upon Palmer v Beck 1993 SLT 485, where Lord Kirkwood said at p 488 that a claim for breach of warrandice could arise if there was a real threat of eviction, as, for example, when the true owner raises proceedings seeking to evict the purchaser and there is no stateable... |
It is to be noted however that this was merely an example: Lord Kirkwood went on to say (ibid) that what constituted a threat of eviction giving rise to a claim for breach of warrandice must depend on the circumstances of each individual case. ARG |
I respectfully agree. Ratio |
Counsel also relied upon a dictum in Holms v Ashford Estates Ltd 2009 SLT 389, where Lord Eassie, delivering the opinion of the court, said (para 45) that one way of putting the requirement that the defect in title be unquestionable was by posing the question whether, were proceedings to take place between the party to... |
In other words, Lord Eassie added, there would be nothing that could properly be disputed or argued in such a hypothetical action on behalf of the person to whom the warrandice has been granted. ARG |
That dictum goes beyond what had been stated in the earlier authorities I have mentioned, and in my opinion it sets too demanding a standard. Ratio |
Pothier requires only that it be proved that the challenger has a right to evict the purchaser: an objective test. Ratio |
Stair can be understood in the same sense. Ratio |
That is also consistent with the approach adopted in Clark v Lindale Homes Ltd. In that case Lord President Hope said (p 216) that the unquestionable nature of the competing title was a fact which could be demonstrated by proof; and his Lordship also observed (ibid) that the warrandice is breached when there is shown t... |
This approach does not depend on whether some argument might be devised by way of a defence to a challenge, but upon whether a defence would inevitably fail. Ratio |
The approach adopted in the passages which I have cited from Stair and Pothier is practical and realistic. Ratio |
If the purchaser of land is facing the prospect of undoubted eviction, even if it is not imminent, he has an immediate practical problem. Ratio |
He cannot, for example, let the land to a tenant for its full value, since he cannot himself grant warrandice; he cannot spend in safety the rent received from any existing tenant, since he is liable to have to account for it to a third party; and he cannot sensibly sow crops, since a third party may be entitled to har... |
It is important for him to be able to resolve the practical problems arising from the defect in his title as soon as he can. Ratio |
Furthermore, where eviction is threatened and the threat is unquestionably capable of being put into effect, the purchaser has no realistic alternative but to accede to it. Ratio |
To defend his title would be a waste of time and money. Ratio |
That may be so even where the person threatening eviction is not currently vested in the property, if for example he has an unqualified right to demand an immediate conveyance of it. Ratio |
In most cases, the threat of eviction will arise because the purchasers right to the property is challenged by a person who has at that time a title to the property. Ratio |
There is not however an invariable requirement that the challenger must have a title, in the ordinary sense of a right of property (whether in rem or ad rem), in order to be able to evict the purchaser, let alone to threaten eviction. Ratio |
One situation where there is no such requirement is where the purchasers title is voidable, and the challenger is a person entitled to have it set aside. Ratio |
In the present case, for example, supposing that Mr Lynchs title was voidable at the instance of JCL, as is averred, and further supposing that he had granted to a third party a disposition of the property other than bona fide and for value, then the third partys title would be voidable at JCLs instance, notwithstandin... |
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