McDougall v Heritage Hotels Ltd & Anor [2008] ScotCS CSOH

OUTER HOUSE, COURT OF SESSION

[2008] CSOH 54

OPINION OF LORD CLARKE

in the cause

JACQUELINE McDOUGALL

Pursuer;

against

(FIRST) HERITAGE HOTELS LIMITED and (SECOND) M H APARTMENTS LIMITED

Defenders:

________________

Pursuer: McIlvride; Lindsays W.S.

Defenders: Peoples Q.C., Cowie; Boyds Solicitors

28 March 2008

Introduction

[1] In this action the pursuer seeks the following orders:

"(FIRST) For declarator that the first defenders entered into a binding contract with the pursuer constituted by the pursuer's Reservation Form dated 20 July 2006 and the letter from the first defenders' solicitors, Boyds, to the pursuer's solicitors, A & S Ireland, dated 24 July 2006 in terms of which the first defenders undertook to make a formal offer to sell to the pursuer Apartment 8W, in the west block of 'West Links', North Berwick;

(SECOND) For declarator that the second defenders, as successors to the first defenders' heritable title to the subjects including the said Apartment 8W, in the west block of 'West Links', North Berwick, remain bound by the said contract concluded between the pursuer and the first defenders;

(THIRD) For decree ordaining the second defenders to implement their obligations in terms of the said contract and that by delivering to the pursuer within 14 days, or such other period as to the court shall seem proper, a formally valid offer to sell to the pursuer the said apartment at a price of £360,000 and subject to the first defenders' standard terms and conditions for the sale of apartments at the West Links development;".

The pursuer also seeks, in her fourth conclusion, interdict in the following terms:

"For interdict of the defenders and any other persons acting on their behalf from (i) advertising Apartment 8W, 'West Links', North Berwick for sale, or (ii) purporting to confer on any party other than the pursuer an option to purchase the said Apartment, or (iii) entering into a contract with any party other than the pursuer for the sale of the said Apartment, and that until the pursuer has rejected, or has failed to accept in formally valid writing within fourteen days of its delivery to her, whichever is the earlier, a formally valid offer to see to her the said Apartment at a price of £360,000 and subject to the standard terms and conditions for the sale of apartments at the West Links development".

On 23 February 2007 Lord Mackay of Drumadoon pronounced interim interdict in favour of the pursuer in terms of the fourth conclusion.

[2] The case came before me for discussion on the procedure roll. There is little dispute among the parties as to the factual background to the dispute. That background is as follows.

The factual context

[3] The first defenders are property developers. They constructed a development of residential properties in North Berwick known as "West Links". They advertised the properties for sale in 2006. Their selling agents were Stewart Saunders Limited. On or about 20 July 2006 the pursuer contacted Stewart Saunders to say that she was interested in purchasing one of the properties, namely apartment 8W. At that time that particular apartment was advertised for sale at a price of £360,000.

[4] Stewart Saunders Limited invited the pursuer to reserve the apartment in question by completing a document described as a reservation form and to pay a non-refundable deposit of £500 by means of a cheque drawn in favour of the first defenders' solicitors, Messrs Boyds. The pursuer, at the same time, was given a leaflet bearing to set out what was described as "the reservation procedure". In due course the pursuer completed and returned to Stewart Saunders a reservation form in respect of the apartment in question, together with a cheque for £500 drawn in favour of Boyds Solicitors. By letter dated 21 July 2006, Stewart Saunders Limited confirmed receipt of the form and the cheque. They also confirmed the location of the apartment in which the pursuer was interested. On or about 24 July 2006 Messrs Boyds Solicitors wrote to the pursuer's then solicitors, A & S Ireland, confirming receipt of the pursuer's cheque. Messrs Boyds encashed that cheque. The reservation procedure leaflet is produced as 6/1 of process. The reservation form is lodged as 6/2 of process. The letter from Stewart Saunders of 21 July 2006 is 6/3 of process and the letter from Messrs Boyds dated 24 July 2006 is 6/4 of process. The reservation leaflet, 6/1 of process, was in the following terms:

"Thank you for your interest in West Links Suites, North Berwick. If you wish to purchase a property, the following procedure applies:-

1. You will be asked to fill out a Reservation Form. A cheque for £500 made payable to Boyds Solicitors will be required to secure the reservation and should be handed to the Selling Agents when completing the reservation form, a copy of which will be issued to you as a receipt. This ensures reservation of your chosen property for a period of fourteen days (no refund of the deposit will be made should you subsequently decide to withdraw).

2. The solicitors to the development, Boyds Solicitors, will then send the Missives to your solicitors, and you shall be asked to sign them. During the fourteen day Reservation Period you may organise the relevant valuations/survey reports, as required. Assuming you are satisfied, you will then instruct your solicitors to accept the offer. When Missives are concluded you become bound to purchase the property.

3. A deposit of a further 5% of the full purchase price will fall due on the conclusion of Missives. When paid the deposit will be treated as a payment to account of the purchase price, i.e. the sum due at the date of entry will be the purchase price less £500 + the 5% already paid.

4. The balance of the purchase price will be payable on the Date of Entry, which will be seven days after Heritage Hotels Limited have intimated to you that the Local Authority have passed the Subjects as fit for occupation.

If you have any questions regarding the above procedure, please contact Stewart Saunders Limited on 0131 226 6464."

[5] The reservation form, 6/2 of process, set out the number of the apartment which the pursuer wished to purchase, the pursuer's details and the name and particulars of her solicitors. At the foot of the page it was stated as follows:

"This form does not create a contract between the developer and the purchaser. The purchaser will be required to enter into missives with the solicitors of the developer within 14 days, failing which the reservation fee may be retained and the property sold to another party."

As well as acknowledging receipt of the pursuer's cheque, Messrs Boyds' letter, 6/4 of process, stated:

"We shall revert to you shortly with the pro forma Missives for execution by their client."

[6] In the event, no offer to sell the apartment, 8W, was issued on behalf of the first defenders, within fourteen days of 20 July 2006. The pursuer avers in Article 4 of Condescendence

"In subsequent telephone conversations between A & S Ireland and Boyds between July and September 2006, A & S Ireland pressed Boyds for the offer. They were advised that, despite the delay in a formal offer being issued, the pursuer's reservation of apartment 8W was 'secure'."

[7] On 5 October 2006, a company known as Macdonald Hotels (UK) Limited, who the pursuer avers are an associated company of the first and second defenders, and who trade under the name "Macdonald Hotels & Resorts" wrote to the pursuer. That letter is 6/5 of process. It was in the following terms:

"I write to advise you that we have decided to retain Property 8W until further notice and I apologise for any inconvenience caused. I enclose your reservation fee of £500 given to Stewart Saunders Limited, together with interest of £2.70, totalling £502.70.

I will ensure that Stewart Saunders remains in contact with you to advise when the apartment is to be released. In the meantime should you wish information and prices on available apartments please contact Stewart Saunders directly on 0131 226 6464."

A cheque for £502.70 made out to the pursuer accompanied that letter. The pursuer goes on to aver, in Article 4 of Condescendence, that "in a telephone conversation between A & S Ireland and Boyds on 9 October 2006, Boyds confirmed that their clients contended the pursuer's option to purchase had been cancelled and that the first defenders intended to market apartment 8W again at a higher price." On 10 October A & S Ireland wrote to Boyds, calling upon the first defenders to implement the agreement between the parties. In a further letter dated 10 October to MHL, A & S Ireland inter alia requested MHL explanation (sic) why they wished to cancel the reservation. In their reply dated 23 October MHL stated "We had not intended that reservation forms be completed at this stage" and that "If your client would like to be contacted again when this property is put back on the market, then we would be pleased to instruct our selling agents to provide the details at that time". In a letter dated 24 October Boyds stated "We understand our clients have responded directly ..." The pursuer goes on to aver that further letters of Messrs Boyds from her solicitors remain unanswered.

[8] In Article 5 of Condescendence the pursuer avers that on the morning of 7 November 2006, at a hearing for interim interdict at the instance of the pursuer, she was advised that the first defenders had already conveyed the subject West Links, including apartment 8W, to the second defenders by a disposition dated 16 October 2006. The pursuer subsequently discovered that, on or about 3 November 2006, the second defenders had granted a standard security over the development in favour of the Bank of Scotland. The Bank of Scotland had not been convened as defenders in these proceedings. In Article 5 of Condescendence, the pursuer goes on to aver that

"The second defenders were aware when they accepted the conveyance of the subjects that the first defenders had contracted to make a formal offer to sell Apartment 8W to the pursuer. Separatim, the second defenders were aware that the first defenders had entered into an agreement in relation to Apartment 8W with the pursuer. They accordingly had a duty to make enquiries to establish the nature of the agreement. Had they done so, they would have ascertained that the first defenders had entered into a prior and binding agreement to make a formal offer to sell Apartment 8W to the pursuer. In accepting the conveyance of Apartment 8W the second defenders acted in bad faith."

[9] Article 6 of Condescendence the averments made by the pursuer are as follows:

"In terms of their contract with the pursuer the first defenders became bound to allow the pursuer the option to purchase Apartment 8W at a price of £360,000 and that by making a formal written offer to the pursuer to sell the apartment to her at that price. The pursuer is accordingly entitled to declarator as first concluded for. The second defenders having been in bad faith in accepting the conveyance to them of title to Apartment 8W, the said obligation is now binding upon them. The pursuer is entitled to declarator, and to implement of the contract as second and third concluded for."

The first three pleas-in-law for the pursuer are in the following terms:

"1. The first defenders having contracted to confer on the pursuer an option to purchase Apartment 8W, and that by making a formal offer to sell the property, the pursuer is entitled to declarator as first concluded for.

2. The second defenders, as successors to the first defenders' heritable title to Apartment 8W who acquired their interest in those subjects in bad faith, are bound by the contract entered into with the pursuer by the first defenders and the pursuer is entitled to declarator as second concluded for.

3. The second defenders being bound to make a formal offer to sell the said property to the pursuer, decree ordaining them to do so should be pronounced as third concluded for."

In Answer 7 for the first and second defenders which, in particular, addressed the application for interim interdict, it is averred:

"Further explained and averred, as regards the balance of convenience, that the pursuer has no prima facie case for interim interdict. Esto she has (which is denied), she has a very weak prima facie case and, in such circumstances, the balance of convenience favours refusal of interim interdict. If the pursuer's action fails and the grant of interim interdict results in financial loss to the second defenders, the second defenders will seek recovery from her of their losses."

[10] Both parties sought to discuss their preliminary pleas as to relevancy. The pursuer simply, however, sought, at this stage, to have declared irrelevant the averments just referred to from the word "Esto". In the event, senior counsel for the defenders did not actually seek to defend retention of those averments in the defenders' pleadings and, had that been the only issue between the parties, I would not have admitted those averments to probation. Senior counsel for the defenders, however, sought to have the whole action dismissed as being wholly irrelevant and lacking in specification.

Defenders' submissions

[11] After having referred to the terms of 6/1, 6/2 and 6/4 of process, senior counsel submitted that, when properly construed, these documents did not contain an offer by the first defenders to sell the subjects in question or any binding undertaking that such an offer was to be made. The documents referred to did not, it was submitted, amount to any binding contract between the pursuer and the first defenders. A fortiori there was no binding obligation which had transmitted to the second defenders who had had no dealings with the pursuer. In the third conclusion the pursuer was seeking an order ordaining the second defenders to deliver an offer to sell to the pursuer the apartment "subject to the first defenders' standards and terms and conditions for the sale of apartments at the West Links development". The defenders, in Answer 6, aver that, at the date of the completion of the said reservation form by the pursuer and as at 24 July 2006, "the first defenders had in existence no standard terms and conditions for the sale of apartments at the West Links development". In that state of affairs, the pursuer did not aver what these "standard terms and conditions" were and, accordingly, on what terms and conditions the offer sought was to be made. When the circumstances were properly analysed, any obligation on the part of the first defenders, created as a result of the pursuer completing the reservation form 6/2 of process, and sending her cheque, was, at most, an obligation to negotiate for the purchase of the apartment and not to deal with third parties during a fourteen day period from the receipt of her cheque. Paragraph 2 of 6/2 of process, it was accepted, envisaged the sending of missives at the expiry of the fourteen day period. But the question remained where that took one. The case put forward by the pursuer was not that there had a binding agreement to negotiate which had been wrongfully repudiated, and in respect of which such repudiation, damages were now being sought. Reference was made in that connection to the English case of Walford & Ors v Miles & Anr (1992) 2 A.C. 128. In it, Lord Ackner, with whom all the other members of the House of Lords agreed, said this at page 139:

"There is clearly no reason in the English contract law why A, for good consideration, should not achieve an enforceable agreement whereby B, agrees for a specified period of time, not to negotiate with anyone except A in relation to the sale of his property. There are often good commercial reasons why A should desire to obtain such an agreement from B. B's property, which A contemplates purchasing, may be such as to require the expenditure of not inconsiderable time and money before A is in a position to assess what he is prepared to offer for its purchase or whether he wishes to make any offer at all. A may well consider that he is not prepared to run the risk of expending such time and money unless there is a worthwhile prospect, should he desire to make an offer to purchase, of B, not only then still owning the property, but of being prepared to considered his offer. A may wish to guard against the risk that, when he is investigating the wisdom of offering to buy B's property, B may have already disposed of it, or alternatively, may be so advanced in negotiations with a third party as to be unwilling or for all practical purposes unable, to negotiate with A. But I stress that this is a negative agreement - B, by agreeing not to negotiate for this fixed period with a third party, locks himself out of such a negotiation. He has in no legal sense locked himself into negotiations with A. What A has achieved is an exclusive opportunity, for a fixed period, to try and come to terms with B, an opportunity for which he has, unless he makes his agreement under seal, to give good consideration."

Although senior counsel for the defender did not himself make the point, the case clearly has to be looked at with some care in a Scots context because of the reference to the doctrine of consideration. Nevertheless, as I understood senior counsel for the defenders reason for referring to this case, was simply as an illustration of a claim, unlike what was being sought in this case, for damages for repudiation of an agreement to negotiate. Whatever might be said for such a claim in Scots law, this was not the redress which the pursuer was seeking in this case.

[12] Senior counsel emphasised that the statement in the reservation form 6/2 of process, quoted above, to the effect that it did not create a contract, made it perfectly clear that 6/2 could not be relied upon by the pursuer as creating any contract between herself and the first defenders. The pursuer herself avers that the property in the subjects had been transferred to the second defenders and had been made subsequently subject to a security in favour of a third party. Yet she did not seek reduction of the disposition in favour of the second defenders or the security in favour of the third party. She, nevertheless, sought to turn the clock back to the position as it obtained between July and October 2007. The pursuer's averments in Articles 5 and 6 of Condescendence seemed to be seeking to set up some kind of case against the second defenders, relying on the law as set out in the case of Rodger (Builders) Ltd v Fawdry 1950 SC 483. In the present action, however, the most the pursuer was seeking to establish was, it seemed, that the first defenders had an obligation to grant her an option. In the case of The Advice Centre for Mortgages v McNicoll 2006 SLT 591, the Lord Ordinary held that an option to purchase in a lease did not transmit against singular successors of the landlord upon the purchase of the leased property and the purchaser of the property was not affected by it, even though they may have had knowledge of it prior to the purchase. The obligation had been one personal to the original landlord and since there was no breach of any existing obligation by the seller, the rule in Rodger v Fawdry had no application. Senior counsel for the defenders submitted that similar reasoning should be applied with regard to the circumstances of the present case.

[13] Lastly, it was submitted on behalf of the defenders that if the pursuer had something in the nature of an option to purchase the subjects, any obligation to create such would require to meet the requirements of section 1(2) of the Requirements of Writing Act 1995 by being subscribed by or on behalf of the first defenders. Section 1(2) requires a written document complying with section 2 of the Act for the constitution of "a contract or unilateral obligation for the creation, transfer, variation or extinction of a real right in land". In the absence of any such writing in the present case (and there was no reference by the pursuer to such writing), any alleged obligation on the lines that may be contended for was unenforceable. For each and all of these reasons the action as pled, it was submitted, was irrelevant and should be dismissed.

Submission for the pursuer

[14] In opening his submissions for the pursuer, junior counsel said that, in these proceedings, all that the pursuer was attempting to achieve by her first and third conclusions was "the receipt by her of an offer to sell the apartment on certain terms and conditions". He contended that there was provided sufficient specification by virtue of the reference to the first defenders' standard terms and conditions. The pursuer was seeking to have the second defenders make an offer to her in the same terms and conditions as the first defenders had been bound to make. The first defenders must have known what their standard terms and conditions were and "by reason of the association between the first defenders and the second defenders, the second defenders should be sufficiently aware of the terms and conditions in question".

[15] Counsel went on to submit that if, at proof, it were to be established, as averred by the first defenders, that there were no standard form terms and conditions which were applicable to the purchase of this apartment at the material time, it would, he said, be open to the court to hold that an offer should be issued on conditions "necessary for the sale of heritage". While it was accepted, on behalf of the pursuer, that a personal obligation would not normally be enforceable against singular successors there was, it was said, a long-standing exception, if the singular successor had knowledge of a personal obligation which was capable of being converted into a real right. In such a case, and in certain circumstances, the personal obligation may be enforceable against the singular successor. Junior counsel for the pursuer accepted that even if an offer to sell the apartment was made to the pursuer, she would not be bound to accept it and that all that would arise, then, in law, would be an opportunity to negotiate. He also accepted that a practical difficulty as to how the offer could be translated into an unencumbered real right arose standing the position of the bank, since there was no question of reduction by the pursuer of the bank's standard security. This practical difficulty, it was said, however, should not prevent the pursuer obtaining the orders which she presently seeks.

[16] In reverting to discuss whether his submissions regarding the enforceability of the alleged obligation to issue an offer as against the second defenders, counsel referred, in the first place, to the case of Petrie v Forsyth (1874) 2 R. 214. That case is authority for the proposition that where there is a binding contract for the sale of heritage, capable of creating legal rights, any subsequent sale of the subjects may be reduced by the original purchaser if the new "purchaser" was aware of the prior sale. Reference was also made to the case of Stodart v Dalzell (1876) 4 R. 236. In that case the purchaser of a piece of ground, a part of which had, to his knowledge, been occupied by a person other than the seller for a long period of years, and who admitted that he knew that the occupier had some sort of right in the land and had erected buildings on it, was held to have been put sufficiently on his enquiry as to the nature of the occupier's right as to personally bar him from founding on his own completed title to the lands as excluding a personal right held by the occupier in the dominium utile of the portion possessed by him. Counsel for the pursuer submitted that similar considerations, as weighed upon the court in that case, should be applied in the present case to bar the second defenders from resisting the order sought against them.

[17] I was next referred to the case of Davidson v Zani (1992) S.C.L.R. 1001. In relying upon the case, counsel for the pursuer was faced with a difficulty in that the decision in that case was expressly held, by the Lord Ordinary in the case of The Advice Centre for Mortgages (supra), to have been wrongly decided. Nevertheless, I was invited by counsel to take a different view of the case. In that case the pursuer was the tenant of certain shop premises. The missives of lease granted the pursuer an option to purchase the subjects, exercisable in the three month period immediately prior to the termination of the lease at a price to be determined in accordance with certain provisions in the missives. The lease itself did not incorporate a clause dealing with the tenant's option to purchase. Prior to the date when the pursuer could exercise the option, the third party concluded missives with the landlord for the sale of the subjects. The attention of the third party's solicitor was drawn to the existence of the option prior to the conclusion of the contract to purchase the shop. The sheriff principal, following the sheriff, held that the obligation in the missives was capable of being converted into a real right by being recorded in the Register of Sasines and, as such, transmitted against a singular successor of the landlord who had knowledge of it. The sheriff principal's reasoning is to be found at page 1004 where his Lordship said this:

"The obligation is indeed solvendum in futuro, but it is still debitum in praesenti. So far as the time-limit is concerned, therefore, there was nothing to prevent the existence of the pursuer's right at the relevant date. Neither does the other qualification on the option to purchase, namely that the obligation became prestable only when the pursuer chose to exercise the option, suspend the coming into being of obligation until that event happened. If an obligation is qualified only by a potestative condition, such as the condition that the creditor can exact performance when he chooses, then, from the point of view of the debtor in the obligation (in this case the second and third defenders, and now the first defender), the obligation is in existence from the time of its constitution, although performance is not is due until this is demanded by the creditor. If, for example, a bank is indebted to a customer on current account, the bank is bound to pay only when payment is demanded by the customer, but the obligation exists from the time when the account is opened and not just from time of the demand (Macdonald v North of Scotland Bank at p. 381). There was therefore already in existence, at the time when the sale to the first defender was made, a completed contract under which the second and third defenders were under an obligation to sell the subjects to the pursuer on demand made by her in the last three months of the lease, and the pursuer had a right corresponding to that obligation. Because the first defender knew of the existence of that contract, her purchase of the subjects was not in bona fide, so that she did not take the conveyance free from the personal obligation affecting the land incurred by the second and third defenders. The pursuer is therefore entitled to enforce the option to purchase against the first defender."

The Lord Ordinary in The Advice Centre for Mortgages case differed from the approach taken by the sheriff principal in Davidson on the basis that the sheriff principal had failed to give the decision of the court in the case Bissett v Magistrates of Aberdeen (1898) 1F 87 its proper significance. The Lord Ordinary, at page 601 para. 38, referred to the case of Bissett in the following terms:

"In Bissett v Magistrates of Aberdeen, supra, the granters of a lease of heritable property for 999 years bound themselves to deliver to the tenant and his heirs, executors and successors at any time they should desire the same a feu charter of the subjects of let. It was held that the option to purchase was not binding on singular successors. Lord Trayner stated (at 1898 1F, p. 90):

'Here the obligation is to put an end to the right created by the lease, and to substitute for it another and different right - to substitute a right of absolute property for a right merely to use. I agree with the Lord Ordinary in thinking that the obligation to grant a feu right was personal to the granter of it, and that it did not transmit against singular successors'."

At para. 39 the Lord Ordinary continued:

"In my opinion Bissett is clear authority that an option to purchase is not normally inter naturalia of a lease. No doubt the reason is that identified in Bissett, namely that it involves converting the rights of a tenant into a wholly different relationship, one of feu or, today, outright ownership. That is the normal rule, and exceptions may exist. One such exception has been identified; that is where it is established by evidence that the custom and practice in leases of a particular nature is to insert a particular form of clause. If that is relied on, however, the party who asserts that a practice exists would require to make appropriate averments. No such averments have been made in the present case. Other exceptions may exist, but none was suggested in relation to the present lease. I accordingly conclude that any option to purchase would not be inter naturalia of the lease, and would accordingly not be binding on singular successors."

At page 605 the Lord Ordinary sought to identify the error on the part of the sheriff principal in his treatment of the decision in Bissett in the following terms:

The sheriff principal held that that decision had no bearing on the case before him, in that it was concerned solely with the construction of the terms of the lease, under which the obligation in question was assumed only by the original lessor without reference to successors. In my opinion the decision in Bissett goes significantly further than that. Lord Moncreiff makes it clear that the ground of decision was that an option to purchase, involving an obligation to alter the tenure from one of lease to one of feu, was not inter naturalia of a lease. The result of that was that it would not affect singular successors. The brief opinion of the Lord Ordinary, Lord Kyllachy, is to the same effect. Lord Trayner agreed with the Lord Ordinary. He was the only judge to refer to the feature of the clause relied on by the sheriff principal, namely that it did not refer to the heirs and successors of the lessor. He only did so, however, in the course of distinguishing an old case, and this feature was only one of the grounds for distinguishing that case; indeed, he doubted whether the case would now be followed. In my opinion the sheriff principal did not give Bissett its proper significance. Bissett is of course binding on me. I accordingly conclude that Davidson v Zani was wrongly decided."

Counsel for the pursuer argued that in The Advice Centre for Mortgages case it was clear that the Lord Ordinary had reached the decision he did having regard to the important feature that there was no antecedent obligation in existence at the time of the subsequent sale which was transferable to singular successors. Moreover, insofar as his Lordship held that the case of Davidson was wrongly decided, it was because the sheriff principal had failed to give sufficient weight to the case of Bissett, which turned on special features of the law of leases. This did not arise in the present case. In the present case, the pursuer avers in Article 2 of Condescendence, page 7B that "the apartment was offered for sale at a price of £360,000". Counsel for the pursuer submitted that any reasonable person reading what was said in 6/1 of process would have considered that it was stating that if the procedure set out there was followed, a binding agreement would be concluded. I understood counsel, thereafter, to contend that the completion of the reservation form by the pursuer brought into existence an obligation on the part of the first defenders to issue the pursuer an offer to sell to her the apartment. Counsel was asked what was to be made of the wording at the foot of the reservation form; his response was to say, as I understood him, that these words were not fatal to the position being argued on behalf of the pursuer since clearly there was a contract whereby the pursuer paid £500 in return for something. It was too early to conclude, without enquiry into all facts and circumstances, that any contract, so concluded, was simply creating a right in the pursuer to have the property reserved for her, in the sense that the first defenders would not deal with another person in relation to a possible sale of the apartment during the fourteen days specified.

[18] Counsel submitted that upon the sending of the letter 6/4 of process, the parties had agreed that for the consideration of £500 the pursuer was entitled to receive an offer to sell the property to her, on condition that she accepted it within fourteen days.

[19] The confusion in the mind of counsel for the pursuer, which seemed to emerge as his submissions developed was, perhaps, fully exposed when he came to address the question of whether or not, whatever the obligation he was founding upon was, it was necessary for the pursuer to meet the requirements of the (Scotland) Act 1995. Initially his position was, it seemed, that he accepted that the requirements of section 1 were attracted and the issue was simply whether or not it could be said that the letter of 24 July 2006, 6/4 of process, was "a writ of the granter". The approached being advanced was that the word "granter" was not being used in a technical sense in section 2 of the 1995 Act and could cover an agent for his principal. However, in discussion with the court, counsel for the pursuer then altered his position and contended that section 1(2) of the 1995 Act did not apply because he was not relying on a contract, or unilateral obligation, for the creation, or transfer of a real right in land. The obligation which arose from the agreement was to provide an offer. Counsel for the pursuer's ultimate overall approach was to urge the court that it would be premature to decide the question of the relevancy of the pursuer's case without an enquiry, into all the facts and circumstances.

Defenders' reply

[20] In reply senior counsel for the defenders stated that, while it might have been possible in circumstances like the present, for the pursuer to sue for damages on the basis of the breach of some personal obligation of some kind, the circumstances did not justify the declarators sought in the present case and the order sought against the second defenders in the third conclusion. The court was still left in a position where no specification had been provided by the pursuers as to the terms of the offer which she said she was entitled to receive. Counsel for the pursuer had never faced up to choosing whether there was a concluded bargain, certain in all its material respects, or a contingent or a conditional bargain.

Decision

[21] It is at least common ground, in the present case, that the pursuer never entered a binding contract with the first defenders for the purchase of the apartment. That is a factor, the consequences of which I do not consider that counsel for the pursuer ever fully faced up to or thought through. It means, in my opinion, that as regards the possible sale of the apartment to the pursuer, the parties never got beyond the position of initial negotiations in this respect. Unlike the position in cases such as Rodger v Fawdry, therefore, the pursuer had not gone any distance, in legal terms, to obtain a legally enforceable right in her to the conveyance of the subjects to which now have been conveyed to the second defenders. For that reason alone I consider that counsel for the pursuer was seeking to stretch the line of authority in cases as Petrie and Rodger v Fawdry beyond what it can bear. In this connection it is instructive to recall the dictum of Lord Gifford in the case of Stodart v Dalzell (1876) 4R 236 at 242 which was relied upon by Lord Jamieson, who gave the leading judgement in the case of Rodger v Fawdry. At page 500 Lord Jamieson said this:

"The right to rely on the Register does not extend to one in knowledge of prior obligations or deeds affecting the subjects. In Stodart v Dalzell, Lord Gifford, after saying that an important principle was involved, went on to say (at p. 242):

'That principle is that the singular successor is entitled to be free from the personal obligations of his predecessor, and to take the subject unaffected by any burden not appearing on the title or on the records. But the singular successor has only this right if he is in ignorance of the existence of any obligation or deeds granted by the seller relative to the subject, and if he was in all respects a bona fide purchaser, without notice of any right in any third party or of any circumstances imposing a duty of enquiry.'"

The position reflected in those dicta, clearly, in my view, is very different from the circumstances of the present case. There was no contract in existence, to the knowledge of the second defenders, which gave the pursuer a right in relation to the subjects. At most she had a right to have the opportunity to continue to deal with the first defenders in relation to the possible sale of the subjects. According to the principles of the law of contract, if the first defenders had, in fact, issued an offer to sell to the pursuer, the pursuer would have been entirely free to reject that offer, to accept it, or to issue a counter-offer. Until that process was completed there was no binding contract in relation to the subjects. She had no rights in relation to the subjects. In my judgment, therefore the second defenders' rights in the property are not in any event in any way affected, which seems to be recognised by the fact that the pursuer does not seek reduction of the disposition in their favour. Nor, in my judgment, can what otherwise must only have been, at most, a personal obligation on the part of the first defenders to continue to contract with the pursuer, be said to have passed to the second defenders, who were not parties to any of the dealings in question. The position, it seems to me, is analogous to that which arose in the case of Wallace v Simmers 1960 S.C. 255. In that case the owner of a farm entered into a Minute of Agreement with his son, whereby he agreed to sell the farm to his son, under the reservation of the right of occupancy to one of the cottages on the farm in favour of himself, his wife and his daughter so long as they wished. The disposition of the property granted to the son did not contain a reference to this reservation. The disposition was recorded in the appropriate division of the Register of Sasines. After he sold the farm to his son, the owner, his wife and his daughter occupied the cottage. After the death of the owner and his wife the daughter continued in occupation of the cottage. The son then exposed the farm for sale by public roup. The farm was sold to a purchaser who had been informed before the roup that the cottage was subject to the daughter's right of occupancy. The purchaser completed title to the farm and brought an action to eject the daughter from the cottage. The First Division held that, as the daughter's right of occupancy, was only a personal right, exercisable as such, only against the granter and not capable of being made a real right, it was not valid against a singular successor, even if he had prior knowledge of it and that accordingly the purchaser was entitled to decree of ejection against the daughter. At pages 259-260 Lord President Clyde said this:

"The general rule is clearly stated in Gloag on Contract, (2nd Ed.) at page 178, to the effect that the purchaser is entitled to rely on the title as it stands in the Register of Sasines, and is not bound by any agreement, although binding on the seller, of which he had not notice. But there is an exception to the general rule where the purchaser is aware that the seller has entered into a prior agreement to dispose of the subjects. In each case, the purchaser is bound to enquire into the nature and result of that prior agreement, otherwise he may be barred by disputing it. It is this exception which the defender here seeks to invoke.

But the present case, in my opinion, clearly falls outside the exception. The exception applies in cases such as Rodger (Builders) Ltd v Fawdry and others and Stodart v Dalzell. In the former of these cases, there was a prior contract of sale of the subjects, in the latter an informal acquisition of a right of feu. From the decisions, it is clear that the exception only operates where the right asserted against the later purchaser is capable of being made into a real right. If it is nothing but a mere personal obligation not capable of being so converted, then the ultimate purchaser is not in any way bound or affected by it. Any other result would be surprising indeed, for it would convert what was and his never been anything but a mere personal right into something real and enforceable against a singular successor."

The law, so stated, can, in my judgment, be applied to the case sought to be made by the pursuer against the second defenders in the present proceedings and the result is that it is clearly irrelevant.

[22] I also consider that the case made against the first defenders is irrelevant. While I am prepared to acknowledge that the language of the documents issued by the first defenders in relation to the reservation procedure, and the terms of certain of the correspondence coming from their agents, might have raised certain expectations in the mind of a lay person reading them, the issue is what legal rights, if any, were created thereby which are now enforceable by the pursuer. In my judgment, the only right she obtained in return for paying £500 was that, during a period of fourteen days after signing the reservation form and paying the £500, the first defenders were not to contract with any other potential purchaser in relation to the property or to sell it to any such person. The pursuer was free to elect not to proceed with the contract thereafter, in which event it appears that she was not even entitled to repayment of her £500. I cannot read the documents, as binding the first defender, after that period, to enter a contract for the sale of the subjects with her and, indeed, the pursuer's pleadings are not to that effect. She was made aware throughout that for a contract of sale to be concluded would depend on valid missives being entered into between the parties. Indeed matters went further for, in 6/2 of process, she was expressly informed that completion of the reservation form would not result in a contract between herself and the developers and that the position would be that if missives were not concluded within fourteen days of the reservation being made, the property could be sold to another party. Apart from the identification of the subjects and the price to be paid for them there is, as has been noted, no specification provided by the pursuer of the standard terms and conditions of the first defenders upon which she says an offer should now be made to her. That would indicate to my mind that she was, therefore, unaware of what such conditions were and that the position, therefore, was that matters had never gone to a stage beyond the possibility of a contract being entered into between herself and the first defenders for the sale of the subjects.

[23] I should add although I have spent some time setting out the discussion that took place before me with regard to the decisions in the cases of The Advice Centre for Mortgages and Davidson v Zani, ultimately that discussion seemed to me to be somewhat beside the point since the pursuer is not, in any event, seeking to sue on the basis of an existing valid and enforceable option, created by the first defenders in her favour in respect of the subjects. Although counsel for the pursuer on occasions used the term "option", it is abundantly clear from the pleadings read as a whole that the pursuer does not bring her case on the footing that she seeks to enforce such an option. In that situation there is no need for me to reach any conclusion as to which of the decisions, in the two cases just referred to, is to be preferred but it does appear to me that the criticisms made by the Lord Ordinary in The Advice Centre for Mortgages case of the sheriff principal's decision in the Davidson case appear to have some foundation.

[24] In all the circumstances, I am therefore clearly of the view that there was no legal obligation on the part of the first defenders to make an offer to the pursuer in terms unspecified by her, and, in any event, she has no rights as against the second defenders. Whether or not the pursuer may have had some claim in damages or restitution on the basis of some breach of obligation on the part of the first defenders or because of some misrepresentation on their part, is not for me to speculate upon, since no such claim is pled.

[25] For the foregoing reasons I reach the conclusion that the action as a whole as pled is irrelevant and falls to be dismissed.

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> McDougall v Heritage Hotels Ltd & Anor [2008] ScotCS CSOH_54 (28 March 2008) URL: http://www.bailii.org/scot/cases/ScotCS/2008/CSOH_54_.html Cite as: [2008] CSOH 54, [2008] ScotCS CSOH_54

Scottish Court of Session Decisions