Scottish Court of Session Decisions

At advising on 12th March 1980, the opinion of the Court was delivered by the Lord Justice-Clerk.

LORD JUSTICE-CLERK (Wheatley).—In this case the Sheriff allowed the parties a proof. On appeal the Sheriff-Principal reversed the Sheriff, sustained the defenders' plea to the relevancy and dismissed the action.

The Sheriff-Principal has very fully set out the facts of the case from the pleadings and we find it unnecessary to repeat them. We require to add, however, that since the hearing before the Sheriff-Principal the pursuers have amended their pleadings by adding this averment, viz:—

"In accordance with normal conveyancing practice a condition of the nature of clause 9 contained in missives does not appear in a subsequent disposition of the subjects."

We further point out that, in accordance with the disposition, the subjects were erected in or about 1937 and that the extension was completed prior to the date of the missives. The Sheriff-Principal has also narrated at length the competing arguments deployed before him and has reviewed in detail the catalogue of cases presented to him. For good measure he has canvassed a number of cases from his own researches and ventured into English law and practice. We do not find it necessary to follow this exercise since as the argument developed before this Court the basic law was not in dispute, and the very narrow issue which eventually emerged was whether the pursuers had tabled averments which took this case out of the general rule of law to which reference will be made later and brought it within the permissible exceptions to that rule. The pursuers' case is based on the missives of sale dated 5th and 6th June 1975. It has to be noticed that these missives were between the first-named pursuer and the defenders whereas the disposition subsequently granted on 27th October 1975 was in favour of both pursuers, who nevertheless founded on the missives. No point was made of this by the defenders and we simply mention it for the record.

Clause 9 of the first-named pursuer's offer is in the following terms:

"The seller warrants that all the statutory and local authority requirements in connection with the erection of the subjects of sale and any additions, extensions and alterations thereto have been fulfilled."

The pursuers' case is crystallised in their third plea in law, namely:

"The pursuers having contracted with the defenders as condescended upon and the defenders being obliged to construct said extension in accordance with their obligation in said missives and having failed to do so, the defenders are in breach of contract with the pursuers and decree should be granted for the sum sued for as craved."

Clause 9 was not carried forward into the disposition. Counsel for the pursuers submitted that this was immaterial since clause 9 constituted a personal or collateral obligation on the defenders under warranty to secure that all the statutory and local authority requirements therein referred to were carried out, and that obligation carried forward from the date of the missives to the date of the disposition and beyond. Thus, although it related to the heritable subjects which were to be disponed, it did not require to be incorporated in the disposition in order to define the nature and extent of the heritage to be disponed, and accordingly its absence from the disposition did not affect the prior personal or collateral obligation which remained standing. Counsel for the defenders maintained that clause 9 did not incorporate any personal or collateral obligation to do anything in the future but was simply a statement of the state of affairs or condition of the property as at the date of the missives.

We are of the opinion that the proper construction of the clause, particularly having regard to the words "have been completed," is the one for which defenders' counsel contended. That, in effect, is the short answer to the case, because if there was no personal or collateral obligation of the nature sought to be put on the clause by pursuers' counsel, then it is immaterial to consider the method or methods by which defenders' counsel submitted that a personal or collateral obligation could be established. The fallacy in the pursuers' argument is illustrated by the terms of their third plea in law which we quoted earlier. That plea in law, as stated, assumes that clause 9 refers to a future obligation whereas it is a warranty relating to what has been done in the past, that is, as we have said, the standard of construction of the subjects of sale as at the date of the missives.

However, in deference to the carefully prepared and presented argument by pursuers' counsel we propose to deal with it. It was accepted that the dictum of Lord Watson in Lee v. Alexander (1893) 10 R. (H.L.) 91, which has been repeated and referred to regularly constituted the general rule when his Lordship said at page 96:—

"According to the law of Scotland, the execution of a formal conveyance, even when it expressly bears to be in implement of a previous contract, supersedes that contract in toto, and the conveyance thenceforth becomes the sole measure of the rights and liabilities of the contracting parties."

It was also accepted that there were exceptions to that general rule. Examples of these were (a) where the missives incorporated obligations in relation to moveables which would not be appropriate to be included in a disposition of heritage, (b) where in the missives there was a collateral obligation distinct from the obligation to convey the heritage, and (c) where there was an agreement in writing either in the missives or in a separate document or in the disposition itself that a personal obligation included in the missives would subsist and remain in force even if it was not included in terms in the disposition. Senior counsel for the pursuers, in seeking to extend the exceptions further, posed the question:

"In what circumstances does an obligation undertaken in the missives remain in force after delivery of the disposition?"

; and proceeded to answer it by saying:

"That depends on the intention of the parties."

He accordingly went on to submit that the general rule would give way to evidence that the parties intended that one or more of the obligations in the missives would remain in force after the delivery of the disposition. If, as here, that was not done expressly, it could be done by Implication. The fact that the obligation for which he contended was in the missives was in itself evidence of the intention of the parties to give the pursuers an actionable right if the obligation was not implemented. This was a warranty of the standard of construction contained in a written probative document, and manifestly the only purpose of including it in the missives was to give the pursuers a right of action if at a later date it was discovered that the warranty was not fulfilled. Accordingly, the clear intention of the parties was that the pursuers could found on the warranty given by clause 9 not only during the period between the missives and the granting of the disposition but also after the granting of the disposition. The non-inclusion of the clause 9 condition in the disposition could be explained away by proving the averment added by way of amendment that it was not normal conveyancing practice to include such a condition in the missives in the subsequent disposition.

That argument cannot be sustained. In the first place it subsumes that it could be established that the intention of the parties was to create a personal or collateral obligation to do something to put the property into a certain condition. As previously observed that is not the proper or natural reading of clause 9. Moreover, admittedly no authority could be found to vouch the placing of the circumstances of the instant case into any of the categories of exceptions to the general rule. In none of the reported cases has it ever been suggested that a presumed intention is the test for deciding that an obligation in the missives which is not repeated in the disposition is an exception to the general rule. In fact the proposition ex facie appears to violate the general rule.

We turn now to consider cases which pursuers' counsel prayed in aid in support of their contention. It was said that M'Killop v. Mutual Securities Ltd. 1945 S.C. 166 was an example of a case where evidence was allowed to establish a collateral obligation in connection with property which was the subject matter of the sale when that obligation was contained in the original contract but not in the disposition. That case, however, was quite different on its facts. As averred by the pursuer therein, there was an obligation, collateral to the obligation to convey the property, to carry out the work of completing the premises which were in the course of erection when the initial contract was concluded in a manner which rendered the property in good condition and free from latent defects. In the instant case, contrary to the pursuers' third plea in law, there was no obligation to carry out future work on the premises but simply a warranty that certain works had been carried out in the past. There was no personal or collateral obligation here to be carried into the future and so the general rule applied. The next case founded upon was Young v. M'Kellar Ltd. 1909 S.C. 1340. In Anderson v. Lambie 1954 SC (HL) 43 Lord Reid described that case as an unusual one which might appear to be an exception to the general rule. In Young v. M'Kellar Ltd. the parties had entered into a special agreement whereby the general rule that the disposition supersedes any prior contract relating to the subjects to be disponed was replaced, and the articles of roup were deemed to be the measure of the rights and obligations of the parties. In that situation the disposition was regarded as being merely executorial of the contract constituted by the articles of roup. That was a very special case and is no authority to buttress the general proposition advanced by pursuers' counsel. The last case mentioned by pursuers' counsel to which we propose to refer is that of Wann v. Gray & Sons 1935 Session Notes, page 8. This was an Outer House decision by Lord Wark. It was a case where missives were entered into on certain conditions in respect of a house being or about to be erected and the disposition was not accepted until after the house was completed. Defects later appeared and the purchaser claimed damages from the builder for breach of contract. After a proof Lord Wark awarded damages to the purchaser, holding that the disposition was not the contract but was merely the machinery for carrying out the contract, and that the contract was embodied in the missives. All that the report records is:

"Lee v. Alexander 10 R (H.L.) 91 and Orr v. Mitchell 20 R. (H.L.) 27 distinguished"

There is no explanation of how that distinction was made. Pursuers' senior counsel frankly admitted that this was not a very good case on which to found his proposition. Not only do we fully agree with that but in the absence of any explanation for the distinction made we cannot have regard to what ex facie appears to be a violation of the general rule.

On the other hand, defenders' counsel relied on a number of cases of which we only require to note two. The first was Hughes v. Gordon 1819 1 Bligh's Reports (House of Lords Appeals) page 287. We do not require to go into the full details of that case. It suffices to say that the point in it which had relevance to the present issue was whether property of a certain size carried with it the right to vote. It was held that a conveyance, referring to letters of a preceding treaty, but not specifying what letters, was too uncertain to incorporate the letters and make them part of the contract; and that such letters could not be used in evidence to explain the contract by showing what was intended to be part of the sale and purchase although not expressed in the conveyance. Counsel submitted that this was an example of a case where a provision which went to the quality of the subjects conveyed and which appeared in the initial contract was superseded by the conveyance as is the situation in the present case. Having regard to the view which we have taken on the purport and effect of clause 9 we agree with this submission. With particular reference to the pursuers' averments in condescendence 2 at page 5 A of the Record, viz:

"Explained and averred that the pursuers through their solicitors made all necessary enquiries in relation to the compliance with the warrant (sic) and the provisions in accordance with the normal practice in such transactions,"

defenders' counsel relied on the appropriate passages in the speeches of Lord Chancellor Herschell and Lord Watson in Edinburgh United Breweries v. Molleson 21 R. (H.L.) 10 to offset the pursuers' argument that clause 9 constituted a continuing obligation on the defenders to put right matters which had not been carried out under the warranty. We understand the word "warrant" in the averments cited to be a mistake for "warranty." We do not require to go into that case in detail and content ourselves with saying that the submission made by defenders' counsel thereon seems justified. Our view on clause 9 is that it was an obligation on breach of which the pursuers could found only until the disposition was delivered.

In all the circumstances, therefore, we are of the opinion that the appeal fails. We shall accordingly dismiss it and affirm the interlocutor of the Sheriff-Principal dated 20th December 1978.