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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Reid v. Grainger & Anor [2002] ScotCS 139 (15th May, 2002) URL: http://www.bailii.org/scot/cases/ScotCS/2002/139.html Cite as: [2002] ScotCS 139

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Reid v. Grainger & Anor [2002] ScotCS 139 (15th May, 2002)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Coulsfield Lord MacLean Lord Hamilton	XA169/00 OPINION OF LORD COULSFIELD in the cause MICHAEL JAMES MESTON REID (permanent Trustee on the estates of CARLENE ROSE BURNETT) Pursuer and Appellant; against HARVEY LEIGHTON GRAINGER and MOIRA ELIZABETH GRAINGER Defenders and Respondents: _______

 

Act: Hodge, Q.C.; Balfour & Manson (for Iain Smith & Co., Aberdeen) (Pursuer and Appellant)

Alt: Gale, Q.C., Webster; Ledingham Chalmers (Defenders and Respondents)

15 May 2002

1. The pursuer and appellant is the permanent trustee on the estate of Carlene Rose Burnett ("the debtor") who was sequestrated on 29 May 1991. The appellant's Act and Warrant was dated 23 July 1991. In this action, the appellant seeks declarator that heritable subjects at 94 Malcolm Road, Peterculter, which were formerly vested in the debtor, are and, have been since the date of the sequestration, vested in him as permanent trustee. The appellant recorded a Notice of Title to the subjects in the General Register of Sasines on 10 December 1991. The debtor had, in October 1990, entered into missives of sale of the subjects to the defenders. On 8 November 1990 a duly executed disposition of the subjects by the debtor was delivered to the defenders in exchange for the purchase price. On 9 November 1990, the defenders took entry to the subjects. They did not, however, record their disposition until one month after the appellant's Notice of Title had been recorded. There seems to be a suggestion, not fully explained, that the delay was due to difficulties over a proposed contract of excambion in relation to areas of garden ground at the subjects, but no explanation has been given for the apparent gross failure of the defenders' solicitors to take appropriate action to protect their clients' position.
2. The action was raised in January 1994. It eventually came before the Sheriff for debate and on 25 July 1995 the Sheriff granted decree in favour of the appellant. Before the Sheriff, the only arguments advanced related to questions of personal bar. The defenders appealed to the Sheriff Principal and the Sheriff Principal sisted the cause pending the outcome of the appeal to the House of Lords in Sharp v Thomson 1997 S.C.(H.L.) 66. After the publication of the decision in that case, the Sheriff Principal heard the appeal on 9 June 1998. Ultimately, on 28 August 2000, he recalled the decision of the Sheriff and dismissed the action. The appellant now appeals to this Court.
3. In Sharp v Thomson the holder of a delivered but unrecorded disposition who had paid the price for, and taken occupation of, heritable subjects successfully maintained that the subjects were not part of "the property and undertaking" of the disponers, who were a limited company, so as to fall under a floating charge which crystallised before the date of recording of the disposition. The central question in the present case is whether the speeches in the House of Lords disclose any ratio or principle which applies to the present case. Two substantial speeches were made in the House of Lords, by Lord Jauncey and Lord Clyde, and the remaining members of the House concurred with both. The question whether there is agreement or disagreement between Lord Jauncey and Lord Clyde has already been much debated in academic and professional literature. The Sheriff Principal took the view that there was no material inconsistency between the speeches of Lord Jauncey and Lord Clyde and agreed with the ratio which counsel for the defenders drew from them. The essence of the view which he took is found in a passage in his Note in which he said:

"Their Lordships' conclusion is that, where the seller of heritage has received payment of the price and delivered a disposition to the purchaser, he has divested himself of all beneficial interest in the subjects to such an extent that they are no longer his property notwithstanding that the title is still recorded in his name.

That view is not wholly novel, having been foreshadowed in the (admittedly non-authoritative) opinions of the learned editors of Goudy on Bankruptcy 4th Ed. at p. 251, footnote (c) and Green's Encyclopaedia of the Laws of Scotland Vol. 13 para. 990. Underlying the reasoning of both Lord Jauncey and Lord Clyde is a clear desire to avoid what they perceive as a grave injustice, namely that if the subjects were regarded as the property of the company on the basis of the recorded title, the receiver would acquire not only the subjects, but the price which the purchasers had paid while, conversely, the purchasers would have neither the price nor the subjects."

4. The Sheriff Principal thus took the view that the conclusions of the House were not restricted to the specific situation of receivership, that their Lordships were seeking to give the word "property", in the interpretation of legislation a meaning which was practical, sensible and equitable as between the seller and purchaser of heritage and that the defenders should enjoy the same protection against the trustee in sequestration as had been given to the purchasers of the heritage in Sharp v Thomson against the receiver.
5. The central question in this case is, as I have said, the proper understanding of the ratio of Sharp v Thomson. I think, however, that, before addressing the question of interpretation of the speeches in Sharp v Thomson directly, it should be pointed out there are differences between the terms of the legislation which is relevant in this case and that which was relevant in Sharp v Thomson. The trustee's claim is founded on section 31(1) of the Bankruptcy (Scotland) Act 1985 which provides:

"Subject to section 33 of this Act and section 91(3) of the Pensions Act 1995, the whole estate of the debtor shall vest as at the date of sequestration in the permanent trustee for the benefit of the creditors; and

(a) the estate shall so vest by virtue of the Act and Warrant issued on confirmation of the permanent trustee's appointment; and

(b) the Act and Warrant shall, in respect of the heritable estate in Scotland of the debtor, have the same effect as if a decree of adjudication in implement of sale, as well as a decree of adjudication for payment and in security of debt, subject to no legal reversion, had been pronounced in favour of the permanent trustee."

6. Notwithstanding the terms of section 31(1), the trustee does not obtain a real right to any heritable property until he records his title in the Register of Sasines (see e.g. McBryde Bankruptcy p.103). Sub-section (4) which provides:

"Any moveable property, in respect of which but for this sub-section -

(a) delivery or possession; or

(b) intimation of its assignation, would be required in order to complete title to it, shall vest in the permanent trustee by virtue of the Act and Warrant as if at the date of sequestration the permanent trustee had taken delivery or possession of the property or had made intimation of its assignation to him, as the case may be."

7. Sub-sections (8) and (9) make provision in regard to items which are and are not to be regarded as included in "the whole estate of the debtor" but the terms of those sub-sections are of no assistance in the present question. It is, however, relevant to notice the provisions of section 33(1) which are as follows:

"The following property of the debtor shall not vest in the permanent trustee - (a) property exempted from poinding for the purpose of protecting the debtor and his family;

(b) property held on trust by the debtor for any other person."

Section 33(1)(b) therefore gives statutory recognition to the exclusion of trust property from the sequestration which was the subject of the decision in Heritable Reversionary Co Ltd v Millar (1892) 19 R.(H.L.) 43.

8. The statutory provisions which were under consideration in Sharp v Thomson were section 462 of the Companies Act 1985 and section 53(7) of the Insolvency Act 1986. Section 462 provided, inter alia,:

"(1) It is competent under the law of Scotland for an incorporated company (whether a company within the meaning of this Act or not) for the purpose of securing any debt or other obligation (including a cautionary obligation) incurred or to be incurred by, or binding upon, the company or any other person to create in favour of the creditor in the debt or obligation a charge, in this part referred to as a floating charge, over all or any part of the property (including uncalled capital) which may from time to time be comprised in its property and undertaking ...

(5) Subject to this Act, a floating charge has effect in accordance with this Part and Part 3 of the Insolvency Act 1986 in relation to any heritable property in Scotland to which it relates, notwithstanding that the instrument creating it is not recorded in the Register of Sasines or, as appropriate, registered in accordance with the Land Registration (Scotland) Act 1979".

9. Section 53(7) of the Insolvency Act 1986 provided:

"On the appointment of a receiver under this section, the floating charge by virtue of which he was appointed attaches to the property then subject to the charge; and such attachment has effect as if the charge was a fixed security over the property to which it has attached ..."

10. The expression "fixed security" was defined by section 70 of the 1986 Act as a security which in a winding up would be treated according to the law of Scotland as an effective security.
11. There are therefore some differences between the legislation governing floating charges and that governing sequestrations. Firstly, a floating charge is not registered in the Register of Sasines and crystallises, and therefore has its statutory effect on the appointment of a receiver, even before notice of that appointment has been registered. Secondly, a floating charge applies to "the property and undertaking" of a company as opposed to "the whole estate" of the debtor. Thirdly, a trustee in sequestration acquires no real right until his Act and Warrant has been registered in the Register of Sasines. One of the issues in this case is whether any of these differences are material.
12. Next, I think that it is useful to try to restate the grounds on which the decision of the First Division in Sharp v Thomson proceeded, without, however, attempting to repeat the reasoning which lay behind them. In brief, the court held that Scots law, like other civilian systems, had adopted a unitary concept of ownership and a clear distinction between real and personal rights, with the consequence that ownership of any property could be transformed only at one moment. In the case of heritable subjects, that transfer took place on registration of a conveyance, and the holder of an unregistered conveyance enjoyed only a personal, not a real, right in respect of the subjects. Scots law, it was held, did not recognise any species of property right intermediate between a real and a personal right. The one major exception to these principles was the case of trust property, in relation to which there was an established rule: but other suggested or apparent exceptions or inconsistencies were capable of explanation or did not affect the substance of the central principles. Accordingly, it was held that to give effect to the claims of the holder of the disposition would breach established principles by recognising an indeterminate right of a proprietary character and would be likely to create serious problems for the development of the law and the operation of the system of registration and transfer of land rights.
13. The decision of the First Division was reversed by the House of Lords, but on a basis which sought, apparently, to leave the fundamental principles of Scots law, as stated by the First Division, intact. As Lord Clyde noted at p.80, no challenge was made in the House of Lords to the basic distinction between real and personal rights. Lord Clyde added:

"It was not suggested that there is any kind of hybrid right somewhere between a real right and a personal right. It was accepted that Scottish law holds to a unitary theory of ownership by which only one right of ownership can exist in respect of any one thing at any one time. The principles recognised in Young v Leith were not disputed.

The appellant's argument before this House does not seek to answer the critical question by founding upon considerations of the law of property but rather rests on the ordinary use of language. This approach leaves aside any analysis into real or personal rights or formal title but looks to a definition of property for the purposes of the terms of the floating charge which relates to the substantial beneficial interests of the purchaser as opposed to the bear title retained by the seller."

14. As both Lord Jauncey and Lord Clyde pointed out, the appellant's argument relied very heavily on Heritable Reversionary Co Ltd v Millar, supra. In particular, reliance was placed upon the speech of Lord Watson at p. 49 in the report. The case was concerned with property of which the bankrupt was a trustee and Lord Watson said:

"Were the subjects in dispute the property of McKay within the meaning of that enactment (Bankruptcy (Scotland) Act 1856) at the date of his sequestration? Upon the language of the statute, that appears to me to be a very simple question, admitting only of a negative answer. An apparent title to land or personal estate, carrying no real right of property with it, does not, in the ordinary or in any true legal sense, make such land or personal estate the property of the person who holds the title. That which, in legal as well as in conventional language, is described as a man's property is estate whether heritable or moveable, in which he has a beneficial interest which the law allows him to dispose of. It does not include estate in which he has no beneficial interest, and which he cannot dispose of without committing a fraud. It is true that the law will sustain a right created by his fraudulent alienation in the person of a bona fide alienee for value, but not, as has been already pointed out, upon the ground that the thing alienated was the property of his author."

15. Lord Watson also observed that the property described in the bankruptcy legislation included no heritable or other estate of which the bankrupt was not the true owner and added that that construction gave effect to the literal meaning of the statutory language and that it was hardly conceivable that the legislature should have intended to confiscate the property of persons other than the bankrupt for the behoof of his creditors by requiring him to execute a disposition in favour of the trustee which but for the statute he could not have granted without being guilty of breach of trust and embezzlement.
16. In the Inner House, Heritable Reversionary Co Ltd v Millar had been treated as a special case depending upon the law of trust although, as the Sheriff Principal observed, in the passage from his Note quoted above, there had been earlier observations suggesting that the decision could be extended beyond trust and possibly might apply in the case of the holder of an unrecorded disposition. There was really no dispute in the argument before us that Lord Jauncey applied what had been said in Heritable Reversionary Co Ltd v Millar in broad terms. It is not, I think, necessary to cite many passages from his speech. It is sufficient to refer to a passage towards the conclusion of it where he said (pps.76-77):

"Property is not a technical, legal expression and neither in the Companies Act nor in the Act of 1986 is there to be found any exhaustive definition of the word. It is therefore appropriate to construe property and undertaking in a practical and realistic way, having regard to the context in which the expression occurs. The purpose of a floating charge is to provide security to the holder in preference to the general creditors and the role of a receiver, once appointed, is to deal with the property of the company to which the floating charge has attached in such a way as to satisfy and the debt thereby secured. There is nothing in the legislation which specifically confers on a receiver the right to do that which the company could not have done. Had Albyn, after receiving the price and delivering the disposition to the Thomsons carried out the same exercise for a third party or granted the standard security over the flat in exchange for a loan, it would have committed a fraud but the ability to commit such a fraud does not amount to a beneficial right of property (Millar). If the respondents were entitled now to sell the flat for which Albyn had already been paid, they would effectively be confiscating that in which the only beneficial interest was in the Thomsons and in the appellants and doing that which Albyn would not lawfully have done. The words or Lord Watson in Millar at page 50 to which I have already referred are here particularly apposite. Had the legislation intended to confer confiscatory powers upon receivers such as are given neither to trustee in bankruptcy nor to liquidators, it is more than remarkable that there is no specific provision to that effect. In my view, when the provisions above quoted refer to property and undertaking they must be given the practical meaning of property which is available for the use of the company, in which it has a beneficial interest, and which it is in law entitled to dispone or subject to heritable security. These provisions are concerned with what is lawfully available to satisfy a company's obligations to the holder of a floating charge and not with formalities of feudal title."

17. In that passage, Lord Jauncey distinguishes between the position of the holder of a floating charge or his receiver and that of a trustee in sequestration or liquidator and refers to the use of the expression "property and undertaking" in the company's legislation. Nevertheless, it was accepted in the argument before us, as it has been in much of the discussion which has followed on the House of Lords' decision in Sharp v Thomson, that Lord Jauncey's approach was one which was easily capable of generalisation and that his speech could bear an interpretation which would lead to the same result being achieved in a case such as the present as was achieved in Sharp v Thomson.
18. Most of the discussion therefore has focused on the speech of Lord Clyde. Like Lord Jauncey, Lord Clyde emphasised that the question in that case was not one of the basic concepts or technical rules which applied in relation to feudal property or feudal title. Like Lord Jauncey, also, he paid particular attention to the decision in Heritable Reversionary Co Ltd v Millar and to the speech of Lord Watson. At p.80, Lord Clyde observed:

"The word 'property' is not a technical term of Scots law. It can take its meaning from the context in which it occurs. It is not disputed that the holder of an unrecorded disposition does not have a real right to the subjects of the conveyance. But it is accepted that while some purposes he may be recognised as an owner or proprietor."

19. Lord Clyde then referred to cases to do with jurisdiction and with estate duty which, as he observed, dealt with different questions from that in Sharp v Thomson but continued:

"But they serve to emphasise the point that 'property' and feudal title may not be synonymous. There is no general requirement to equiparate 'property' with real right of feudal title so as to make these terms equally to extensive."

20. It may be observed in passing that earlier on the same page of his opinion Lord Clyde had pointed out that no challenge had been made to the decision of the Court of Session that no hybrid right between real right and personal right was recognised by Scots law and had remarked that that decision was not questioned. It is not altogether easy to see how that unchallenged principle can be reconciled with the observations just quoted. In any event, Lord Clyde went on to refer to the speeches in Heritable Reversionary Co Ltd and, at p.82, he continued:

"In my view there are sound reasons for preferring a construction of the floating charge which looks to the ordinary use of language rather than a strict application of the principles of property law. The property over which the charge extends is property comprised in the company's property and undertaking. The final word of that phrase seems to me to take one away from any exclusive concentration on the word property, to look at the variations in the identity of the property which may occur during the continuing course of the company's business and to invite a less strict construction which may take account not only of title but of beneficial interest. Even if the subjects must be in the legal ownership of the company for the charge to attach, it does not follow that everything over which it has a real right falls within its property and undertaking. In particular, when the company has, as here, sold a heritable subject and delivered the disposition of it to the purchaser so that the company only retains the bare title, has no right and obligation to do anything more as regards the subjects beyond the negative obligation of refraining from conveying them to anyone else, and indeed no longer has the right of lawful disposal, I do not consider it correct to regard the subjects as part of the company's property and undertaking."

21. That passage strongly suggests that Lord Clyde's decision was confined to the terms of the floating charges legislation and was not intended to extend more generally. That interpretation is supported by a passage at p.83 in which Lord Clyde said:

"The particular construction of the phrase 'property and undertaking' in the floating charge does not in any way affect or erode the ordinary law on the transference of moveables or immoveables. The appellant's argument is concerned not with the methods for transferring real rights but with the meaning of the words 'property and undertaking' in the particular context of the floating charge."

22. Again, at p.84, Lord Clyde referred to a number of cases including Gibson v Hunter Home Designs Ltd 1976 SC 23 and observed:

"As was recognised in the former case the legal effect of a disposition delivered but not followed by infeftment vests in the disponee most of the essential attributes of ownership, and the right which he enjoys is usually called a personal fee. I understand the Lord President in Gibson and indeed the judges who have followed his dicta in that case not to be intending to erode the distinction between a jus in re and jus ad rem or a jus crediti but without analysing in any depth the position of a holder of an unregistered disposition, to be recognising that changes may occur in the substance of the right acquired by a disponee even though the essential quality of his right may remain constant."

23. It has to be said, with respect, that I find that passage in Lord Clyde's speech difficult to follow. Counsel for the respondents in this case recognised the difficulty and could not explain it. Lord Clyde does not, it respectfully appears to me, explain how exactly the effect of an unregistered disposition should be understood or classified. The source of the difficulty which I feel is, I think, that, on the face of it, recognition that an unregistered disposition takes the subjects out of the property and undertaking of the company would seem to entail that it places some kind of property somewhere else. Lord Clyde, however, has expressly disclaimed any recognition of an intermediate right, with the consequence that this part of his reasoning remains obscure.
24. It is true, as counsel for the respondents argued and as the Sheriff Principal has accepted, that there are substantial elements in common between the speeches of Lords Jauncey and Clyde. Both consider that the question is one of statutory interpretation. Both place great emphasis on the speech of Lord Watson in Heritable Reversionary Co Ltd v Millar. Both point to the position of the disponer of property and emphasise the fact that the person who has granted and delivered a disposition, for value, is deprived of the ability to deal with that property without committing a fraud. On the other hand, Lord Clyde's speech is much more qualified than that of Lord Jauncey. In dealing with the question of statutory construction Lord Clyde repeatedly refers to the use of the words "property and undertaking" in the floating charges legislation. As has been pointed out above, he draws attention to distinctions between the position of a trustee and that of the holder of the floating charge or a receiver and his reasoning may be said to betray a reluctance to apply the approach which he had adopted generally, possibly because of a recognition that to do so would create real difficulties for the general law of property. In my opinion, therefore, there are marked differences between the approaches of Lord Jauncey and Lord Clyde and while, as I have observed, Lord Jauncey's speech is capable of being read as leading to the conclusion that the result in the present case should be the same as it was in Sharp v Thomson, Lord Clyde's speech at least leaves the matter open and, very possibly, may be taken to suggest that Lord Clyde would not have reached the same result in the present case.
25. The question then is how we should proceed. It respectfully appears to me that if there is a difference between the speeches or opinions of judges in a superior court, so that their decision is capable of a wider or of a narrower interpretation, then it can only be the narrower interpretation which is binding on an inferior court. We were not referred to any specific authority on this point but it does not appear to me that authority is necessary. The respondents of course submitted that the logic of Lord Jauncey's view, based as it was on the decision in Heritable Reversionary Co Ltd v Millar and supported by Lord Clyde's reliance on the same authority was compelling and should oblige us to take the broader interpretation and apply the same construction to the words "the estate of the debtor" as was applied to the "property and undertaking" of the company. I do not find myself able to take that course. With the greatest of respect to the views expressed by Lord Jauncey, I remain of the opinion which I expressed in Sharp v Thomson to the effect that the property law of Scotland should be regarded as a whole and should be given a logical and consistent interpretation and application across the whole field of property, that to recognise the respondents' argument does involve a recognition of some kind of property intermediate between real and personal which is repugnant to the underlying principles of the law of Scotland and that such a recognition is liable to cause difficulty and inconsistency in the interpretation and application of the law. I understand that the views of the Lord President and Lord Sutherland in Sharp in the Inner House were to the same effect. It respectfully appears to me therefore that the decision of the House of Lords should be regarded as a special decision relating only to the wording of the floating charges legislation and in particular based upon the addition of the words "and undertaking" to the word "property" which may involve, as Lord Clyde thought, some reference to the property available to a company for its business purposes from time to time.
26. I think that in considering this part of the argument it is legitimate for us to take into account the reception of the House of Lords' decision in Sharp v Thomson in Scotland. The question of the effect of an unrecorded disposition was much discussed while the litigation was in progress and academic and professional views were expressed on both sides, although my impression would be that the views which were contrary to the ultimate House of Lords' decision were in the majority. Since the decision, the practical effects, which the House of Lords dismissed as of little weight, have increasingly been recognised and have lead the Law Society of Scotland to seek and obtain a reference of the issue to the Scottish Law Commission. The Scottish Law Commission has issued a consultation paper which recommends that the effect of the decision should be reversed by statute, although it also recommends that there should be provision for a brief period of grace to ensure that the recipient of a disposition should be able to record it without having to rush to the Register within hours of its receipt. In para.1.8 of the paper, the Commission say:

"That those who welcomed the decision of the Court of Session should be unhappy with the decision of the House of Lords was of course to be expected. But what was less expected was the absence, by and large, of support for the new decision. As at earlier stages in the litigation, the decision attracted a substantial body of published commentary. Almost always it was hostile to the approach taken by the House of Lords. Further, as the implications of the decision became more apparent over time, there were signs of an emerging consensus among those whose views had previously been divergent. The consensus, if such it be, has two aspects. It is recognised that the facts of Sharp highlight a problem which needs to be solved; but it is accepted that the solution adopted by the House of Lords is flawed, and probably damaging. The disease is harmful, but the cure more harmful still."

27. It may be added that there are two cases in which judges have indicated a preference for the narrower view of the effect of the decision in Sharp v Thomson , namely Lady Fforde v McKinnon 1998 S.L.T. 902 (Lord Justice Clerk Cullen at 909A) and Fleming's Trustee v Fleming 2000 S.C. 206 (Lord Caplan). In all the circumstances, it seems to me that this Court should not be anxious to extend the ambit of the decision or see it extended and that the narrower view should prevail. In these circumstances, I would decline to apply to the bankruptcy legislation the interpretation of the words "property and undertaking" approved in Sharp v. Thomson in regard to the floating charges legislation. Instead I would take the view that in referring to the whole estate of the debtor in section 31(1) the legislator intended to refer to everything to which the bankrupt has a real right.
28. There are three points which I would like to add. The first is that the Inner House in Sharp v Thomson were aware that the decision could appear hard, particularly as the disponees were purchasers of a dwelling house: but in Sharp v Thomson, as in this case, there is every reason to think that the purchasers had a remedy against the advisers who had allowed them to place themselves or to remain in a situation in which their rights could be defeated. The position in Gibson v Hunter Home Designs was a little different because the contract for the purchase of the house was framed in such a way as to require the purchaser to pay the price at a certain date even if a title was not then available, but the solicitors acting for the purchasers must, I would have thought, at least been bound to advise their clients of the risk they were taking. The second point is that, in my view, it is possible to overemphasise the case of the 'fraudulent sale' in thinking about the equities of the situation. It is true, of course, that once the seller has delivered a disposition, he cannot grant a further disposition without fraud, but the competition in many, perhaps most, of the cases, is likely to be a competition between the holder of the unregistered disposition and other creditors of the disponer who, ex hypothesi, have also given value and may indeed be prior in time to the holder. In bankruptcy, as counsel for the pursuers submitted, someone loses. The overall object of bankruptcy law is to achieve as much equity between creditors as is possible and it is not obvious to me that the recipient of a disposition who delays to take the elementary step of registration deserves preferential treatment, any more than, for example the recipient of a conveyance or assignation in security who similarly fails to perfect his right in the appropriate way. There does not appear to be any recorded case in which a disponee who proceeded to record his disposition with even moderate diligence has been defeated by a later deed. Thirdly, and in a similar vein, it appears to me that too much emphasis can be put on the proposition that if the holder of the unregistered disposition fails in his claim to the property, the disponer retains both the property and the price. In a case like this, it is not the disponer who has the benefit of the property but the trustee, for the benefit of all creditors according to their rights, all of whom have given value in some way and all of whom stand to lose the value they have given without recovery of the consideration they should have received in exchange. Of course, the purchase of a house is a transaction of critical importance for most people, and the interests of such purchasers should be protected: but the effect of holding that the holder of an unregistered disposition could retain the property against a trustee in bankruptcy, or a liquidator would be to extend a benefit equally to commercial purchasers, perhaps less inviting sympathy. It does therefore respectfully appear to me that the equities of the situation are not all one way.
29. Counsel for the appellant proposed an additional argument based upon the fact that the legislature in 1985 specifically recognised, in section 33, the exemption of trust property from the sequestration and submitted that that indicated that the legislature had given statutory recognition to the effects of Heritable Reversionary Co Ltd v Millar and that it could be implied that the intention was that the principle, if any, contained in that decision should not extent to the interpretation of section 31. I do not, however, think that that argument is of any material assistance. At most, it suggests to me that it may have been assumed in framing the legislation that the principle only applied to trust property. Even that, however, is doubtful in view of the fact that the Scottish Law Commission Report which preceded the 1985 Act included proposals for legislation in relation to the effect of an unrecorded disposition. Those proposals were not included in the legislation and the reason for their exclusion cannot be ascertained. On the whole, it seems to me that this chapter of argument involves too much speculation to be of assistance.
30. On the whole matter, I would recall the interlocutor of the Sheriff Principal and restore the decision of the Sheriff.

Reid v. Grainger & Anor [2002] ScotCS 139 (15th May, 2002)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Coulsfield Lord MacLean Lord Hamilton	XA169/00 OPINION OF LORD MacLEAN in APPEAL From the Sheriffdom of Grampian, Highland and Islands at Aberdeen in the cause MICHAEL JAMES MESTON REID (BURNETT'S PERMANENT TRUSTEE) Pursuer and Appellant; against HARVEY LEIGHTON GRAINGER and ANOTHER Defenders and Respondents: _______

 

Act: Hodge, Q.C.; Balfour & Manson (for Iain Smith & Co., Aberdeen) (Pursuer and Appellant)

Alt: Gale, Q.C., Webster; Ledingham Chalmers (Defenders and Respondents)

15 May 2002

1. By letters dated 25, 26 and 31 October 1990 Mrs Carlene Rose Burnett ("the debtor") entered into Missives with the respondents for the sale and purchase of heritable subjects at 94 Malcolm Road, Peterculter, in the County of Aberdeen. The respondents duly paid the purchase price to the debtor and on 8 November 1990 received in exchange an executed disposition by the debtor. On 9 November 1990 the respondents took entry to the subjects. On 29 May 1991 the debtor was sequestrated in terms of section 12(4) of the Bankruptcy (Scotland) Act 1985. The appellant is the permanent trustee on the debtor's estate in terms of an Act and Warrant dated 23 July 1991. He recorded a Notice of Title to the subjects in the General Register of Sasines on 10 December 1991. On 27 January 1992 the respondents recorded the disposition in their favour in the same Register.
2. In this action the appellant seeks declarator that the respondents are not entitled to occupy the subjects because the property in the subjects has since the date of sequestration been vested in him as permanent trustee. The principal legal issue raised in the action is whether, in terms of section 31(1) of the Bankruptcy (Scotland) Act 1985, the "whole estate of the debtor" which vested in the appellant at the date of sequestration for the benefit of creditors, included the subjects at 94 Malcolm Road, Peterculter, in the circumstances which are set out in the opening paragraph of this Opinion. Another, perhaps cruder way of expressing the issue is, which of the two recorded titles prevails. Did the appellant obtain a real right to the subjects when he recorded his Notice of Title?
3. The answers to these questions, as it seems to me, turn upon a proper understanding of the speeches of Lord Jauncey and Lord Clyde in Sharp v Thomson 1997 SC (HL) 66, bearing in mind that the other members of the Appellate Committee agreed with both speeches. If the speeches are to be applied widely, and not to be restricted to floating charges, the subjects in this case could not form part of the whole estate of the debtor once the debtor had delivered the disposition relating to them to the respondents. The recording of title thereafter was immaterial, at least so far as the parties to the action were concerned.
4. The question, of course, is whether Lord Jauncey and Lord Clyde adopted the same approach to the issue before the court in Sharp. I have had the opportunity of reading the Opinions of your Lordships in draft, and I agree with the conclusion reached and for the reasons given, that they did not. Lord Clyde, as I think, was more circumspect in his approach and sought to confine his decision to the particular question, which was whether the property in that case which was, as it happens, also a flat in Aberdeen, was at the relevant time comprised in the "property and undertaking" of the company (Albyn Construction Limited) in terms of a floating charge granted by the company. Following missives and payment of the price by the purchasers, the Thomsons, the company gave entry to the subjects on 14 April 1989. On 9 August 1990 the company delivered an executed disposition of the flat to the purchasers' solicitors. The next day the respondents were appointed as receivers by the holders of the floating charge. On 21 August 1990 the disposition and a standard security granted by the purchasers to the appellants, the Woolwich Building Society, were recorded in the General Register of Sasines. The dispute between the parties was whether on 10 August 1990 the flat was part of the property and undertaking of the company in terms of section 462(1) of the Companies Act 1985. It was held unanimously, reversing the unanimous judgment of the First Division which had upheld the Lord Ordinary's judgment, that when the floating charge crystallised on the appointment of the receivers on 10 August 1990, the flat did not form part of the property and undertaking of the company. That I consider properly to be the essence of the decision, notwithstanding the wider expression of opinion at times by Lord Jauncey in his speech. The view I have expressed is also to be found in cases subsequent to Sharp, and in particular in Lady Fforde v McKinnon 1998 S.L.T. 902 per Lord Justice Clerk (Cullen) p.909A and in Fleming's Trustee v Fleming 2000 S.C. 206 per Lord Caplan at p.215.
5. At first sight it does seem unjust that purchasers of property who have taken entry and who hold an unrecorded disposition of that property, should be deprived of the property which they occupy or at least a return of the whole purchase price they paid, because a trustee in sequestration who has been appointed, subsequently has recorded a Notice of Title to that property. It is impossible to read the speeches in Sharp v Thomson without inferring, I hope reasonably, that that sense of injustice was influential upon their Lordships' thinking and, indeed, their whole approach. Lord Jauncey, at p.70D said:

"The argument for the respondents which was accepted by the First Division produces a most inequitable result for the Thomsons and the appellants who have between them paid the full price for the flat and will be left to rank with other creditors in any proceedings to recover what they have paid. Conversely, the holders of the floating charge will have available as a fund out of which to satisfy Albyn's indebtedness to them, not only so much of the purchase price remains in bonis of Albyn, but also such sums as they may realise on any sale of the flat. Albyn's property for the purposes of section 53(7) theoretically includes both the purchase price and the flat itself. On any view this would be a most unjust result. However, if the undoubted effect of the relevant legislation is to produce such a result, injustice cannot stand in the way of a decision in favour of the respondents. It must then be for Parliament, if so advised, to remedy the situation."

I should add that the reference to section 53(7) is a reference to that section in the Insolvency Act 1986. Lord Clyde was to the same effect on p.82G where he said:

"The present case has some features in it which are, at least as one would hope, unusual. But even if that is recognised, the decision reached in the lower courts appears unattractive and unfair. It would be unfortunate if the law had to be so applied as to compel such a result."

A curious feature in Sharp v Thomson was the lapse in time, between 14 April 1989 and 9 August 1990, before the company executed and the company's solicitors delivered a disposition of the flat to the Thomsons' solicitor. That lapse in time is unexplained. It may, however, be that they would not, in any case, have been without a remedy against their solicitor in these circumstances.

6. In this case, however, the respondents received an executed disposition of the subjects on 8 November 1990 which was not recorded until 27 January 1992. In the sheriff's note there is reference to a contract of excambion being entered into which was intended to be recorded together with the disposition. For that reason the disposition which was sent for recording in Edinburgh on 14 February 1991, was withdrawn. While that may explain some of the delay, it does not explain the failure of the respondents' solicitors to record the disposition until 27 January 1992, notwithstanding the sequestration of the debtor on 29 May 1991. It may not be unreasonable to suppose that in these circumstances the respondents will in any event have a remedy against their solicitors. This plainly is not a case in which there was a race to the Register which the respondents lost and so would have been without such a remedy. Indeed, we were not referred to any reported case which involved a genuine race to the Register.
7. Both Lord Jauncey and Lord Clyde in Sharp drew strong support for their construction of the words "property and undertaking" from some of the expressions of opinion in Heritable Reversionary Company v Millar (1892) 19R (HL) 43 and in particular in the speech of Lord Watson, in the course of which his Lordship said at p.49:

"That which, in legal as well as in conventional language, is described as a man's property is his estate whether heritable or moveable, in which he has a beneficial interest which the law allows him to dispose of. It does not include estate in which he has no beneficial interest, and which he cannot dispose of without committing a fraud."

The ratio of that case, however, is now contained in the provisions of section 33(1) of the Bankruptcy (Scotland) Act 1985 which provides:

"The following property of the debtor shall not vest in the permanent trustee - ...(b) property held on trust by the debtor for any other person."

Counsel for the respondents urged us to follow both Lord Jauncey and Lord Clyde and to give a broad interpretation of the crucial words, "the whole estate of the debtor" in section 31(1) of the 1985 Act, by adopting the same approach as Lord Watson in Heritable Reversionary Company v Millar (supra). In company with your Lordship in the Chair I decline to do so, fundamentally because I am persuaded that Scots law does not recognise any right of property intermediate between a real and a personal right. I am also persuaded by counsel for the appellant that to hold otherwise would create incoherence and uncertainty in the Scots law of property. As counsel expressed it, the Scottish system is a simple and coherent system. If I might say so, the coherency of that system was fully discussed and amply set out in the Opinions of the judges of the First Division in Sharp. Indeed, the Lord President's Opinion in that case might be regarded as an exegesis of the system. As counsel for the appellant pointed out, the court in seeking to do justice between individuals may create uncertainty in the realm of property law, and that should be avoided. It follows from these general observations that in my opinion the property at 94 Malcolm Road, Peterculter, formed part of the whole estate of the debtor upon the recording of the Notice of Title by the trustee in sequestration on 10 December 1991.

8. On the other hand, there is not much doubt that the system is not wholly satisfactory. As the Scottish Law Commission has said, Sharp highlights a problem that needs to be solved. In resolution of that problem it recommended that a brief period should be allowed between receipt of the delivered disposition and the recording of it in the Register. It would follow, of course, that if advantage was not taken of this opportunity to record title, the real right in the property might pass to someone who recorded a title to the property after the period had expired without the disposition being recorded.
9. I would allow the appeal and recall the interlocutor of the Sheriff Principal. The result of that is that the orders sought in the crave of the initial writ will be granted.

Reid v. Grainger & Anor [2002] ScotCS 139 (15th May, 2002)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Coulsfield Lord MacLean Lord Hamilton	XA169/00 OPINION OF LORD HAMILTON In APPEAL From the Sheriffdom of Grampian, Highland and Islands at Aberdeen in the cause MICHAEL JAMES MESTON REID (BURNETT'S PERMANENT TRUSTEE) Pursuer and Appellant; Against HARVEY LEIGHTON GRAINGER and ANOTHER Defenders and Respondents: _______

 

 

Act: Hodge, Q.C.; Balfour & Manson (for Iain Smith & Co., Aberdeen) (Pursuer and Appellant)

Alt: Gale, Q.C., Webster; Ledingham Chalmers (Defenders and Respondents)

15 May 2002

1. By missives passing in the last week of October 1990 the defenders contracted to purchase and Mrs. Carlene Rose Burnett to sell a flatted dwellinghouse in Peterculter. The purchase price was £45,000. On 8 November a disposition duly executed by Mrs. Burnett was delivered to the defenders in exchange for the purchase price. On 9 November the defenders entered into occupation. Some six months later on 29 May 1991 sequestration of Mrs. Burnett's estate was awarded under the Bankruptcy (Scotland) Act 1985. The pursuer was in due course elected as permanent trustee on the sequestrated estate. On 23 July his election was confirmed and the relative act and warrant issued to him. On 10 December 1991 he recorded in the Register of Sasines a notice of title to the dwellinghouse. As at that date the defenders had not presented for recording in the Register of Sasines the disposition of the dwellinghouse delivered to them some 13 months earlier.
2. The issue in this case is whether, in the events which have occurred, the dwellinghouse is comprised within the sequestrated estate of Mrs. Burnett and so available for the benefit of her creditors. The resolution of that issue turns ultimately on the interpretation of sections 31 and 33 of the Bankruptcy (Scotland) Act 1985 but is crucially affected by the decision of the House of Lords in Sharp v. Thomson 1997 SC (HL) 66.
3. Section 31(1) of the 1985 Act provides:

"Subject to section 33 of this Act...the whole estate of the debtor shall vest as at the date of sequestration in the permanent trustee for the benefit of the creditors; and

(a) the estate shall so vest by virtue of the act and warrant issued on

confirmation of the permanent trustee's appointment and;

(b) the act and warrant shall, in respect of the heritable estate in Scotland

of the debtor, have the same effect as if a decree of adjudication in implement of sale, as well as a decree of adjudication for payment and in security of debt, subject to no legal reversion, had been pronounced in favour of the permanent trustee".

Section 31(8) provides:

"In subsection (1) above 'the whole estate of the debtor' means...his whole estate at the date of the sequestration, wherever situated...".

Section 33(1) provides:

"The following property of the debtor shall not vest in the permanent trustee -

(a) property exempted from poinding for the purpose of protecting the

debtor and his family;

(b) property held on trust by the debtor for any other person".

4. In the present action, which was raised in Aberdeen Sheriff Court at about the beginning of 1994, the pursuer seeks declarator that the dwellinghouse has vested in him as permanent trustee. He seeks certain further remedies, including that of ejection of the defenders from the dwellinghouse. After a debate the sheriff granted decree in the pursuer's favour. That debate took place in July 1995 after advising of the decision of the Inner House of the Court of Session in Sharp v. Thomson 1995 S.C. 455 but before that case reached the House of Lords. The debate, which was concerned with matters no longer in issue, proceeded on the basis that the decision of the Inner House represented the law of Scotland. The defenders appealed to the sheriff principal who, in June 1998, heard counsel in the appeal. That hearing took place against the background of the decision of the House of Lords in Sharp, judgment having been issued in February 1997 reversing the decision of the Inner House. The sheriff principal ultimately issued his judgment in the appeal in August 2000. By his interlocutor dated 28 August he allowed the appeal and dismissed the action. He did so essentially because he held that the ratio, as he construed it, of the House of Lords in Sharp ruled the circumstances of the present case and that he was accordingly bound to determine this case to the like effect. Against the sheriff principal's interlocutor the pursuer has appealed to this court.
5. This court is bound, as was the sheriff principal, by the decision of the House of Lords in Sharp. It is also bound by the ratio, as properly construed, of that decision. In so far as the views expressed in their Lordships' speeches go beyond that ratio these views are not, as a matter of judicial precedent, binding on this court but they are entitled to be afforded the greatest respect. Lord Jauncey of Tullichettle and Lord Clyde delivered the leading speeches in Sharp. Each of the remaining members of the Appellate Committee (Lord Browne-Wilkinson, Lord Keith of Kinkel and Lord Steyn) agreed with Lord Jauncey and Lord Clyde that the appeal should be allowed. They each did so for the reasons given by both Lord Jauncey and Lord Clyde. A question, to which I shall return, arises as to the effect of these concurring speeches.
6. In some respects the facts of Sharp bear a remarkable resemblance to those of the present case. In each a seller had contracted to sell to a purchaser an item of heritable property (each a flat in Aberdeen), the seller had executed and delivered to the purchaser a disposition of the subjects, the purchase price had been paid (in Sharp for the most part prior to the delivery of the disposition, in the present case in exchange for it), entry had been taken by the purchaser and an event (or events) in some way arguably bearing on proprietorial rights had occurred before the disposition in favour of the purchaser was presented for recording in the Register of Sasines. At least in one respect, however, the circumstances of Sharp are different from those of the present case. The central question in Sharp (at least as determined in the House of Lords) was the interpretation and application of section 462(1) of the Companies Act 1985; the central question in this case is the interpretation and application of section 31(1) (as read with section 33(1)) of the Bankruptcy (Scotland) Act 1985.
7. The seller in Sharp was a body corporate. Section 462(1) of the Companies Act 1985, whose ultimate ancestor was section 1 of the Companies (Floating Charges) (Scotland) Act 1961, empowers an incorporated body, for the purposes of securing any debt or other obligation, under the law of Scotland to create in favour of the creditor in that debt or obligation a floating charge "over all or any part of the property (including uncalled capital) which may from time to time be comprised in its property and undertaking". Section 462(5) provides that in relation to any heritable property in Scotland a floating charge has effect in accordance with certain statutory provisions, including certain provisions now contained in the Insolvency Act 1986. These have the effect that on the appointment of a receiver the floating charge by virtue of which he was appointed attaches to the property then subject to the charge, such attachment having effect as if the charge was a fixed security over the property to which it has attached. In Sharp a floating charge had, some years before the sale of the flat, been created by the corporate seller over "the whole of the property (including uncalled capital) which is or may be from time to time, while this instrument is in force, comprised in our property and undertaking". On 10 August 1990, the day after the delivery of the executed disposition, receivers were appointed by the creditor in the floating charge. The question was whether, as at 10 August, the flat was comprised within the property and undertaking of the seller. That, for the House of Lords at least, involved essentially a question of construction of the instrument of charge and by implication of the statutory provision, the terms of which it echoed (Lord Clyde at p. 79H-I). Their Lordships answered that question to the effect that the flat was not so comprised.
8. There are in the reasons given by Lord Jauncey and Lord Clyde respectively undoubtedly common elements; there are also, in my view, divergent elements. The common elements include (1) that the issue before the House was one of construction (Lord Jauncey at pp. 76-7; Lord Clyde at p. 79H and p. 82B), (2) that in that exercise the approach of the House of Lords in Heritable Reversionary Co. Limited v. Millar (1892) 19 R (HL) 43 was instructive, particularly as regards the construction in statutes of the expression "property of the debtor" or analogous expressions (Lord Jauncey at pp. 71-2; Lord Clyde at pp. 80-1), (3) that the word "property" was not a technical term of Scots law but took its meaning from the context in which it occurred (Lord Jauncey at p. 76I-77A; Lord Clyde at p. 80) and (4) that the introduction to Scotland of a floating charge as a form of security was innovatory and alien to the pre-existing system (Lord Jauncey at p. 69H-I; Lord Clyde at p. 82D-E). It is also right to note that both judges perceived the result of the construction urged by the receivers, if correct, to be inequitable ("most unjust" - Lord Jauncey at p. 70E; "unattractive and unfair" - Lord Clyde at p. 82G). There are, however, in other passages decided differences of approach between Lord Jauncey and Lord Clyde. Lord Jauncey, in discussing "beneficial interest" in the context of the relative positions of disponer and disponee, tends to move closer to a position that some proprietorial right passes from the former to the latter on delivery of the disposition (pp. 70G - 71D), though he at no stage suggests in terms that the concept of an "equitable interest" in property or any similar concept forms any part of the law of Scotland. Lord Clyde on the other hand notes that there was no challenge in argument to the careful analysis by the judges of the First Division of the basic concepts of Scots law; nor was there a suggestion that there was any kind of hybrid right between a real right and a personal right; the unitary theory of ownership under Scots law was acknowledged (p. 80C). In a possibly difficult passage at p. 84B-C Lord Clyde interpreted certain earlier dicta as not intended to erode the distinction between a ius in re and a ius ad rem or ius crediti. Importantly for the present case was their respective treatments of the position of adjudgers. The leading authority in that field is the somewhat elderly case of Mitchells v. Ferguson (1781) M. 10296. Lord Jauncey at p. 74 described the proceedings there as complex and doubted the factual basis of the receivers' argument in so far as based on it. Lord Clyde (at pp. 83G and 84G) appears, however, to acknowledge that an adjudger could, on recording his decree of adjudication in the Register of Sasines, obtain a better right than a prior disponee for value who had not recorded his disposition, the material distinction between that situation and the situation in Sharp being that the party who had already granted the disposition was only a passive party to the subsequent adjudication process. Both judges appear to recognise the distinction between the position of a receiver and that of a trustee in sequestration and a liquidator (Lord Jauncey at p. 77E-G, Lord Clyde at p. 83A-B); but Lord Jauncey, on one view, appears to regard the trustee in sequestration as unable to acquire a right in preference to a disponee for value, whereas Lord Clyde appears to acknowledge that each of the latter might do so (being not disqualified from participating in a "race to the register" and having won that race).
9. As noted earlier both Lord Jauncey and Lord Clyde placed reliance on the decision and reasoning in Heritable Reversionary Co. Limited v. Millar. The issue there turned on the construction of section 102 of the Bankruptcy (Scotland) Act 1856 which provided that the Act and Warrant of Confirmation in favour of the Trustee "shall ipso jure transfer to and vest in him...for behoof of the Creditors, absolutely and irredeemably, as at the Date of the Sequestration, with all Right, Title, and Interest, the whole Property of the Debtor...". It was there held in the House of Lords (reversing the First Division) that heritage to which the debtor held an ex facie unqualified feudal title in his own name but which, at the date of sequestration, he truly held in trust for the pursuers did not form part of his sequestrated estate. Although the discussion ranged widely the approach of their Lordships was essentially that the House was concerned with identifying the true meaning and effect of the statute under construction and in particular whether "the property of the debtor" in section 102 included the subjects in dispute.
10. On first impression there might be thought to be a close parallel between "the whole property of the debtor" in section 102 of the 1856 Act and "the whole estate of the debtor" in section 31(1) of the 1985 Act (and the expression "The...property of the debtor" in section 33(1)). But on closer examination there is, as Mr. Hodge for the appellant submitted, a material difference. Section 33(1), to which section 31(1) is subject, excludes certain classes of property of the debtor from investiture in the permanent trustee. The property so excluded is, as a matter of language, necessarily property which but for that exclusion would have been "property of the debtor" within the meaning of the opening words of section 33(1) and encompassed in "the whole estate of the debtor" within the meaning of section 31(1). But within the classes excluded is "property held in trust by the debtor for any other person" (section 33(1)(b)) - the very class of property discussed in Heritable Reversionary Co. Limited v. Millar. If Parliament had intended that "the whole estate of the debtor" within the meaning of section 31(1) should have the same meaning as "the whole property of the debtor" in section 102 of the 1856 Act (as construed in Heritable Reversionary Co. Limited v. Millar) it would have been otiose to make the express exclusion in section 33(1)(b). The circumstance that the 1985 Act was framed in the way that it was points, in my view, to an intention that "the whole estate of the debtor" should encompass all property to which the debtor had a "real" right (in the sense of that expression as a matter of Scots property law) but that the result of Heritable Reversionary Co. Limited v. Miller (and of earlier cases there discussed in relation to moveable property) should be preserved by the express exclusion from the estate vesting in the permanent trustee of property held by the debtor solely in the capacity of a trustee under a trust. I am unable to accept the sheriff principal's suggestion that this would involve imputing an intention "to effect such a material change in the law by such devious means". The statutory structure adopted preserves the result of Heritable Reversionary Co. Limited v. Millar and analogous cases in respect of trusts of moveables (for which there can readily be seen to be a policy justification) while departing from its rationale. It provides a solution which is consistent with basic concepts of property law but which allows for express exclusions on policy grounds. A further exclusion provided for is of property necessary to protect the debtor and his family (section 33(1)(a)).
11. It is plain that the Scottish Law Commission in its relative Report (Scot. Law Com. No. 68) considered and favoured a statutory provision which would similarly exclude from the estate vesting in the permanent trustee property in respect of which prior to the date of sequestration the debtor had granted a deed alienating it to a person who had acquired it in good faith and for value (paras. 11.28 - .29). A clause to that effect appeared in the draft Bill appended to the Report (clause 32(3)). It took essentially the same form as that proposed for trust property. In the event clause 32(3) was not enacted. I doubt whether any confident inference as to Parliamentary intention can be drawn from that omission but that does not, in my view, detract from the force of Mr. Hodge's argument.
12. A "property law" approach appears to me to be broadly consistent with the concept (now reflected in section 31(1)(b) of the 1985 Act) that, in respect of the heritable estate in Scotland of the debtor, the permanent trustee's act and warrant has the same effect as if a decree of adjudication in implement of sale etc. had been pronounced in favour of the permanent trustee. Notwithstanding any difficulties which may be presented by the reporting of Mitchells v. Ferguson, at least Lord Clyde in Sharp (at p. 83G-H) appears to have accepted that the interest of the first defenders in that case could have been defeated by an adjudication followed by infeftment prior to the infeftment of a prior disponee. If that is correct, it may lend some support to the view that a statutory provision which in effect equiparates a permanent trustee to an adjudger at common law likewise contemplates the possibility that the permanent trustee might secure a preferable right over the prior disponee. He could only do so if "the estate of the debtor" within the meaning of section 31 encompasses heritable property which the debtor has already disponed but in respect of which the disponee has not recorded a title.
13. The decision of their Lordships' House in Sharp has raised much academic and other discussion. Mr. Hodge drew to our attention the potential consequences for Scots property and insolvency law, both in respect of heritable and of moveable property, if that decision were to be interpreted as applying widely across a range of other situations arising under statute and at common law. Mr. Gale for the respondents,

as I understood him, accepted that a wider interpretation and application of that decision could have implications beyond those concerned with receivership or personal insolvency. I agree that there is a material risk of such consequences if a wider interpretation is adopted. That concern does not permit this court to refrain from adopting and applying such an interpretation if, on a sound analysis, it is the effect of their Lordships' decision in Sharp. But it does, in my view, justify a cautious approach.

14. We were not referred to any authority on the application of the doctrine of judicial precedent to the circumstances of a case such as this. What requires to be identified and applied is the ratio of their Lordships' decision in Sharp. In that case two of their Lordships delivered substantive speeches. These speeches, while containing certain common elements of reasoning, also contain elements of reasoning which are, in my view, importantly different. The remaining three members of the Appellate Committee concurred in both substantive speeches. In the absence of authority directed to the point it appears to me that in such circumstances the binding ratio is those elements of reasoning in the two substantive speeches (and only those elements) which are common to those speeches and with which the remaining members of the Committee by their concurrence in both substantive speeches must be taken to have agreed. That ratio, in so far as going beyond matters concerned with floating charges and the legislation regulating them, appears to me, subject to one possible qualification, to be in essence restricted to the proposition that, in the context of the construction of statutory provisions, the word "property" and analogous expressions (within which I would include "estate") are not technical terms and that in any particular case their proper interpretation depends on the statutory context in which they appear. If that is the true ratio then, having regard to what in my view is the significantly different framework of the Bankruptcy (Scotland) Act 1985, this court is not bound by the ratio of Sharp to hold that heritable subjects which a debtor has disponed for value prior to his sequestration are excluded from his "whole estate" within the meaning of section 31 of the 1985 Act. Being not so bound I am free to hold that they are not so excluded. For the reasons given above I so hold.
15. The possible qualification referred to above is that both Lord Jauncey and Lord Clyde perceived the effect of the respondent's argument in Sharp to be inequitable. Presumably the remaining members of the Appellate Committee thought likewise. But perceptions of inequity must be related to the particular case in hand. At least one distinction between Sharp and the present case which may bear on the equities is that the effect of the Companies legislation was that upon appointment of the receivers (in that case on the day following the delivery of the disposition) the floating charge immediately crystallised to the effect of attaching all property within the scope of the charge; in the present case the grant of the permanent trustee's act and warrant (in this case more than eight months after delivery of the disposition) of itself vested no real right in the trustee, that right accruing only when four and a half months later (the statutory provisions relative to publication of sequestration proceedings presumably having been complied with) he recorded a notice of title prior to any equivalent recording by the disponees. In these circumstances shared perceptions of inequity in Sharp, in my view, form no part of the binding ratio of that case in so far as applicable to the present case.
16. In the whole circumstances I would allow this appeal and grant the orders sought.