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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> GW Tait & Sons SSC v Taylor & Anor [2001] ScotCS 234 (16 October 2001) URL: http://www.bailii.org/scot/cases/ScotCS/2001/234.html Cite as: [2001] ScotCS 234, [2002] SLT 1285, 2002 SCLR 213

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[1] The pursuers in this action are a firm of solicitors. The action arises out of the purchase of a house in Edinburgh by a Mr and Mrs Taylor from a Mr Thomson in which the pursuers acted for the purchasers. Mrs Taylor is the first defender and Mr Thomson is the second defender. Mr Taylor is not a party to the action. The matter came before me for procedure roll debate on the first defender's first and second pleas-in-law. The second defender did not appear and I was given to understand that it was intended to abandon the action against him.

[2] In about 1991 the pursuers were approached by Mr Taylor to act on his behalf in the purchase of heritable property at 3Belford Mews, Edinburgh. They accepted his instructions and undertook to arrange finance from the North of England Building Society. On 12 August 1991 Mr Taylor applied for a loan from the Building Society. In response to that application the Building Society agreed to advance Mr Taylor £123,500 towards the purchase price of the subjects and instructed the pursuers to act on their behalf in respect of that loan and to obtain security therefor in the form of a Standard Security. There was thus a contract between the Building Society and the pursuers in respect of that loan transaction and the loan was conditional on the Society's obtaining a standard security from Mr Taylor.

[3] By Missives dated 7, 9 and 15 August Mr Taylor offered to buy and Mr Thomson agreed to sell the subjects at a price of £130,000. These Missives created a binding contract for the sale of the subjects. The Missives included a clause obliging Mr Thomson to deliver, in exchange for the purchase price, a duly executed Deposition in favour of Mr Taylor or his nominees. On or about 6 August Mr Taylor instructed the pursuers to take title in the subjects in the joint names of himself and his wife and to prepare the Disposition accordingly. The pursuers did so and on 16 August sent the Disposition to Mr Thomson's solicitors for execution. The duly executed Disposition was delivered to the pursuers on 21 August. This Disposition is referred to by the pursuers on record as the "Mistaken Disposition". On 23 August the pursuers paid the purchase price, apparently by means of bridging finance, to Mr Thomson and thus settled the purchase transaction. The pursuers did not, and have not yet, registered the Disposition. On 27 August, Mr Taylor granted a Standard Security in favour of the Building Society. That Standard Security was registered by the pursuers on 15 May 1992. On 27 August 1991 the pursuers requested a loan cheque from the Building Society. A cheque in the agreed amount was duly provided and was cashed by the pursuers on 8 January 1992.

[4] In Condescendence 5 of the record the pursuers aver that they made an "error". The pleadings read as follows:

It is upon that error that the pursuers claim that the first defender claim that the first defender came to be enriched unjustifiably. In terms of their own pleadings that averment cannot be correct. As at 16 August when they claim to have made an error in respect of the "overlooking" of something in the Standard Security, that document had not even been executed. Not until 27 August, that is to say after the purchase transaction had been completed, was the Standard Security executed. It is plain that there was nothing "mistaken" about the Disposition. The pursuers had complied with their clients' instructions in taking the title in print names of himself and his wife. The seller had complied with his obligation in the missives to grant title in the name of Mr Taylor "or his nominee". Thus at settlement on 23 August no "error" had been made in so far as the purchase transaction was concerned. That was conducted perfectly properly and was by that date completed. The title "Mistaken Disposition" is therefore, quite clearly, an erroneous description.

[5] If the pursuers made any error it could not have been in respect of the purchase transaction. It must therefore have been in respect of the loan transaction between the pursuers and the Building Society. With regard to that transaction, neither the first or second defenders were party. On their own averments the pursuers did not even request a loan cheque from the Building Society until 27 August 1991 and, having obtained such a cheque, did not cash it until 8 January 1992. Their request for a cheque must have been made when the Standard Security was granted. They must have drafted the Standard Security and had it signed by Mr Taylor alone, forgetting the fact that the disposition by that time already signed, sealed and delivered conveyed title to Mr and Mrs Taylor in joint names. Furthermore it is clear from a proper reading of the pleadings that the loan cheque was not used to settle the purchase transaction but rather to reimburse the pursuers or their bankers for some sort of bridging finance. It was not even cashed until 8 January 1992. In my opinion, it is plain, first of all, that there was nothing "erroneous" in the purchase transaction. Where the pursuers made an "error" was in not obtaining clearance from the Building Society for taking title in joint names and consequently in not having a Standard Security granted to the Building Society by both of the new proprietors. In making such an error they failed in their contractual obligations, not to the Taylors or to Mr Thomson, but to the Building Society. Any such "error" therefore occurred in the loan transaction not in the purchase transaction. In making such an "error" the pursuers deprived the Building Society of their proper security rights over the property.

[6] In order to correct this "error" the pursuers drafted a new disposition to be granted by Mr and Mrs Taylor in favour of Mr Taylor alone. They requested the Taylors to sign this "Corrective Disposition" in September 1992. The request was declined. The pursuers then "in a further attempt to correct the error" drafted what they refer to as an "Amended Disposition" in terms of which Mr Thomson would grant title to Mr Taylor alone on the understanding that the original disposition would be destroyed. This "Amended Disposition" was sent to Mr Thomson for signature in February 1993 in promise of a fee of £500 for so doing. He declined to sign it. It should be noted that these "Corrective" and "Amended" dispositions were drafted by the pursuers on their own initiative and without instructions from either Mr or Mrs Taylor. That is admitted on Record. It is further admitted by the pursuers on Record

It should further be noted that the pursuers aver that they original disposition was induced by representations made by Mr Taylor in the breach of some fiduciary relationship which he had with them. As I said earlier, Mr Taylor is not a party to this litigation nor have any steps been taken to recover any loss from him.

[7] As matters turned out, Mr Taylor failed to make any payments due in repayment of the loan. In the latter part of 1992 the Building Society initiated calling-up proceedings. They were unable to trace Mr Taylor's whereabouts and were unable to trace any property of his upon which to do diligence. They were unable, for obvious reasons, to enforce the terms of the Standard Security or to enforce any personal obligation incurred by Mr Taylor. On 1 June 1995 Mr Taylor was sequestrated. The pursuers admit that by their actings the Standard Security was deprived of effect.

[8] In May 1994 the Building Society raised an action in the Court of Session against the pursuers, alleging that they had been negligent in carrying out legal services for them in that they had failed to obtain a valid Standard Security in respect of the loan. Thus, the negligence relied upon related not to the preparation of an unauthorised Disposition but to a failure in carrying out their contractual obligations in respect of the loan. In September 1996 the pursuers settled that action extra-judicially by paying the whole sum sued for plus judicial expenses, in total £152,500. By Deed of Assignation dated 9 August 1996 the Building Society assigned all its rights and entitlement "by virtue of the loan application and under the Standard Security" to the pursuers. That, of course can only relate to the Society's rights against Mr Taylor since only he signed the Standard Security, although the assignation purports to assign any rights which the Society has against Mrs Taylor also (No. 6/5 of Process).

[9] The pursuers go on to aver that "as a result of the loan" Mrs Taylor has been enriched. They say that "but for the loan and Mr. Taylor's instructions to the pursuers, the first defender would not have been able to take title and enter the subjects". They further aver that she has been able to live in the subjects since August 1991 without paying rent. They therefore claim rent in respect of that right of occupation of the sum of £76,824 being the sum first sued for, plus a payment of £900 per calendar month from 1 July 2000 onwards. The balance of the sum paid in damages by the pursuers to the Building Society they originally claimed from Mr Thomson.

[10] In addition to the various denials and arguments made for the first defender on Record, she also avers that any right of action against her has prescribed This action was not served upon her until 25 February 1999. The pursuers' action is based upon unjustified enrichment. If any such enrichment occurred, it occurred on 8 January 1992. At the latest, the pursuers were aware of any such unjustified enrichment in February 1992 when the Keeper of the Register refused to register "the Deeds", or by 8 September 1992 when they sent their Corrective Disposition" to Mrs Taylor for signature.

[11] In answer to that, the pursuers aver that the present claim is founded on the "payment of the judicial settlement" by the pursuers to the Building Society in about September 1996. Accordingly the quinquerinium does not expire until September 2001. In any event, they argue that the obligation founded upon in the present action is one related to land, to which the quinquerinium does not apply in terms of the Prescription and Limitation (Scotland) Act 1973, Schedule 1, Sub-section 2(e).

[12] The pursuers claim in this action is that the first defender has been unjustifiably enriched by reason of the expenditure made by the pursuers under and in terms of the extra-judicial settlement. Counsel for the first defender relied upon the general description of unjustifiable enrichment in Dollar Land (Cumbernauld) Ltd v C.I.N. Properties Ltd 1998 SC HL 90 where, at 998 J Lord Hope referred with approval to a dictum of Lord Rodger in the same case in these terms:

Taking each of these elements in turn, counsel submitted firstly that it had not been demonstrated on the pursuer's pleadings that any enrichment on the part of Mrs Taylor had been at the expense of the pursuers (that is the Building Society who had assigned their rights). Indeed, it was plain that any benefit to Mrs Taylor had been acquired when her husband effectively gave her a one-half share in the property when he instructed that the title be taken in joint names. That had occurred before the Building Society were even involved. Secondly, he submitted that the pursuers had failed to demonstrate in their pleadings that Mrs Taylor had no legal justification for retaining the benefit she had acquired. Mrs Taylor was entitled to be a one-half pro indiviso proprietor because Mr Taylor had directed it should be so even before the Building Society had been involved. If her share had been a gift from Mr Taylor why should she not keep it? Similarly, if she had in the some way paid Mr Taylor for it why, again, should she not keep it? Thirdly, even if Mrs Taylor had been enriched at the expense of the pursuers, and even if there was no legal justification for retention, counsel questioned what was equitable at this stage that Mrs Taylor be made to pay rent to the pursuers from August 1991, especially where the fault here lay with the pursuers. Why should Mrs Taylor pay the pursuers for their failings? The pursuers accepted both on the pleadings and in settling the Building Society's action that they were the authors of their own misfortune. They failed properly to perform their contract with the Building Society. Why should Mrs Taylor pay for that? Counsel submitted that the pursuers failed in relation to each branch of the test laid down by the House of Lords. He suggested that this case could properly be viewed simply as a loss to the Building Society stemming from their lending a bad debtor. Viewed in that light the proper remedy lay in recovery of the debt from Mr Taylor. No such remedy had ever been pursued. It was clear that Mr Taylor had been enriched both to the extent of a one-half share and also to the extent of getting an unsecured loan. Why, counsel asked, should Mrs Taylor pay when the primary obligant, the debtor in the loan transaction, was left untouched? Counsel for the first defender submitted that the case against the defender was irrelevant. He suggested that the appropriate test was that "no Lord Ordinary could properly hold it equitable to grant the remedy sought" and that the pursuers had failed to pass the test.

[13] Counsel for the first defender then turned to the question of prescription. According to him, the cause of action arose from the date of the wrong occasioned to the Building Society by the pursuers' breach of their contractual condition to deliver a valid Standard Security. The Building Society suffered loss when they paid the loan cheque to the pursuers or at least when the pursuers encashed the cheque. At least from then the pursuers had breached their contract with the Building Society to deliver a valid Standard Security in exchange for the loan cheque. The Building Society had contracted to get a secured loan but got an unsecured loan instead. That was at the latest January 1992. The pursuers were clearly aware of their breach of contract as is witnessed by their actions in seeking to remedy the situation. In any event, the pursuers claim to base their present action on the unjustified enrichment of Mrs Taylor. On their own averments, that occurred when Mrs Taylor became beneficiary to the right to a one-half share of the property - i.e. in August 1991. Accordingly any right of action arose at that time and the case is clearly time barred, the summons not having been served until February 1999. In these circumstances, the first defenders' first plea-in-law should be sustained.

[14] Counsel for the pursuers began by accepting that his own factual averments did not present an attractive or impressive record of professional behaviour on the part of the pursuers. He accepted that most of the criticisms of their behaviour was correct, but denied any bad faith or fraud. He further accepted that the pursuers could not escape the consequences of their actions simply by relying on the Assignation. They had made "a blunder". He then proceeded to deal with the relevancy of his case which, he said was based on the principle of recompense. He suggested that there were five requirements for the operation of that principle:- 1) enrichment on the part of the defender, 2) improverishment on the part of the pursuers, 3) a connection between those two, 4) an absence of justification or cause for retention by the defender (in this case, at least, in absence of donation) and 5) the question of an alternative remedy. He accepted that the overall question was whether it was equitable to grant the remedy sought. As to the first requirement, enrichment of the defender, he submitted that the pursuers' case against the first defender relied on the factual averments that she enjoyed and continued to enjoy free occupation of the subjects. She had never made any financial contribution for that, whether by way of capital, interest or rent. Therefore, she was enriched in the broad sense. Occupation of premises was a "benefit" for which in the normal case the occupier is liable to pay (Glen v Roy 1882 10R. 239). That principle can only apply in cases of recompense where someone is enriched by the occupation of another's property (Gloag & Henderson, The Law of Scotland 10^th Ed. per Lord President Rodger at 479). Also, counsel suggested, the first defender has been enriched in that she has an unregistered disposition which, if registered, would make her an infeft one-half pro indiviso proprietor. She would have that in addition to nine years free occupation.

[15] As to requirement 2), improverishment by the pursuers, they have paid the cheque in settlement in favour of the Building Society in 1996. They thereby incurred loss, albeit partly through their own fault.

[16] Counsel conceded that the difficulty for the pursuers came in relation to requirement 3), namely the necessity of establishing that the one was consequent upon the other. He accepted that the pursuers failed at procedure roll if no relevant link was pled. He suggested, however, that there was an "indirect link". The loan monies to Mr Taylor were not used by Mrs Taylor to obtain her benefit. She got free occupation because other people paid for it. She has taken benefit from a transaction between two other parties. Counsel suggested that the actio de in rem verso was the relevant legal principle. The first defender was not suggesting that she instructed the pursuers to take the title in joint names, nor that in this context Mr Taylor was her agent.

[17] In relation to category 4), absence of just cause for retention, counsel referred to the general presumption against donation. He submitted that it was for the first defender to aver and prove an intention to give, not for the pursuers to prove that they did not intend to give (Morgan v Guaranty Trust Co. of New York v L.R.C. 1995 SLT 299).

[18] In relation to requirement 5), the question of the availability of another remedy, counsel referred to the case of Varney v Lanark Burgh 1974 SC 245 where it was held that a party could not claim a remedy in equity when they had one in law and had chosen not to exercise it. Counsel submitted that that decision should be treated with great caution and that "inroads" had been made in it by Lawrence Building Co v Lanark County Council 1978 SC 30 and City of Glasgow D.C. v Morrison McChlery & Co 1985 S.L.T. 44. In the present case any alternative legal remedy for recovery of the premises loss lay against Mr Taylor whose address was unknown, who had been sequestrated and who had no assets. Counsel suggested that the story would be very different if he had not been sequestrated. Spending money on a useless decree was not a practical proposition. Public policy would discourage such a course. Counsel submitted that it was fairer that the pursuers should not be out of pocket than that the first defender should retain a benefit for which she had not paid, fairer in all the circumstances, including Mr Taylor's bankruptcy. That was the proposition upon which the pursuers' claim basically relied. Accordingly, he submitted, in practical terms, the only remedy available to the pursuers was the present one. There was no other remedy based on statute or common law, for example the pursuers could not force Mr Taylor to sign a disposition. Counsel also made reference to Bennett v Carse 199 S.L.T. 454 and again suggested that the principle in Varney should be approached with caution. In this case there was no realistic alternative remedy.

[19] Counsel for the pursuers then went on to deal more generally with the principle of recompense which he suggested might conveniently be stated as "non-one should be enriched by his brother's loss". (Morgan Guaranty op. cit. Lord President Hope at 309 J-K). He submitted that this case involved a branch of recompense - the actio de in rem verso - which, though rare, was part of the law of Scotland. It was a remedy available against a third party who derived a benefit from a transaction to which he was a stranger. Some discussion of this remedy was to be found in an article by MacQueen & Sellar to be found in a book "Unjustified Enrichment", edited by Eltzo and Selirage. The fact that no recent mention had been made of this classical remedy by the courts did not mean that it was extinct. Counsel then made reference to Whyte v McIntyre 1841 3D 334, Mellor v William Beardmore 1927 S.C. 597, Peter Wallace v Leith Glazing Co Ltd 1980 S.C.T. (Sh. Ct.) 104 and Morgan v Morgan's J.F. 1922 247. Counsel submitted that the case of Commercial Bank of Scotland v Biggar 1958 SLT (Notes) 46 was an example of the operation of the actio. It demonstrated a flexible approach to try to ensure that a party does not get a windfall benefit from a contract between two other parties. He submitted that that was a proper approach in the present case where the first defender obtained benefit from the Standard Security. He accepted that the actio was obscure and could be described as obsolescent.

[20] In my opinion, if such a principle were proved part of the law of Scotland, it does not do so now. Lord President Rodger makes no mention of it in Gloag & Henderson, nor is it compatible with the general principles of recompense described by Lord Rodger and Lord Hope in Dollar Land.

[21] In the whole matter of relevancy, I agree with the submissions of counsel for the first defender. It is plain from the pleadings that any benefit to Mrs Taylor had been acquired when her husband effectively gave her a one-half share in the property when he instructed that the title be taken in joint names. That had occurred before the Building Society were even involved. Secondly, in my opinion the pursuers have failed to demonstrate in their pleadings that Mrs Taylor had no legal justification for retaining the benefit she had acquired. Mrs Taylor was entitled to be a one-half pro indiviso proprietor because Mr Taylor had directed it should be so even before the Building Society had been involved. If her share had been a gift from Mr Taylor which can be presumed as Mrs Taylor was his wife, there is no reason why she should not retain it. Further, if she had in some way paid Mr Taylor for it there is again no reason why she should not keep it. Thirdly, even if Mrs Taylor had been enriched at the expense of the pursuers, and even if there was no legal justification for retention, I can see nothing equitable in the claim that Mrs Taylor be made to pay rent to the pursuers from August 1991, especially where the fault here lay with the pursuers. In my opinion, there is no good reason why Mrs Taylor should pay the pursuers for their failings. The pursuers accepted both on the pleadings and in settling the Building Society's action that they were the authors of their own misfortune. They failed properly to perform their contract with the Building Society. It is hardly equitable that Mrs Taylor should recompense them for that. In my opinion the pursuers have failed in relation to each branch of the test laid down by the House of Lords. As counsel for Mrs Taylor suggested, this case can properly be viewed simply as a loss to the Building Society stemming from their lending to a bad debtor. Viewed in that light the proper remedy lies in recovery of the debt from Mr Taylor. No such remedy has ever been pursued. It is clear that Mr Taylor has been enriched both to the extent of a one-half share and also to the extent of getting an unsecured loan. I see no equitable reason why Mrs Taylor should pay when the primary obligant, the debtor in the loan transaction, is left untouched? In my opinion the case against the first defender is irrelevant. I agree that the appropriate test is that "no Lord Ordinary could properly hold it equitable to grant the remedy sought" and I also agree that the pursuers have failed to pass that test.

[22] As to the question of prescription, in my opinion the cause of action arose from the date of the wrong occasioned to the Building Society by the pursuers' breach of their contractual condition to deliver a valid Standard Security. The Building Society suffered loss when they paid the loan cheque to the pursuers or at least when the pursuers encashed their cheque. At least from then the pursuers had breached their contract with the Building Society to deliver a valid Standard Security in exchange for the loan cheque. The Building Society had contracted to get a secured loan but got an unsecured loan instead. That was at the latest January 1992. The pursuers were clearly aware of their breach of contract as is witnessed by their actions in seeking to remedy the situation. In any event, the pursuers claim to base their present action on the unjustified enrichment of Mrs Taylor. On their own averments, that occurred when Mrs Taylor became beneficiary to the right to a one-half share of the property - i.e. in August 1991. Accordingly any right of action arose at that time and the case is now time barred, the summons not having been served until February 1999. In these circumstances the first defenders' first plea-in-law would fall to be sustained also. However, there remains the question of whether the obligation founded on by the pursuers is one "related to land" in terms of subsection 2(c) of Schedule 1 of the Prescription and Limitation (Scotland) Act 1973. The obligation founded on here is an alleged obligation by Mrs Taylor to recompense the pursuers for loss sustained by them arising out of their professional negligence. Although that negligence related to a loan transaction for the purpose of acquiring land, the subsequent obligation to recompense is not properly, in my view, an obligation related to land at all. Accordingly, subsection 2(c) does not apply.

[23] In the whole matter, therefore, I sustain the first and second pleas-in-law for the first defender and grant decree of absolvitor.