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OUTER HOUSE, COURT OF SESSION
[2008] CSOH 160
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A467/07
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OPINION OF LORD
BRODIE
in the cause
KHALID PARVAIZ
Pursuer;
against
THRESHER WINES
ACQUISITIONS LIMITED
Defender:
ннннннннннннннннн________________
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Pursuer: Stewart; Drummond Miller LLP
Defender: Connal QC; McGrigors LLP
19 November
2008
[1] The
pursuer is designed as a merchant resident in Glasgow. The defender was the heritable proprietor of
subjects at 9 Hyndland Street, Glasgow,
registered in the Land Register of Scotland under title number GLA82702 and
occupied as a shop ("the subjects"). The
pursuer concludes, first, for production and reduction of Minute of Preference
and Enactment of Sale dated 29 March 2007 relative to the subjects and, second,
for the repayment by the defender to the pursuer of the sum of г26, 200 with
interest. The pursuer avers that the
defender caused the subjects to be exposed for sale by public roup or a uction,
that the auction took place in London on 29 March 2007 and that the pursuer's
bid of г262,000 was the highest and was accepted by the judge of the roup. In accordance with General Conditions of sale
annexed to the Articles of Roup the pursuer paid a deposit of г26, 200. The pursuer further avers that he entered
into the purchase of the subjects under essential error as to their extent and
it is for that reason that he seeks decree of reduction and repetition. The pursuer explains that when he inspected
the subjects on 28 March 2007 he was shown the ground floor shop premises
containing a front sales area, a storage area, an extension to the rear with
storage space and toilet facilities. The
toilets were accessed through the subjects.
There was no other means of access to the toilets. They were the only toilets in the
subjects. From his inspection the
pursuer reasonably believed that the toilets formed part of the subjects and
that the defender had heritable title thereto.
He reasonably believed the defender was selling the subjects with heritable
title to the full extent occupied by it.
This has not proved to be the case.
The contract of sale of the subjects is, the pursuer avers, accordingly
voidable and he is therefore under the necessity of seeking reduction of the
Minute of Preference and Enactment of Sale signed by him on 29 March 2007 when
his bid was accepted.
[2] The
action came before me on 23 October
2008 on the Procedure Roll for debate. Mr Andrew Stewart, advocate, appeared on
behalf of the pursuer. Mr Connal
QC, solicitor-advocate, appeared on behalf of the defender. Mr Connal's motion was for dismissal on the
ground that the pursuer's averments were irrelevant and lacking in
specification. Mr Stewart moved me to
allow proof before answer.
[3] In
developing his submissions Mr Connal began by emphasising the context. The pursuer had purchased a particular title
at an auction sale. The nature of an
auction is that an item is exposed. The
potential buyers make such enquiries as they wish. Once a bid is accepted the successful bidder
goes away with the item. The auctioneer
gives no guarantee whatsoever. The
situation is one of caveat emptor. It is for the purchaser to have made enquiry
before he "raises his paddle". Because
it is for the purchaser to enquire, he cannot complain if he gets something
other than what it is that he wants.
[4] Mr
Connal then drew my attention to the central documents. Number 7/1 of process was Land Certificate
GLA82702. It was what was carried by
that title that the pursuer had agreed to purchase. Number 7/2 of process was the Articles of
Roup which incorporated by reference the Minute of Preference and Enactment,
the General Conditions and the Special Conditions. Number 7/3 of process was the Minute of
Preference and Enactment of Sale which had been executed by the pursuer and the
judge of the roup on the pursuer's bid of г262,000 having been accepted. Again that incorporated the General
Conditions of Sale and the Special Conditions of Sale. Number 7/4 of process was the General
Conditions of Sale. Mr Connal drew my
particular attention to conditions 12 and 13.
It was Mr Connal's submission that the effect of condition 12 which
included the statement that "the subjects are sold tantum et tale as they exist with no warranty as to descriptions,
extents, boundaries..." threw onto the purchaser the risk of the title being in
any way insufficient to carry the subjects.
Number 7/5 of process was the Special Conditions of Sale. Mr Connal drew my particular attention
to condition 18 which provided that all statements made in any particulars of
sale are made without responsibility on the part of the seller and that any
purchaser should be deemed to have satisfied himself by inspection or otherwise
as to the correctness of each statement contained in the Particulars. In Mr Connal's submission the whole
structure of the contract which was constituted in terms of these documents was
that the purchaser contracted to acquire title number GLA82702, whatever that
might comprise.
[5] Mr
Connal then considered the pursuer's averments with a view to identifying what
was his case. Notwithstanding the terms
of the contract that he had entered into, the pursuer was seeking reduction and
repayment of the deposit on the basis that the defender had no title to the
toilet area which had been occupied by it.
The nub of the pursuer's case was to be found at page 11C to D of the
Closed Record. There it was averred:
"The pursuer
entered into the purchase of the subjects under essential error as to the
extent of the subjects. From his
inspection of them he reasonably believed that the toilets formed part of the
subjects and that the defender had heritable title thereto. The pursuer reasonably believed that the
defender was selling the subjects with heritable title to the full extent of
the subjects occupied. Neither of these
has proved to be the case. The contract
of sale of the subjects is voidable at the pursuer's instance and he is
therefore under the necessity of seeking reduction of the Minute of Preference
and Enactment of Sale dated 29 March
2007."
What the pursuer sought, submitted
Mr Connal, was precisely what he could not do.
He had received the Particulars before the auction. The Particulars referred him to the Conditions
on which the subjects were to be sold.
Accordingly the basis upon which the roup was conducted was known before
the sale and in terms of the Conditions the pursuer is taken to have known
everything about the subjects and the title to them in advance. There was accordingly no relevantly averred
error. The pursuer's unilateral uninduced error took him nowhere.
[6] Mr
Connal then turned to what he submitted were the relevant authorities. As was
demonstrated by Carruthers v Stott (1825) 4S 34, the effect of
articles of roup in terms such as the Articles of Roup in the present case was
to put the purchaser on guard with the result that he had no remedy if things
did not turn out well. Mr Connal
accepted that the decision in Hamilton v Western Bank of Scotland
(1861) 23D 1033 was against him but it was difficult to find any legal
proposition in the opinions in that case.
In Morton v Smith (1877) 5R 83 more questions were
unanswered than answered but it pointed to articles of roup being given effect
unless in what was described as "a clear case of injustice". There was no averment of clear injustice in
the present case. Davidson v Dalziel (1881)
8R 990 was a case about a burden but it demonstrated that it was perfectly
lawful for parties to contract on the basis that the pursuer took the risk that
the title was burdened. Young v McKellar 1909 SC 1340 demonstrated that unilateral error, even if
material, was not of itself enough to justify reduction of an onerous
contract. The recent cases were Steel's Trustee v Bradley Homes (Scotland) Ltd 1972 SC 48 and Royal
Bank of Scotland Plc v Purvis 1990
SLT 262. Neither gave support to the
proposition that unilateral error by itself could be a basis for reducing a
contract.
[7] In
conclusion, Mr Connal submitted that here the pursuer got exactly what he knew
he would get and exactly what he had contracted for. This was not a case where there was material
error. Rather, the pursuer had made
certain assumptions. This was clearly a
case of uninduced unilateral error. The
seller, for its part, specifically did not offer to give more than was set out
in the title. It intended to dispose of
the subjects on these terms. It was not
in error. The sufficiency of the title
or extent of the property were not matters with which it had to concern
itself. Mr Connal confirmed that his
argument did not depend on any speciality to do with auctions but in the
auction cases it had been pointed out that the purchaser has the opportunity to
inform himself of what is of importance to him.
Certainty was of importance in property transactions: Cobb v Yeoman's Row Management Ltd [2008] 1 WLR 1752 at 1775E.
[8] Mr
Stewart began by reminding me of the high test to be met if a case is to be
dismissed by reason of irrelevancy: Jamieson
v Jamieson 1952 SC (HL) 44 at
63. Given the area of law with which it
was concerned it would be particularly helpful in this case for the facts to be
established. As appeared from Halliday Conveyancing Law and Practice at
paragraph 30 - 175, while articles of roup normally provide that offerers will
be held to have satisfied themselves as to the validity and sufficiency of the
exposer's title which will be accepted as it stands, such a condition will not
oblige the pursuer to accept a title which excludes a material or substantial
part of the subjects offered: Hamilton v
Western Bank of Scotland supra. As far as materiality was concerned in the
present case, Mr Stewart pointed me to the surveyor's plan attached to number
6/5 of process showing the toilet area lying outside the line demarcating the
superficial area of the subjects. The
pursuer's position was as set out at pages 6D to 7A, 9B to 10D (where reference
is made to correspondence lodged as numbers 6/4 to 6/7 of process) and 16A of
the Closed Record. The pursuer avers
that he was in error as to the extent of the subjects comprised within the
defender's title. The defender's
position on error was unclear. The
pursuer's call at page 10D to aver whether, prior to the date of the auction,
29 March 2007, the defender was aware that it had no heritable title to the
toilets had gone unanswered. The
correspondence between solicitors acting on behalf of the neighbouring
proprietor at 11 Hyndland Street
and the solicitors acting for the defender, which was referred to on Record,
points to it being the impression of the defender's solicitors that what had
been sold did include the toilet area.
What was averred, once established at proof, would allow the inference
that the defender and its solicitors were under the impression that what had been
sold was the entire area of the shop as it had been occupied by the
defender. The possibilities appeared to
be that either the defender and solicitors were not aware of the problem in the
title until after the auction and that therefore that this was a case of mutual
error or that the defender and its solicitors were aware before the auction
that the defender's title did not cover the toilets and yet did nothing
whatsoever to draw that to the pursuer's attention or otherwise put him on
notice. Mr Connal had submitted that
what had been sold was simply the title certificate but whatever his views may
be in retrospect, it is quite clear that his conveyancing colleagues thought
what they were doing at the relevant time was selling the entire occupational
extent of the subjects, including the toilet area. Were it otherwise there would have been no
point in the defender's solicitors trying to include the toilet area in the
disposition that they proposed to grant to the pursuer, as appeared from the
correspondence which was referred to in the pleadings had been their intention.
[9] Mr
Stewart turned to consider the law. The
kind of error which is relevant here was error as to identity of subjects
sold. For the reasons given by McBryde
in the Law of Contract in Scotland
paragraph 15-02 there are difficulties in explaining the Scots law on
consensual error. There is inherent
difficulty in the subject. As Grotius
said, de pacto errantis perplexa satis
tractatio est. Mr Stewart accepted
McBryde's characterisation of the present law of error as requiring "error
plus" in order to found a reduction, that is error with some other factor:
McBryde supra paragraphs 15-23 and
15-34. The effect of error, in Mr
Stewart's submission, was that there was no contract by reason of absence of
consensus. In other words the contract
was void ab initio. In determining whether there had been
relevant error one has to have regard to the whole circumstances which here
would include the fact of the auction sale as well as the terms of the
Particulars of Sale and the state of occupation of the subjects when they were
viewed. When the facts had been
established this might turn out to be a case of mutual error but Mr Stewart did
not commit himself to that alternative only.
He was presenting the case as being either one of mutual error or one of
unilateral error. He relied on Hamilton v Western
Bank of Scotland as still representing the law. Essential error might destroy what would
otherwise be a contract notwithstanding any exclusion clause found in the
Articles of Roup. Morton v Smith was a case
about materiality. Young v McKellar related
to supersession of contractual terms by the delivery of a disposition and
immaterial inaccuracies but in a part of his opinion which is admittedly obiter, Lord Low discusses examples where error might be relevant. Carruthers
v Stott was distinguishable in
that it concerned a defect in title and not an error in the identity of the
subjects. Again, Davidson v Dalziel was a
case about burdens on the title and not about the identity of the
subjects. Mr Stewart submitted that
there was clear authority in Hamilton v Western Bank of Scotland which
was directly in point to the effect that essential error will allow a contract
to be reduced notwithstanding any exclusion clause contained in articles of roup. Mr Stewart pointed to the similarities
of the articles in Hamilton with the articles in the present
case. Here, materiality would depend
upon the evidence but there was enough in the averments to indicate that an
error as to the inclusion of the toilet area might be material. Mr Stewart accepted that it is difficult to
found on unilateral error but something might turn on the state of the
defender's knowledge as to whether the title did indeed cover the toilet area
in that this might lead to a question as to whether the defender had acted in
good faith: cf McBryde supra
paragraphs 15-40 and 15-41, Smith Short
Commentary on the Law of Scotland at p819, Davidson v Dalziel supra
at 994, and Steel's Trs v Bradley Homes (Scotland) Ltd supra at 58. Agreeing, as he understood it, with Mr Connal,
Mr Stewart accepted that the law as to the return of a deposit was
authoritatively stated in Zemhunt
(Holdings) Ltd v Control Securities
plc 1992 SC 58. When a contract
stands, Mr Stewart would accept that usually a deposit would not be
returnable. However, his argument was
that because the contract as a whole fell to be reduced a necessary consequence
was that any deposit paid in terms of that contract must be returned. As appeared from Gloag On Contract at p59, where a contract is reduced there must be
restitution.
[10] We have the authority of Grotius for the proposition that the
law of error in relation to contract is difficult. No doubt wisely, Mr Connal
and Mr Stewart skirted round its edges in their respective submissions,
confining themselves to the question as to whether the remedy of reduction was
available on the ground of error as to the extent of the subjects held under
the title which the seller has undertaken to sell. The principle founded on by
the pursuer is that a contract is an agreement, a coming together of the
respective free wills of the parties or consensus in relation to certain
essentials of which, in sale, the identity of the subjects is one. Where at
least one of the parties enters into the contract with a subjective belief
about an essential matter, which turns out to be materially wrong, there can be
no agreement and therefore no contract, hence the categorisation of this as
consensual error: McBryde supra
paragraph 15-01. Outward appearances may suggest that there is a contract but
because in truth there has been no coming together of wills in relation to all
the essentials, there is no contract. Mr Stewart described a contract as being
"destroyed" by error and that is an expression found in the authorities. By
seeking decree of reduction in the present case the pursuer is saying there was
never a contract but that nevertheless there is a deed apparently to contrary
effect and he wishes that deed annulled.
[11] Now, it was clear from parties' submissions and the authorities
to which I was referred that, whatever may be the theory, what I have referred
to as the principle founded on by the pursuer would not translate into an
accurate rule of Scots law without considerable refinement: see e.g. Steel's Tr v Bradley Homes 1972 SC 48 at
56. That said, I did not see it as a matter of controversy between the parties
that there are circumstances where in the event of material error in respect of
something essential, Scots law allows the remedy of reduction of what on the
face of it is a concluded contract. If a rule of thumb were required it would
be difficult to improve on Professor McBryde's suggestion that for error to be
relevant there must be some other factor in addition. Professor McBryde
describes this as "error plus": McBryde supra
paragraph 15-23. Mr Connal's attack on the relevancy of the pursuer's pleadings
was less to do with the effect of error (or "error plus") as a matter of generality than with the fact of
error in the present case or, which was to look at the same thing slightly
differently, the effect of the Articles of Roup as contracting out of what
would otherwise be the effect of error. It was his submission that the pursuer
simply could not assert that he (and Mr Connal's approach was that the case was
only concerned with the pursuer's belief) had entered into the contract under
error as to the physical extent of the subjects. The pursuer did not aver that
he was not to be held to be aware of the terms of the defender's General
Conditions and Special Conditions. This was a contract for a specified title.
That is what the pursuer must be taken to have intended to acquire. That is
what he had contracted for and that is what he was offered in implement of the
contract. The pursuer took the risk of the title not being sufficient to cover
what he wished to acquire. In the language of Lord President Hope in Carruthers v Stott supra at 37: "[the articles of roup] required purchasers to satisfy
themselves not only as to the validity of the titles, but also as to the right
to the property; and therefore they were put fully on their guard." Mr Connal's
argument was not unpersuasive. Competing with the underlying theory that a
contract requires a true consensus between the parties is the consideration
expressed by Lord Dunpark in Steel's Tr v
Bradley Homes supra at 57: "it is
essential for business efficacy that the ordinary rule should be that an
onerous contract reduced to writing in plain terms should bind the parties
thereto." However, I have come to the conclusion that Mr Connal's argument does
not survive a review of the authorities to which my attention was drawn. On the contrary, it is Mr Stewart's
analysis that is supported by the case-law and it is Mr Stewart's motion to
which I intend to give effect.
[12] Carruthers v Stott does
not support the proposition that a sale under articles of roup cannot be
reduced in the event of error as to the extent of the subjects. The case was
not concerned with error as to the extent of the subjects. Rather, it was
concerned with what was said by the pursuer to be a defect in the title which
the majority of the Court considered could be cured. On that view, in the
opinion of Lord Balgray, with whom Lord President Hope concurred, "the question
just resolved into this, whether or not the purchaser was bound to be at this
expense?", in other words whether the pursuer was entitled to damages (which he
does not appear to have sued for). Moreover, having made the remark which was
founded on by Mr Connal, the Lord President went on:
"It would, no
doubt be different, if the titles referred to another estate, from which that
had been exposed for sale - to that of B, instead of A. But here the objection
was not that the estate was different from that which had been exposed for
sale, but merely that a mid couple of the titles was wanting, which might be
supplied."
Now it may be that the Lord
President had in mind a more significant difference between the subjects
exposed and the subjects to which the seller offered a title than the absence
of a toilet area, but the materiality of such a difference is a matter of fact
and degree for assessment after proof and not for determination at the stage of
consideration of relevancy. Here I consider that there is enough averred to
allow it be concluded that the distinction between a shop with the specified
toilet area and a shop without that area is a difference which may be so
material as to bear on the identity of what was exposed.
[13] Mr Connal conceded that Hamilton v Western Bank of Scotland was against him. As a decision of the
Inner House its ratio is of course
binding on me. Mr Connal submitted that a ratio
was not apparent. I disagree. In Hamilton
the pursuer averred that subjects purchased by him from the Bank were
understood by both parties to include the whole of a tenement block. That is
what was disponed to him but it was later discovered that the Bank had not had
title to the whole of the tenement. The pursuer accordingly sued for reduction,
repayment of the price and damages in respect money outlaid in repair and
improvement. The Lord Ordinary (Jerviswoode) found the facts relevant to infer
reduction and repetition and the articles of roup insufficient to bar the
pursuer from insisting in his conclusions. For the Lord Ordinary the question
turned "upon the matter of fact as to whether or not the pursuer has got the
subject for which he contracted? If he has, there is an end of the case. If he
has got only a portion of it, he got something different from that for which he
contracted, and he is therefore entitled to be free" (supra at 1038). As far as
the articles of roup were concerned, Lord Jerviswood said this: "where there is
a flaw which strikes at the contract itself, and which would suffice to annul
it, nothing short of a positive declaration that the purchaser shall be held to
have no remedy in such a case can bar his right to restoration against it" (supra at 1037). The Inner House gave
short shrift to the appeal against the Lord Ordinary's decision. His
interlocutor was held to be right. The Inner House did not specifically adopt
the Lord Ordinary's opinion but they briefly paraphrased it. The Lord President
(McNeill), with whom Lords Ivory and Curriehill concurred, put it this way:
"I think the
pursuer was in error as to the identity of the subjects which were the matter
of this transaction. I cannot hold that an error as to one-fourth of one-fifth
part of the whole building was not a material error particularly considering
the nature of the subject. As to the purchaser satisfying himself as to the
extent of the subject, I think that if the measurement had turned out to be
thirty-four ells, instead of thirty-five ells, as he may have supposed it to
be, or if there had been some such difference between the actual and the
supposed extent, the articles of roup would have covered a case of that kind.
But the issues before us is not as to an error in mensuration, but as to the
identity of the subject. I am therefore of the opinion that the interlocutor of
the Lord Ordinary is right."
According to Lord Deas, "[this] is
the clearest case of essential error I have ever seen. The clause in the
articles of roup was never intended to cover a case of this kind." Now, it may
be that the members of the Inner House did not consider it necessary to provide
elaborated reasoning. That is because, to their minds, the averred facts so
clearly pointed to a case of essential error as to the identity of what was
being sold which in turn opened the remedy of reduction. Elaboration was
unnecessary. The articles of roup were
"never intended" to exclude the remedy of reduction where there was
essential error (cf Halliday supra at
paragraph 30-175). I agree with Mr Connal on this: Hamilton is
against him. It may be a stronger case on the facts than the present case but
otherwise it appears to me to be entirely on point and capable of yielding the ratio that at least where there is
mutual error as to the identity of the subjects to which the seller has title,
a purchaser is entitled to have the contract and indeed a disposition following
on that contract reduced as a nullity.
[14] I do not find Morton v
Smith, on which Mr Connal founded, to be inconsistent with Hamilton. On
the facts it was not found to be a case of error at all, let alone material
error, hence, no doubt, Lord Justice-Clerk Moncrieff's observation that: "I
know no case where reduction or rectification of the contract has been allowed,
unless the error was material." Mr Connal relied on the Lord Justice-Clerk's statement
of opinion that "the articles of roup, although they might not prevail against
a clear case of injustice, are sufficient to protect the sellers where there is
a doubt whether there is any error at all." Mr Connal sought to extract from
that the proposition that articles of roup will prevail unless there is averred
to be "a clear case of injustice". With all respect to Mr Connal the Lord
Justice-Clerk's remark does not support that construction. It is true that in
the debate before me the exact terms of the articles of roup were not examined
very carefully, it being common ground between Mr Stewart and Mr Connal that
the articles in the present case were remarkably similar to their nineteenth
century predecessors. One nevertheless has to consider the effect of the
particular articles in a particular case. However, I see no special virtue in
the phrase "a clear case of injustice". I would expect Lord Justice-Clerk
Moncrieff to have considered it "a clear case of injustice" where parties found
themselves bound by a contract despite having both been mistaken as to what it
was that the seller title to. I do not read his opinion as requiring more for
reduction than material error.
[15] As Mr Connal recognised, Davidson
v Dalziel was a case about a real burden or, rather, a case where the Lord
Justice-Clerk considered that there was no real burden and Lords Young and
Craighill considered that that was not a question which could be answered as
between the parties to the bill of suspension. It was not a case of error as to
the identity of the subjects of sale. Nor was it maintained that the contract
was void. The sixth head of the articles of roup had provided that the subjects
were purchased under the "burdens, conditions, provisions, restrictions,
reservations, and declarations specified and contained or referred to herein,
or in the title-deeds thereof". As the will creating what was said to be the
burden had been exhibited the Lord Ordinary had held that the purchaser had
purchased under the burden, if it was a burden, and therefore could not
withhold the price until the title was cleared. It was in that context that
Lord Justice-Clerk Moncrieff observed, supra
at 994:
"Now, there is
no doubt that a man may expose his property for sale under any condition that
he pleases, provided that condition is legal and clearly expressed, and if a
purchaser purchases on the footing on which the exposure is made, he is bound,
and cannot complain. If property was exposed on the express condition that the
purchaser shall take his chance of the title, I am not prepared to say that
that would not be a legal stipulation. But then it must be clearly expressed."
As Lord Moncrieff did not find
there to be a real burden his decision that there was no ground for the
suspension brought by the purchaser did not depend on the sixth head of the
articles of roup. Lords Young and Craighill, on the other hand, proceeded on
the basis that there may have been a real burden and decided the case similarly
to the way it had been dealt with by the Lord Ordinary: the purchaser had
bought with express notice of the will and its contents, "and that with
whatever burdens it saddled the property"; he had accordingly taken "the risk
of such burdens as there might be as a
condition of his bargain" (Lord Young supra
at 995). Notwithstanding the difficulty over determining whether there was in
fact a real burden, Davidson is
simply about construction of the contract constituted by the articles of roup,
it being open to a seller to contract for the sale of a property subject to
such burdens as may be imposed by the disclosed title. The relevant contractual
provision must of course be clearly expressed if the seller is to exclude what
would otherwise be his obligation to grant a title free from onerous burdens
but there is no question but that the obligation can be qualified or excluded.
Contracting out of material error is another matter. I took it to be Mr
Stewart's position that this was simply not possible. Lord Jerviswoode would
seem to have expressed a different opinion in Hamilton v
Western Bank but this is not a question I need enter into. Notwithstanding
anything said in Davidson, I am
satisfied that the Articles of Roup here, as was the case with the articles of
roup in Hamilton v Western Bank, were
"never intended" to exclude the remedy of reduction where there was error as to
something as fundamental as the identity of the subjects of sale.
[16] Young v McKellar was an action for breach of
warrandice. The property to which the purchaser was granted title was 25 square
yards less than the 383 square yards that had been referred to in the
disposition in his favour and the pursuer accordingly sought damages. Reversing
the Lord Ordinary, the Inner House held that the disposition had not superseded
the full terms of the articles of roup. The articles provided that the
purchaser was taken to have satisfied himself "with respect to the extent,
condition, and description of the subjects." Lord Low, with whom the other
members of the court concurred, held that the pursuer must be held to be barred
from founding on the fact that there was an error in the alleged extent of the
ground. As it appears to me, the key to understanding the distinction between Young and Hamilton v Western Bank and why Young does not support Mr Connal's
argument as to the effect that should be given to the Articles of Roup in the
present case, lies in the alleged materiality of the discrepancy and, flowing
from that, the remedy sought. Lord Low explains the matter as follows, supra at 1347 to 1348:
"It was said
that the object of such conditions in articles of roup was merely to prevent
the purchaser throwing up his bargain on account of immaterial inaccuracies of
description or measurement. I think that is the case to this extent, that if the
inaccuracies are not material the purchaser will be barred from founding upon
them to any effect, The conditions here (and they are very much in the usual
form) are quite general in their terms and make no distinction between
inaccuracies which are material and those which are not. Its seems to me that
it really comes to be a question of remedy. If the inaccuracy was small and
immaterial, I think that the conditions would bar the purchaser from taking
objection in any form, but if the inaccuracy were material, and if there was
anything of the nature of deliberate misrepresentations on the seller's part,
or if the inaccuracy were of a kind which the purchaser could not reasonably be
expected to discover, or if the parties had been under mutual error in regard
to the subjects, the conditions of roup would not prevent the purchaser from
reducing the sale, and it may be also claiming damages, But if the purchaser
elects to abide by his purchase, I think that he must also be held to the
conditions upon which the purchase was made."
Thus, a party suing on a contract
must take into account all the terms of the contract and it may be that these
terms, properly construed, will exclude his claim (or not, as the case may be).
However, the party who seeks to have the contract reduced on the ground of
material error as to the essentials and who can establish circumstances in
which the remedy of reduction will be granted, will not be barred by an
exclusion provision in the contract which, ex
hypothesi, was never intended for such a purpose and which, in any event,
it is proposed should be set aside together with everything else in the
contract.
[17] Independent of his argument that the pursuer's claims for
reduction and repetition were barred by the terms of the Articles of Roup was
Mr Connal's contention that this was a case of unilateral error and that Scots
law did not permit the remedy of reduction in a case of the uninduced error of
one party alone.
[18] Before looking at the two recent cases which were cited in
support of the proposition that unilateral error was irrelevant except in the
most exceptional of circumstances, Steel's
Trustee v Bradley Homes (Scotland)
Ltd supra and Royal Bank of Scotland
Plc v Purvis, it is convenient to
return to McBryde's formulation of "error plus" (McBryde supra at paragraph 15-23). What I understand by that formulation is
that McBryde is talking about material error as to the essentials of the
contract (of which the subject matter of a contract of sale would be one) and
that he takes as a starting point the proposition that one party's error, even
if material and essential, will not allow that party to reduce the contract.
There must also be something else. A
clear example of "something else" is that the other party was also in error as
to the same matter, in other words that there was mutual error. McBryde points
out that there is difficulty in determining exactly what situations are
comprehended by the expression mutual error: supra paragraph 15-34, but I do not understand there to be any
doubt but that a situation where both parties erroneously thought that the
seller had title to property of extent A and was offering to sell all of that
property whereas the reality was that all he had title to and therefore all he
had to sell was A - B is properly described as a situation of mutual error and
that in that situation the purchaser can seek to reduce the contract. That was
the factual situation in Hamilton v
Western Bank and in Young v McKellar mutual error in regard to the
subjects is one of the examples given by Lord Low as to where a purchaser might
reduce a sale. McBryde supra at
paragraph 15-34 quotes Lord Trayner in Dornan
v Allan & Son (1900) 3 F 112 at 117:
"Mutual error
may be pleaded in support of the contention that there is no contract binding
on the parties in respect that by reason of their mutual error they were never
agreed in idem."
and at paragraph 15-35 he quotes
Lord Moncrieff in Sutherland v Bremner's
Trs (1903) 10 SLT 565 at 568:
"Pure cases of
mutual or common error in essentials are rare. The only cases in which the plea
is sustained are those in which the error goes to the root of and destroys the
contract, such as a mistake as to the identity of the subject sold (Hamilton v Western Bank 23 D 1033)."
In the present case I accept that
enough is averred, if proved, to allow the inference that what is said to have
been the pursuer's error was shared by the defender and that therefore this was
a case of mutual error as to the subjects of sale (cf the analysis of Earl of Wemyss v Campbell (1858) 20 D
1090 by Lord Dunpark in Steel's Tr v
Bradley Homes supra at 58). As Mr Stewart pointed out, the defender has not
answered the call at page 10D of the Record to aver whether the defender was
aware that it had no heritable title to the toilet area. Accordingly the
possibilities seem to be that either the defender and its solicitors were not
aware of the problem in the title until after the auction and that therefore
this was a case of mutual error or that the defender and its solicitors were
aware before the auction that the defender's title did not cover the toilets
and yet did nothing whatsoever to draw that to the pursuer's attention or
otherwise put him on notice.
[19] I recognise that there is a question over the materiality of
the error founded on here but, having regard to the authorities mentioned
above, I would see the pursuer's case in its first alternative, mutual error as
to the extent of the subjects, to be relevant for enquiry. However, Mr Stewart
also puts his case on the alternative basis of unilateral error on the part of
the pursuer. That raises the question as to whether uninduced unilateral error,
even where material and in relation to an essential matter, can ever provide
the basis for reduction of an onerous contract.
[20] In Steel's Tr v Bradley Homes supra at 57, Lord Dunpark notes dicta by Lord Reid and by Lord President Clyde respectively in Hunter and Anor v Bradford Property Trust
Ltd 1970 SLT 173 at 184 and 176 reiterating the general rule that uninduced
unilateral error will not per se
found reduction of an onerous contract. Although careful to describe these dicta as obiter and to point to Lord Watson's apparent allowance for the
possibility of exceptional cases in Stewart
v Kennedy (1890) 17 R (HL) 25 at 29, Lord Dunpark comes close simply to
endorsing the general rule by his observation (supra at 58) that no such exceptional case has found its way into
the law reports. Steel's Tr was a
case of error as to price. Royal Bank of
Scotland Plc v Purvis was a case
of alleged error as to the nature of the contract. In the latter, again without
absolutely ruling out the possibility of an exception, Lord McCluskey had
difficulty in imagining a case where the general rule would not simply be
applied. However, Lord Dunpark's formulation of the general rule is that
uninduced unilateral error will not per
se found reduction. His inclusion of "per
se" is suggestive of McBryde's requirement of "error plus". Here, the
"plus", that is the additional factor over and above the pursuer's error, which
is relied on by Mr Stewart is the possibility, left open by its failure to
answer the call at page 10D, that the defender did not act in good faith. That
would be on the factual hypothesis that the defender (through its responsible
employees or agents) knew that it did not have title to the toilet area, knew
that the appearance of the subjects indicated that the toilet area was
included, did nothing to draw this to the pursuer's attention, but, rather,
relied on the exclusion provisions in the Conditions incorporated in the
Articles of Roup to throw the risk of eviction from what is averred to be a
material part of the subjects of sale onto the purchaser. Mr Stewart did not
develop this branch of his argument in any detail. He did not go the distance
of suggesting that this could be regarded as a case of misrepresentation or one
where the defender knew of the pursuer's error and took advantage of it: cf Steuart's Trs v Hart supra and McBryde supra at paragraphs 15-30 to 15-33. I
see that there may be difficult questions as to what is required by way of good
faith in a sale of heritage by public roup (that something is required is at
least suggested by the Lord Justice-Clerk's unhappiness over the seller's
failure to disclose what might have been a burden in Davidson v Dalziel at 994). I am nevertheless prepared to allow
this aspect of the pursuer's case to go forward to enquiry. In my opinion, its
relevance can better be judged once all the facts are known.
[21] As I have already indicated, I shall allow proof before answer
on all of parties' averments, with all pleas being reserved.
