EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Emslie Lord Menzies Lord Wheatley	[2012] CSIH 59 XA103/11 OPINION OF THE COURT delivered by LORD EMSLIE in the cause PETER McSORLEY Pursuer and Respondent; against DAVID DRENNAN and MRS TRACY DRENNAN Defenders and Appellants: _______

Pursuer: Jamieson; BMK Wilson, Glasgow

Defenders: ECM MacLean; Balfour + Manson LLP, Edinburgh (for Mathie Morton, Ayr)

10 July 2012

[1] This appeal concerns a property transaction which should have been simple and straightforward but went off the rails. In 2006 the pursuer (the present respondent) put an Alloway cottage and its garden up for sale, and the defenders (the present appellants) were the purchasers. A potential complication, identified at an early stage, was that the pursuer's Land Certificate related to an additional plot of ground which he owned nearby as well as the cottage and garden which were to be sold. Both the additional plot and the garden area were tinted pink on the relevant plan. Correspondence between the parties' solicitors at that stage confirmed that the additional plot formed no part of the deal, and the missives proceeded to an uneventful conclusion.

[2] Unfortunately, the disposition subsequently drafted by the defenders' solicitors bore to convey the cottage together with inter alia all areas of ground tinted pink on the Land Certificate plan. This description mistakenly covered both the garden and the additional plot, yet notwithstanding their recent correspondence neither the defenders' nor the pursuer's solicitors noticed the error. The disposition thus came to be engrossed, executed, delivered and recorded in its uncorrected state. A few months later, on 10 July 2006, the pursuer's solicitors wrote to their counterparts pointing out that the pursuer no longer had a Land Certificate reflecting his title to the additional plot. No reply to this letter was received; the matter was not followed up; and it was not until nearly a year later that the pursuer and his solicitors learned that the whole subjects had been sold on by the defenders to a third party who maintained that the additional plot was now his.

[3] At this point the pursuer and his solicitors might have considered taking steps to ascertain when and in what circumstances the resale to the third party had taken place. Relevant documents might have been recovered in that connection. The position of the third party sub-purchaser might have been challenged. Proceedings for partial reduction of the sale and sub-sale might have been instituted, so as to enable the error to be corrected and the pursuer's title to the additional plot restored. Failing restoration along these lines, a claim might have been directed against the defenders and/or their sub-purchaser for unjustified enrichment at the pursuer's expense. Alternatively, if the pursuer could have demonstrated bad faith on the part of the defenders at the time when the erroneous title was taken and sold on, a claim of damages might have been made on delictual grounds.

[4] None of these options was, however, taken. Instead, the pursuer raised the present action against the defenders in Ayr Sheriff Court claiming damages on the general premise that they had at some stage taken advantage of his initial error. Neither unjustified enrichment nor delict was advanced as a ground of action. No specific breach of contract was identified either, and the principal plea-in-law was in the following terms:

"(2) The Pursuer having suffered loss in consequence of the unintentional error known to and taken advantage of by the Defenders is entitled to reparation in respect of his loss arising therefrom".

As averred, the pursuer's complaint was that "...the Defenders sold the Property and area of land when it was known and accepted by them that the Pursuer only entered into the Missives for the sale of the Property and the gardens to the front and rear thereof". And in that context he went on to assert that "...(as) a third party had acquired title to the Property and the area of land in circumstances meantime unknown to the Pursuer but believed to be in good faith", he was unable to seek reduction of the disposition and rectification of the Land Register.

[5] At a debate hearing before the sheriff in September 2010, the defenders challenged the pursuer's approach as fundamentally irrelevant and sought dismissal of the action. The sheriff, however, was persuaded that damages could be claimed on the basis that:

"...an unintentional error being an error of expression by one party to a contract known to and taken advantage of by the other party is a wrong for which our law provides a remedy....".

It was, he reasoned, only logical that where the primary remedy of "restitution" was unavailable to "put right" the "wrong" which had occurred, then damages should be awarded. He further drew the inference, contrary to the defenders' denials on Record, (i) that they were or must have been aware that the additional plot had come to be included in their title, and (ii) that in that state of knowledge they must deliberately have sold it on to the third party. In the result, the sheriff sustained the pursuer's preliminary plea to the relevancy of the defences; repelled the defenders' plea to relevancy; and allowed a proof restricted to the quantum of damages only. The merits of the pursuer's claim were thus effectively upheld without admission or proof.

[6] When the defenders appealed against this decision, the temporary sheriff principal was again persuaded, not merely that the pursuer had pled a relevant case to go to inquiry, but that he should effectively have summary decree on the merits of his claim with proof restricted to the quantum of damages only. In line with the sheriff's approach, the temporary sheriff principal's decision of 23 May 2011 proceeded on the basis:

(i) that although the pursuer did not found on the breach of any contractual term, there was no reason in principle why a relevant case for damages might not be made if the pursuer's loss arose "in the broadest sense" out of the contract (para.39);

(ii) that on the authority of Steuart's Trustees v Hart 1875 3R 192 and Angus v Bryden 1992 SLT 884 "...an error of expression by one party, known to and taken advantage of by the other party puts the latter in bad faith and is a wrong for which the law provide (sic) a remedy" (para.45);

(iii) that, as a matter of law, constructive knowledge of the error in the disposition fell to be imputed to the defenders, not apparently in consequence of their solicitors' receipt of the letter of 10 July 2006, but on the broad proposition that, as prudent purchasers, they must be deemed to know that they now had title to the additional plot (para.51); and

(iv) that the pursuer had therefore relevantly averred recklessness and bad faith on the part of the defenders at the point of the second sale (again para.51).

[7] Before this court, counsel for the defenders challenged the soundness of both of the decisions in the court below. The sheriff and temporary sheriff principal had, it was said, fallen into error in omitting to notice serious deficiencies in the pursuer's claim as pled, and in failing to dismiss the action. On any view, they had gone too far, too fast in purporting to uphold the pursuer's claim on the merits and in appointing a proof to take place on the quantum of damages only. Properly analysed, the pursuer's pleadings failed to identify any legitimate basis for a claim of damages. Neither contract nor delict was expressly relied on; if liability ex contractu was intended, no identifiable breach of obligation had been averred; the only averments of actual or imputed knowledge referred, not to the existence of the error, but to the intended scope of the original missives; there was no allegation of any such knowledge having arisen prior to the date at which the contract was fully performed; nor was there any relevant averment of such knowledge in advance of the resale to the third party. If, as the pursuer maintained, the parties' common error had resulted in a non-contractual benefit being unintentionally conferred on the defenders, then his remedy was to pursue either (a) reduction of the offending titles, or (b) a claim in unjustified enrichment, or possibly (c) a claim based on delict. What he could not do, especially in the absence of supporting authority, was promote a claim of damages on the vague and inspecific basis which had found favour in the court below.

[8] In seeking to support the decisions complained of, counsel for the pursuer recognised (correctly, in our view) that authorities such as Steuart's Trustees, Angus and Anderson v Lambie 1954 SC (HL) 43 fell into a category concerned with the remedy of reduction. None of these cases contained any reference to damages. Nevertheless, it was said, they tended to suggest that the law would provide a remedy for "wrongs" whereby, in a contractual context, one party's unintentional error was known to and taken advantage of by the other. Admittedly no particular breach of contract was averred, nor indeed was any such breach suggested in argument, but where the remedy of reduction was not available, or had (rightly or wrongly) been discounted, damages should be seen as a suitable alternative. For essentially the reasons given by the sheriff and temporary sheriff principal, therefore, this appeal should be refused.

[9] In our opinion this matter can be disposed of quite shortly. In the first place, we are satisfied that the sheriff and temporary sheriff principal went much too far, at the debate stage, in allowing a proof restricted to the quantum of damages alone. The pursuer's claim on the merits was neither admitted nor proved, and even if some of the most obvious deficiencies in his pleadings had not been present he could, at most, have hoped to achieve a proof before answer on the whole averments on Record. But more importantly, as it seems to us, the deficiencies in the pursuer's pleadings should have led the sheriff, and in turn the temporary sheriff principal, to dismiss this action. It is well settled that the private law remedy of damages is available where one party sustains loss through another's breach of some contractual or delictual obligation. In this case the pursuer disclaims delict altogether, and one looks in vain for any relevant averment of breach by the defenders of any contractual obligation incumbent on them. On the contrary, in the context of the parties' bargain having been implemented and carried into effect by the recording of the disposition, there is no offer to prove that the defenders were, actually or constructively, alerted to any problem by that stage. Thereafter, in our view, the terms of the letter of 10 July 2006 were perfectly consistent with all parties remaining unaware that the disposition had in error carried the additional plot to the defenders; it is a matter of speculation what the defenders' solicitors made of that letter, or whether they ever mentioned it to their clients; there is no averment as to when, in what circumstances or on what terms the resale took place; the averments of knowledge in articles 2 and 3 of condescendence expressly concern the (correct) missives rather than the (erroneous) disposition; and against that background we reject as untenable the notion that, as a matter of law and in all circumstances, purchasers like the defenders must be deemed aware of the technical details of dispositions, Land Certificates and related plans which they may never have seen. The pursuer's principal authorities, notably Steuart's Trustees and Angus, do not vouch any such proposition, and furthermore they are in our view readily distinguishable on the ground that (unlike the present case) they concerned pre-contractual dealings and the "snatching of a bargain" by unfair means.

[10] In any case dependent on allegations of deliberate and dishonest wrongdoing, it is in our view essential for a pursuer to make specific and pointed averments if the test of relevancy is to be met. With this well-established rule in mind, it seems to us that the deficiencies in the present pleadings are all the more striking and significant; that the pursuer's averments fail the test of relevancy by a considerable margin; and that the action ought not to have survived at either stage of the proceedings in the court below. For these reasons we shall allow the appeal, recall the decisions of the sheriff and temporary sheriff principal, sustain the first plea-in-law for the defenders, repel the pleas-in-law for the pursuer and dismiss the action.

[11] Where the pursuer may go from here is a matter on which we propose to say very little. If the facts now asserted in the defenders' note of argument are correct, then some of the cases discussed by the House of Lords in Anderson v Lambie might be thought capable of supporting a remedy along reductive lines notwithstanding the interposition of a third party. Failing that, counsel for the defenders seemed to think that some compensatory remedy might be pursued on the basis of unjustified enrichment or on delictual grounds. Where the matter was not fully argued before us, we would be reluctant to hold that, with appropriate legal and factual averments, a claim focused ex contractu might not also be open, and for all we know there may be other potential avenues available to the pursuer beyond the examples already given. Suffice it to say that none of these options, if thought to have any merit, has found expression in the present action.