Scottish Property Law: Dispute over Improper Liferent and Personal Rights, Lecture notes of Law

Download Scottish Property Law: Dispute over Improper Liferent and Personal Rights and more Lecture notes Law in PDF only on Docsity! SHERIFF APPEAL COURT [2017] SAC (Civ) 26 GLW-A1160-15 Sheriff Principal D L Murray Sheriff Principal M W Lewis Appeal Sheriff A G McCulloch OPINION OF THE COURT delivered by SHERIFF PRINCIPAL D L MURRAY in appeal by ELIZABETH MILLER Appellant against STEVEN SMITH & OTHERS Respondents Appellant: Reid Respondents: Thompson Edinburgh, 29 August 2017 [1] This appeal is against the decision of the sheriff following a debate at the instance of the first and second respondents. The sheriff upheld the first and second defender’s first pleas-in-law, and dismissed the action, awarding expenses in favour of the first and second defenders. [2] The appellant resides at 39, Third Avenue, Auchinloch, Kirkintilloch. She appeals on her own behalf and as executrix dative of her late husband. She and her late husband are the parents of the third respondent. The third respondent was previously in a relationship 2 with the second respondent. The fourth respondent is their daughter. The first respondent is the brother of the second respondent. The action is defended by the first and second respondents. The third and fourth respondents have not entered appearance in the proceedings [3] It is averred by the appellant that on or around May 2004, the subjects at 39 Third Avenue, Kirkintilloch, hereinafter referred to as “the subjects”, were purchased by the third respondent. The purchase price paid was £75,000. The first appellant and her late husband provided approximately £50,000 of the purchase price, which sum came from receipt of proceeds from the sale of the first appellant and her late husband’s former property which was sold on or around 19 April 2001. Following the sale of that property, the first pursuer and her late husband resided at an address in Lenzie, before taking up residence in the subjects. Title to the subjects was transferred by way of a series of dispositions inter family: from the third respondent to the fourth respondent; from the fourth respondent to the second respondent; and from the second respondent to the first respondent. No consideration was paid in any of these transactions. [4] The appellant and her late husband (until his death) had continuously occupied the subjects since their acquisition. The subjects were modified at their cost to meet their special needs. They have met the ordinary maintenance and repair expenses of the subjects, but have not been required to pay anything in the way of rent in respect of the subjects. The appellant avers that these arrangements reflect an agreement with the third respondent that she and her late husband be allowed to reside in the subjects, without payment, other than the ordinary maintenance and repair expenses, until their respective deaths and that the subjects would be held for the benefit of and in trust for their grandchildren. The appellant 5 directed at an issue which is irrelevant and fails to address the case which the appellant seeks to make, which founds on a personal right by virtue of an “improper liferent”. The sheriff has erred as she proceeded on the basis that the right being claimed is a real right, as set out in paragraph 24. The appellant submitted the sheriff is in error when she stated: “ In Scots law the right to possession is a real right.” Rather, possession is the consequence of the right enjoyed by the appellant and does not characterise that right. The appellant submitted the right to possession may arise from either a real right or a personal right as set out in Vol. 18 of the Stair Encyclopaedia paragraph 126: “Possession is either as of right or without right. There are or appear to be two categories of rightful possession. The first is possession by one, such as the owner of property or its tenant or liferenter who, by virtue of that ownership or other right, holds a right to possession in relation to that property … The second category is possession by one who, while not himself holding a real right to possession, has a personal right to possession as against a person who does.” In relation to the first category, the reference to a real right of a liferenter is to a proper liferent, where they have a registrable liferent. An improper liferent, such as the appellant argued for, does not establish a real right. It is said to be analogous to the right of a beneficiary under a trust. This passage from the Stair Encyclopaedia demonstrated the error in the sheriff’s analysis. [10] An improper liferent is merely a beneficial interest under a trust. In an improper liferent of land, therefore, the liferenter has no direct legal connection with the land at all, title being held solely by the trustees. W.M. Gordon’s Scottish Land Law at paragraph 17.26: “The improper liferenter has no real right in land, nor can he claim a conveyance in liferent, even if the right given is simply a liferent and he is of full age, if the trust is required in order to protect the interest of the fiar.” It was argued before the sheriff that the agreement between the appellant and her late husband, and the third respondent, the existence of which is admitted by the first and 6 second respondents, constituted an improper liferent. The sheriff erred in not determining how the agreement be categorised. In so far as she considered it to be a lease, she was in error. It could not be a lease as it was accepted that payment of rent, a cardinal feature of a lease, was not present. The improper liferent gave the appellant a personal right against the third respondent. [11] The sheriff fell into error in failing to recognise that the basis for reduction under what is termed by Lord Justice Clerk Thomson in Rodger (Builders) Limited v Fawdry and Others 1950 SC 483 the “offside goal” rule, can apply where there is a breach of a prior obligation, even where that obligation only establishes a personal right. Even if there is a difficulty in establishing the creation of a trust there is a personal right as against the third respondent. [12] Criticism was directed against the failure of the sheriff to explain why the case of The Accountant in Bankruptcy v McKay 2004 SLT 777 was not analogous to the instant case. Lord Bracadale held in the Accountant in Bankruptcy case, albeit prior to the implementation of the 1995 Act, that writing was not required to establish a trust of the nature averred in the particular facts of that case. Further criticism was directed at the sheriff for having focused on the nature of the remedies as opposed to the nature of the agreement in determining whether the first and second respondents’ preliminary pleas should be sustained. Submissions for the Respondents [13] Mr Thomson appeared for both the first and second respondents. He invited us to adhere to the sheriff’s interlocutor and to dismiss the appeal. He submitted that the appellant and her late husband do not have real rights over the subjects but have at best a personal right against the third respondent, a submission which reflected the submissions 7 made on behalf of the appellant. He pointed out that what the appellant sought was to reduce a series of dispositions which would have the effect of transferring back the heritable interest in the subjects to the third respondent, who it was accepted had acted in breach of his agreement with the appellant and her late husband. [14] The personal bar provisions within section 1 of the Requirements of Writing (Scotland) Act 1995 were inapplicable as they are not available to real rights and in a personal context adopting Lord Drummond Young’s phrase in Advice Centre for Mortgages v McNicoll 2006 SLT 591 act as “a shield rather than a sword”. [15] In respect of the submission that the appellant enjoys an improper liferent, there was a lack of specification in the pleadings of the creation of a trust. As a consequence even if there might be a basis in law for the argument which the appellant may endeavour to advance there are insufficient averments to support the claim. Accordingly the sheriff was correct to uphold the first and second pleas in law of the respondents and dismiss the action. [16] Where the claim was only for a personal right the “offside goals” rule had no application as against singular successors. Absent there being a claim by the appellant founding on a real right the appellant had no case in law beyond a claim against the third respondent. Decision [17] A difficulty which arises in this case is that the Rule 22 note focused on the appellant seeking to rely on a verbal agreement to create real rights in land, but that is not the argument which the appellant seeks to put forward. In the appeal the appellant seeks only to maintain the argument that the agreement constitutes an “improper liferent”, and it is conceded by the appellant that the agreement does not create a real right. The respondents 10 [22] The First Division found that the daughter’s right of occupancy was a personal right, exercisable only against the granter, and not capable of being made a real right, it was not valid against singular successors even if the singular successor had prior knowledge of it. Lord President Clyde who gave the leading judgment, recognised under reference to Gloag on Contract, (2nd ed.) at p. 178 , the general rule that a purchaser is entitled to rely on the title as it stands in the Register of Sasines, and is not bound by any agreement, although binding on the seller, of which he had no notice. A rule which he noted has an exception where the purchaser is aware that the seller has entered into a prior agreement to dispose of the subjects as seen in Rodger (Builders), Limited v Fawdry and Others. The Lord President concluded at page 259: “…the exception only operates where the right asserted against the later purchaser is capable of being made into a real right. If it is nothing but a mere personal obligation not capable of being so converted, then the ultimate purchaser is not in any way bound or affected by it. Any other result would be surprising indeed, for it would convert what was and has never been anything but a mere personal right into something real and enforceable against a singular successor.” That is also the view reached in The Advice Centre for Mortgages v McNicoll. There Lord Drummond Young, sitting in the Outer House, after analysing the authorities concluded that where the rights conferred on the occupier or tenant are purely personal, they do not survive the sale of the property. We do not accept the submission of the appellant’s counsel that the Lord Ordinary’s comments are restricted in application only to leases. [23] There is a distinction between the facts of Wallace v Simmers and The Advice Centre for Mortgages v McNicoll and the instant case, because in the instant case the dispositions are said not to have been granted for value. We have however concluded that even although the dispositions are not granted for value, where the agreement between the appellant and 11 her late husband only establishes a personal right between the appellant and the third respondent, this does not give a basis to reduce the subsequent dispositions, granted by the fourth and second respondent respectively. This because the personal right against the third respondent is enforceable only against him and does not, even where the subsequent transactions are not for value, give the appellant the right to reduce the subsequent transactions. That view accords with what is written by Professor Reid in Vol. 18 of the Stair Encyclopaedia at paragraph 697. Having reached that view the questions relating to the application of the Requirements of Writing (Scotland) Act 1995 and personal bar are irrelevant. Accordingly, albeit on a different basis we conclude that the sheriff was indeed correct to uphold the first and second pleas-in-law for the first and second respondent and dismiss the action. We therefore adhere to the sheriff’s interlocutor and refuse the appeal. As far as expenses are concerned, parties were agreed that expenses should follow success and in these circumstances we award the expenses of the appeal in favour of the first and second respondents.