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The Michaelmas term in the Supreme Court opens on Wednesday, 3 October 2012 with a one day hearing in the Scottish private law case of Morris v Rae. The question is an interesting one about the Scots law of “warrandice”.  Warrandice clauses appear in the seller’s deed transferring heritable property (known as the “disposition”). It occupies the area where the law of contract meets the law of property. By “granting warrandice” the seller guarantees the buyer that he will not be “evicted” from the property by someone with a better title. Where there is real or threatened eviction, the seller is obliged to indemnify the buyer against any loss that results. This case is about what it means to be threatened with eviction.

Current law

It is settled law that, for the purposes of making a claim on the warrandice clause, eviction means not only physical removal, but involves the emergence of a real or threatened burden on the property by a competing third party with a judicially declared, or unquestionably better, title than that of the buyer. The present law is that if the person with the better title takes no action then the buyer, even though he has a defective title (probably reducing the resale value of the property) cannot take action under the warrandice clause (which includes seeking an indemnity from the seller of the property).

The facts

This case, the buyer (which later assigned its right to take legal action to the Pursuer) bought the property from the Defender. When the buyer came to register the disposition, the Keeper of the Registers discovered that the Defender was not the owner of all that she had purported to sell and as a result refused to unreservedly register the title. Thereafter the person who appeared to be the owner of the disputed property threatened to evict the Pursuer from it. That claim was bought off for £70,000, but it later turned out that the person to whom the £70,000 had been paid did not, as a matter of fact, own the disputed area. The person who had been paid had, many years before, in error, transferred it to someone else (the registered owner).

When all of this was brought to the attention of the registered owner, he, for no consideration, provided a disposition making good the buyer’s title. The Pursuer then sued the Defender for £70,000 and other expenses associated with making good the title.

Previous decisions

The action was founded on the warrandice clause. The Lord Ordinary (Temporary Judge Rita Rae QC) allowed the claim to proceed, but on appeal an Extra Division of the Inner House (Lord Clark and Lord Bracadale, Lord Bonomy dissenting) dismissed the claim as irrelevant on the technical ground that the person who threatened eviction did not, at the date it issued the threat, have a judicially declared or unquestionably better title; in fact, it had no title at all. The Division’s decision did not mention that the party threatening eviction could, with little difficulty, have made its title good at any time by an action of rectification and obtained a better title than the buyer.

The leading modern case on warrandice is Clark v Lindale Homes Ltd (1994 SC 210, IH). It was decided in 1993 by the First Division of the Inner House chaired by Lord Hope as Lord President of the Court of Session.  Lord Hope is due to chair the panel in the Supreme Court. In his dissenting judgment in the Inner House, Lord Bonomy referred back to Lord Hope’s obiter dictum in Clark where it was suggested that the law of warrandice was not a good fit with a system of land registration because the land registration system did not allow the purchaser to search the register for deeds affecting his title before completing the purchase so problems with his title would usually only emerge after completion when the Keeper of the Registers refused indemnity in relation to part or all of the subjects.

Comment

The leading scholars on Scots conveyancing consider Morris v Rae a curiosity: see Gretton and Reid, Conveyancing 2011 (2012) page 146-150. It is rare for the warrandice clause to be invoked. In modern conveyancing practice the seller who finds out that he has a defective title usually relies on the contractual remedies under the missives of sale. Furthermore, Professor Gretton and Reid say (and they would know) that, contrary to what Lord Hope said in 1993 and Lord Bonomy repeated in 2011, it is possible to search the Land Register for competing titles before concluding missives and all competent conveyancers would do so. 

I would not be at all surprised to see the Inner House decision reversed. Professors Gretton and Reid consider that many will “see this [decision of the of the Inner House]… as unfortunate”. They observe, that if the remedy under the warrandice clause is for those whose title is under an immediate and unquestionable threat then in Mooris the event from which the warrandice clause was meant to indemnify the buyer had, in substance, come about.

I will be tuning in for the argument on Wednesday, 3 October 2012. Disappointingly it will be without access to the parties’ Cases and the Statement of Facts and Issues. If the Supreme Court is serious about increasing public understanding of its work these documents should be available on its website. This would be in keeping with the spirit of the Court of Appeal (Civil Division) decision in R (Guardian News and Media Limited) v City of Westminster Magistrates Court ([2012] EWCA Civ 420, [2012] 3 All ER 551) where it was decided that to give the right to be present at hearings substance those attending should be able to access written arguments and other documents referred to in court or taken as read.