EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2014] CSIH 51
Lady Paton Lady Dorrian Lord McGhie	CA50/11 OPINION OF LADY PATON in the reclaiming motion   in the cause   MOHAMMED AMEED MIRZA Pursuer and reclaimer;   against   MRS FOZIA ASLAM or SALIM Defender and Respondent;   and   MESSRS MELLICKS, Solicitors Third Party: _______________

 

Pursuer and reclaimer:  JJ Mitchell QC; Beveridge & Kellas SSC (for Jeffrey Aitken, Solicitors, Glasgow) 

Defender and respondent:  Martin QC, Skinner;  Drummond Miller LLP (for Brunton Miller, Solicitors, Glasgow)

Third party:  Paterson;  Dundas & Wilson

 

3 June 2014

 

Erroneous land title:  retroactive rectification and damages for wrongful interdict

[1]        In 1999, 398 Cumbernauld Road in Glasgow consisted of a shop and an L-shaped yard.  The owner wished to grant a 21-year lease of the shop (but not the yard) to Mrs Suriya Khan.  By mistake, the schedule to the lease referred to the leased premises as comprising both the shop and the yard.  The mistake went unnoticed, and the lease was duly registered in the land register.

[2]        In 2002, Mrs Salim (the defender in this action) wished to have the lease assigned to her.  She instructed her lawyer, of the firm of Messrs Holmes McKillop.  By letter dated 22 February 2002 her lawyer advised her that the landlord was making it clear that the yard was not included in the lease.  He also enclosed a report by chartered surveyors, Spiers Gumley, which stated at page 5 that if the yard were to be included in the let premises, that might lead to expense and liabilities.

[3]        On 1 March 2002, the defender took entry to the premises, prior to missives being concluded.  By letter dated 14 March 2002 her lawyer advised her that her title appeared to include the yard after all.  He wrote:

“I enclose a copy of a letter from [the landlord’s] solicitors, Archibald Sharp & Son which says that their clients are leasing only the shop and not any adjacent ground.  However I consider Archibald Sharp & Son’s statement to be incorrect.  In terms of the lease, the subjects leased are the whole premises registered under the landlord’s title.  I enclose a copy of the plan showing the subjects which are registered under the landlord’s title.  Those subjects are the area of ground shown tinted pink on the plan.  Thus the lease includes the shop and adjacent ground.  I would suggest that you do not raise this with the landlord at the moment in case he withdraws his co-operation to the assignation but I draw it to your attention in case you wish to raise the matter with the landlord at some future date, particularly since the billboard appears to be erected on the adjacent ground.”

 

There was no suggestion that the defender had not received or understood this letter.  Missives relating to the lease were ultimately concluded on 18 April 2002.

[4]        In 2003, Mr Mirza (the pursuer) became the owner of the whole plot, including both shop and yard.  He received rent from the defender.  He also received rent from advertising companies in respect of the billboard erected on the yard. 

[5]        In 2006, the billboard contract came to an end.  The pursuer then sought planning permission in order to build flats and a shop on the yard.  The defender did not object to the planning application.  Planning permission was duly granted.  However on 28 September 2006 the defender’s solicitors wrote to the pursuer’s solicitors informing them that the yard was part of the subjects leased to the defender, and calling upon the pursuer to desist from the construction of the new premises until the end of the lease in 2020.  The pursuer’s agents replied that the yard was not part of the subjects leased.

[6]        In late 2006, construction work began in the yard.  The solicitors continued to correspond.  The parties spoke to each other about the possibility that the new premises might be leased to the defender.  The defender’s ultimate position was that she could not afford the rent asked, and in any event she was not obliged to pay rent for subjects which were already part of her lease.

[7]        In February 2008, when the new building was nearly complete, the defender raised an action in Glasgow Sheriff Court seeking (i) declarator that her lease included both the shop and the yard, and (ii) interdict against the pursuer from encroaching on the premises leased to her and in particular from “entering there, erecting buildings there or opening and operating shop unit premises there”. The defender founded upon the terms of her lease which referred to a land certificate plan showing both shop and yard leased to the defender.  She also averred that:

“ … Prior to [her] taking on the tenant’s interest in said lease, she with her husband and her parents were shown the extent of the shop premises being the shop itself and the adjoining ground by Mr Khan [Mrs Suriya Khan’s husband].  The [defender] relied on the information given by Mr Khan in determining whether to take on the tenant’s interest in said lease.  Neither the pursuer or her husband or parents ever met Suriya Khan or had any discussions with her.  Subsequently the pursuer appointed law agents to carry out the necessary conveyance.  The law agents’ advice confirmed the information imparted by Mr Khan, namely that the tenant’s interest in said lease comprised the shop itself and the adjoining ground.  The [defender] relied on this advice in determining whether to take on the tenant’s interest in said lease.”

 

[8]        The pursuer for his part lodged defences and a counterclaim seeking declarator that the premises leased comprised the shop alone.  Failing such declarator, he sought rectification of the lease and the land register as they did not properly reflect the relevant parties’ agreement.  He averred that the defender had never exercised possession of the yard to any extent (a fact found proved by the sheriff:  finding-in-fact 19 of his judgment dated 18 August 2009, page 77 of the appendix); that she had discussed the acquisition of the lease as being restricted to the shop when she spoke to Suriya Khan in 2002;  that she had always been aware that the subjects let comprised only the shop; and that the law agents she referred to were Messrs Holmes McKillop who had not confirmed that the tenant’s interest in said lease comprised the shop itself and the adjoining ground.  The pursuer called upon the defender to produce her law agents’ file, as previous requests for the file had been refused.

[9]        The defender then sought interim interdict.  A hearing took place on 27 February 2008.  The sheriff granted interim interdict.  The pursuer subsequently added averments in the sheriff court action that the interdict altered the status quo (as the defender was well aware) by –

“i) interfering with the continued exercise by the [pursuer] of his rights as proprietor in possession;  and ii) halting the building works which had been ongoing for over a year.  As a result of the interdict, the [pursuer] will suffer loss and damage which has yet to be quantified.  He reserves his right to seek damages against [the defender] … "

 

[10]      On 16 May 2008, the interim interdict was varied to permit some fitting-out work in the newly-built premises.  On 19 June 2008 the sheriff heard the pursuer’s motion for recall of the interim interdict.  The pursuer contended that there was no need for rectification of the lease and the land register;  esto there was such a need, rectification (in the pursuer’s favour) was likely to be granted.  Having heard submissions, the sheriff refused to recall the interim interdict.  He concluded inter alia as follows:

“ … there is no dispute that at the time [the defender] acquired her interest, on the face of the land certificate [with the lease attached] the tenant’s interest extended to the shop and the adjacent land … I consider that on a proper construction the lease clearly includes both the shop and the adjacent land as shown on the title plans to the two land certificates … I do not consider that [the pursuer] is at present able to argue that he has a competing title.  His land certificate GLA 117001 … clearly shows that the whole of the subjects have been leased to the pursuer.  The very fact that rectification is sought is a recognition that, as matters presently stand, it is [the defender] who has title to possess …

    In summary I refused to recall the interim interdict because I considered that as the pleadings presently stand, [the defender] has a prima facie case both in relation to the principal action and the counterclaim and in respect of each has reasonable prospects of success …”.

 

[11]      A proof before answer took place in the sheriff court on 12 to 14 November 2008, 2, 5, and 6 March 2009, and 14 to 17 July 2009.  On 27 July 2009 the parties had a meeting.  They again discussed the possibility of leasing the newly-built premises to the defender or her family.  No agreement was reached.

[12]      By judgment dated 18 August 2009, the sheriff held inter alia that the lease and the land register erroneously showed both the shop and the yard as leased to the defender, whereas the correct position was a lease of the shop alone.  In addition, he made a finding-in-fact-and-law 4 that the defender did not qualify within the group of persons protected from rectification by reason of their reliance on the title deed as it originally stood (section 9(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, quoted in paragraph [17] below).  He recalled the interim interdict and ordered that the lease and the land register be rectified without any modification in relation to date in terms of section 9(4) and (5) of the 1985 Act.  Rectification duly took place.  The pursuer was then able to occupy and use the new building, including the shop, all of which had remained unused for about 18 months.

[13]      On 1 April 2010 the defender ceased trading in her shop.  With the pursuer’s consent, she sub-let it.

[14]      In 2011 the pursuer raised the present action in the Court of Session seeking damages of £250,000 in respect of losses caused by wrongful interdict.  The defender sisted her current firm of solicitors as a third party.  A debate on relevancy took place on 26 October and 20 December 2012.  By interlocutor dated 16 May 2013 Lord Woolman sustained the first plea-in-law for the defender and for the third party and dismissed the action. 

[15]      The pursuer now reclaims against that interlocutor, seeking either a proof before answer restricted to quantum of damages, or alternatively a less restricted proof before answer covering matters such as the defender’s alleged bad faith in seeking the interim interdict, and quantum of damages.  Thus the main issues in the reclaiming motion are (i) the proper construction of section 9(3A) of the Land Registration (Scotland) Act 1979 concerning retroactive rectification of title deeds and the land register;  (ii) whether the action should have been dismissed;  and (iii) if the action were to proceed to proof, the extent of any proof before answer.

 

Relevant legislation in force

[16]      The Land Registration (Scotland) Act 1979 (as amended by the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985)

3  Effect of registration

 

(1) Registration shall have the effect of –

1. vesting in the person registered as entitled to the registered interest in land a real right in and to the interest and in and to any right, pertinent or servitude, express or implied, forming part of the interest …

 

(3) A – (a) lessee under a long lease … shall obtain a real right in and to his interest as such only by registration …

 

(4) The date – (a) at which a real right or obligation is created … shall be the date of registration …

 

9  Rectification of the register

 

(1) Subject to subsection (3) below, the Keeper may, whether on being so requested or not, and shall, on being so ordered by the court … rectify any inaccuracy in the register by inserting, amending or cancelling anything therein …

(3A)  [Inserted by the 1985 Act] Where rectification of an entry in the register is consequential on the making of an order under section 8 of the said Act of 1985, the entry shall have effect as rectified as from the date when the entry was made:

Provided that the court, for the purpose of protecting the interests of a person to whom section 9 of that Act applies, may order that the rectification shall have effect as from such later date as it may specify …

 

[17]      The Law Reform (Miscellaneous Provisions) (Scotland) Act 1985

 8  Rectification of defectively expressed documents

 

(1) Subject to section 9 of this Act, where the court is satisfied, on an application made to it, that –

1. a document intended to express or to give effect to an agreement fails to express accurately the common intention of the parties to the agreement at the date when it was made …

it may order the document to be rectified in any manner that it may specify in order to give effect to that intention …

 

(4) Subject to section 9(4) of this Act, a document ordered to be rectified under this section shall have effect as if it had always been so rectified.

 

(5) Subject to section 9(5) of this Act, where a document recorded in the Register of Sasines is ordered to be rectified under this section and the order is likewise recorded, the document shall be treated as having been always so recorded as rectified.

 

9  Provisions supplementary to section 8:  protection of other interest

 

(1) The court shall order a document to be rectified under section 8 of this Act only where it is satisfied

(a) that the interests of a person to whom this section applies would not be adversely affected to a material extent by the rectification; or

(b) that that person has consented to the proposed rectification.

 

(2) Subject to subsection (3) below, this section applies to a person (other than a party to the agreement or the grantor of the document) who has acted or refrained from acting in reliance on the terms of the document or on the title sheet of an interest in land registered in the Land Register of Scotland being an interest to which the document relates, with the result that his position has been affected to a material extent.  

 

(3) This section does not apply to a person –

(a) who, at the time when he acted or refrained from acting as mentioned in subsection (2) above, knew, or ought in the circumstances known to him at that time to have been aware, that the document or (as the case may be) the title sheet failed accurately to express the common intention of the parties to the agreement or, as the case may be, the intention of the grantor of the document;  or

(b) whose reliance on the terms of the document or on the title sheet was otherwise unreasonable.

 

(4) Notwithstanding subsection (4) of section 8 of this Act and without prejudice to subsection (5) below, the court may, for the purpose of protecting the interests of a person to whom this section applies, order that the rectification of a document shall have effect as at such date as it may specify, being a date later than that as at which it would have effect by virtue of the said subsection (4).

 

(5) Notwithstanding subsection (5) of section 8 of this Act and without prejudice to subsection (4) above, the court may, for the purpose of protecting the interests of a person to whom this section applies, order that the document as rectified shall be treated as having been recorded as mentioned in the said subsection (5) at such date as it may specify, being a date later than that as at which it would be treated by virtue of that subsection as having been so recorded …

 

Legislation not yet in force

[18]      The Land Registration etc (Scotland) Act 2012

 55- (1) The Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 (c73) is amended as follows:

 

(2) … (b) after [subsection (3) insert –

‘(3A) If a document is registered in the Land Register of Scotland in favour of a person acting in good faith then, unless the person consents to rectification of the document, it is not competent to order its rectification under subsection (3) above’ …

 

(3) After section 8 insert –

‘8A Registration of order for rectification

An order for rectification made under section 8 of this Act in respect of a document which has been registered in the Land Register of Scotland –

1. may be registered in that register, and
2. does not have real effect until so registered’.

 

 

Submissions for the pursuer

[19]      Senior counsel for the pursuer submitted that all three statutes had to be considered (the 1979 Act, the 1985 Act, and the 2012 Act which was not yet in force).  In terms of the 1979 Act, rectification of the land register was not retrospective (see for example MRS Hamilton Ltd v The Keeper of the Registers of Scotland 2000 SC 271, at pages 277E-G, 279 A-I).  But the 1979 Act had been amended by the 1985 Act, which inter alia inserted section 9(3A) and expressly introduced retroactive rectification.  Had the current dispute arisen prior to the 1985 Act, the pursuer would not have brought the present claim, unless there had been an absence of good faith.  The old possessory interdict (based on authorities in the 19^th century) could be obtained without any consequences in damages:  but despite the defender’s assertions that she had had a degree of possession, the sheriff had concluded that she never had possession of the yard, and was never entitled to a possessory interdict.  The core of the defender’s argument was that the 1985 Act had made no difference:  retroactive rectification was so inherently impossible that the 1985 Act should be ignored. 

[20]      The scheme of the 1985 Act made clear that no distinction was to be drawn between cases concerning the land register and other cases.  It did not matter whether the case concerned a real right, or a personal right.  The statute implemented the recommendations of the Scottish Law Commission (made following upon the case of Hudson v St John 1977 SC 255).  Rectification was expressly made retroactive:  section 8(4) and (5).  But it was recognised that an absolute rule about retroactivity could bring injustice to those who had relied on the previous state of affairs.  Accordingly exceptions were permitted:  section 9 (rectification could be refused altogether;  or the rectification order could be made not retroactive;  or the rectification order could be made to take effect from a certain date).  But the sheriff in this case had found that the defender did not qualify within section 9(2) as a person who had "acted or refrained from acting in reliance on the terms of" the title and the land register.  The defender had maintained that, before missives were concluded and before she took over the tenancy, her solicitors indicated that the yard was included in her lease.  But the sheriff, in a careful judgment, found as a fact that she had never acted in reliance on the fact that the yard was part of her title.  His judgment had not been appealed:  thus while there might be difficult questions arising under section 9(2), the issue had been dealt with, and the defender held not to qualify thereunder.

[21]      Section 9 was specifically amended by the 1985 Act.  The Scottish Law Commission, in paragraph 7.1 of their report, pointed out that the effective date of rectification might be important.  The wording of section 9(3A) was quite clear:  there could be no argument about it.  It was also irrelevant that the defender was an assignee.

[22]      The pursuer’s principal argument was therefore straightforward.  If that principal argument was wrong, and if the court in some way regarded the issue as one of possessory interdict, there was authority that the defender’s good faith or bad faith was a core question.  In that event, a proof before answer should be allowed.  The pursuer had sufficient pleadings on the question of bad faith.

[23]      The Lord Ordinary had been heavily influenced by the question of “real rights”, and had possibly viewed the case as similar to MRS Hamilton v The Keeper of the Registers of Scotland 2000 SC 271, with all the policy considerations there involved.  He might have had authorities such as L’Office Cherifien v Yamashita Ltd [1994] CSIH 51

Lady Paton

Lady Dorrian

Lord McGhie

 

CA50/11

 

OPINION OF LADY DORRIAN

 

in the cause

 

MOHAMMEDAMEED MIRZA

Pursuer and reclaimer;

 

against

 

MRSFOZIA ASLAM or SALIM

Defender and Respondent;

 

and

 

MESSRS MELLICKS, Solicitors

Third Party:

_______________

 

 

Pursuer and reclaimer:  JJ Mitchell QC; Beveridge & Kellas SSC (for Jeffrey Aitken, Solicitors, Glasgow) 

Defender and respondent:  Martin QC, Skinner;  Drummond Miller LLP (for Brunton Miller, Solicitors, Glasgow)

Third party:  Paterson;  Dundas & Wilson

 

3 June 2014

[61]      I am grateful to your Ladyship in the chair for the narrative setting out the background circumstances in this case, and a summary of the submissions made to the court.  However, regrettably I am unable to agree with your ladyship as to the appropriate disposal of this case. 

[62]      The critical question is whether the fact that by rectification of the entry in the register, the right relied upon by the defender and respondent has been deemed never to have existed, meant that by seeking interim interdict in the first place she exposed herself to a risk of liability in damages, were loss to have resulted from the existence of the interdict.  I entirely agree with your Ladyship that there are several reasons to suggest that the intention of Parliament was indeed that this would be the result of retrospectivity, all as set out by your Ladyship in para 53(i) to (iii).  However, unlike your Ladyship, I consider it not just “difficult” to accept the respondent’s argument referred to in para 53(iv), I think it is impossible to accept.  I am not persuaded that there is any justification for reaching a conclusion opposite to the one which consideration of the factors in para 53(i) to (iii) would naturally lead.  The reality must be that the entry is deemed never to have been in the terms in which it was originally recorded, and that it is fully retrospective in that sense. 

[63]      There were basically two arguments advanced as to why the opposite conclusion should be reached.  The first was that although the provisions had retrospective effect, that retrospectivity only operated back to the date of rectification.  Such an argument must in my view be rejected.  It would effectively mean that there was no point to retrospectivity.  The second argument was that even if the effect of retrospectivity was to expunge the apparent right upon which a party relied, it should not have the effect of expunging all reliance on that right, and, in particular, where a party sought by interdict to vindicate an ex facie valid real right such as that held by the respondent under the lease in question, the fact that her right was not ultimately vindicated, should not expose her to damages in respect of that interdict.  It might be thought that this is really just a variation of the first argument: namely that although the legislation clearly has retrospective effect, it does not do so for certain (unspecified) purposes, of which this was one.  Like the first argument, it is simply an argument that the court should conclude that despite the clear terms of the legislation, and despite the clear change brought about by the 1985 Act, which suggests that Parliament would have been fully aware of what it was doing, the provisions should nevertheless not be given full legislative effect.  I have difficulty in understanding why that should be so. 

[64]      In MRS Hamilton Ltd v The Keeper of the Registers of Scotland 2000 SC 271, the reasons given by the Lord President (Rodger) for concluding that the 1979 Act did not have retrospective effect included the following (my emphasis added):

“The register as it existed in 1993 would therefore ultimately prove to have been misleading.  In other words, if retrospective rectification were allowed, no-one consulting the register could be confident that it was determinative of the state of the title at that time: the law might subsequently hold that, even at that time, the legal position had been different from the position disclosed in the title sheet.”

 

Prima facie, it seems to me that this is indeed the effect of the retrospectivity which was added to the Act by amendment, save insofar as it might concern the position of those entitled to the protection of section 9 of the 1985 Act.  I think counsel for the reclaimer was correct to suggest that further support for his argument that this was the effect of retrospectivity might be taken from what Lord Maxwell said in Hudson v St John 1977 SC 255 at p260:

“Moreover in my opinion the principle operates to correct the mistake not merely from the date when the correction is made but retrospectively from the date when the mistake was made.  This I think is logical, since the purpose is to put the parties in the position in which they intended to be and, so far as emerges from the authorities, this is what the Court has in fact done.  For example in Krupp v Menzies the action in which the defence of mistake was held relevant was for accounting and payment in respect of the period from the date of the minute of agreement containing the alleged mistake and in cases such as Anderson v Lambie, where the remedy of a bare reduction has been all that is required to effect the correction, the effect of reduction is (possibly subject to some conditions) the same as if the defective deed had never been granted.”

 

[65]      That case involved a common law rectification, but of a kind which would now be carried out under the statute. 

[66]      Parliament has provided that any rectified entry in the register shall have effect as rectified from the date when the entry was made;  and has addressed the difficulties which might arise in connection with innocent third parties who have acted in reliance of the entry or deed in question.  Where a party is found to bring themselves within the protection given by the legislation, the court may provide that rectification is to take effect from a date later than that which would otherwise apply, and had the respondent in the present case been able to bring herself within the terms of the protection the sheriff could have provided for the rectification to take effect from a different date.  The sheriff found, however, that the respondent is not a person to whom the protection applies, not being someone whose position has been affected to a material extent by acting or refraining from acting in reliance on the face of the register. 

[67]      The remaining question is whether there is any basis in the general law in relation to interdict which might suggest that a different result should follow?  In my view there is not.  The position in relation to interim interdict is clear, and well understood by practitioners, namely that such an order is sought periculo petentis.  This rule means that, in general, where loss has been caused, damages will automatically follow where an interdict has turned out to be unjustified.  A petitioner for interdict perils his case, and places himself at risk of damages if it prove to be otherwise, that he will eventually be vindicated in his claim.  It seems to me that there is good reason why that should be so: without it the court would be faced with real difficulties in deciding, on the strength of ex parte statements, where the balance of convenience lies.  It is clear from the authorities that, other than on a change of circumstances, recall of an interim interdict is conclusive proof of its having been wrongfully obtained.  It is not necessary to prove malice or want of good faith, consistent with a petitioner acting at his own peril if he seeks this particular remedy.  If the court were eventually to conclude, following a grant of interim interdict (to use the words in MRS Hamilton) “that even at that time the legal position had been different from the position disclosed in the title sheet”, it would mean that there had never been a basis for seeking the protection of the court, and the recall of the interim interdict would be sufficient indication that it had been wrongously obtained.  If the interdict turns out to have been unjustified the petitioner will be liable in damages for any loss which has been caused.

[68]      The general rule appears to be subject to very few exceptions.  What seems clear is that one – possibly the only - exception is the possessory remedy, or at the very least proceedings which require to be viewed as “in substance” a possessory remedy.  One can well understand why possession has been considered to be an interest sufficiently important to justify a departure from the rule, but in such cases the interdict proceeds on the basis of possession, not mere title.  Whether there is truly any justification for an exception based on circumstances which are viewed as being “akin” to the possessory remedy, it seems to me that the exception does not go beyond that.  I note that in his Civil Remedies (pp855/856) Professor Walker draws a clear distinction between those cases under the possessory remedy, where a party is seeking to protect the actual possession which he is enjoying on an apparently sufficient title, who is entitled to the protection of the court until competing claims have been investigated, and in respect of whom malice and want of probable cause are necessary before damages may follow; and those cases where

“… the effect of interim interdict is to interfere with a party’s continued possession of property or with the continued exercise of rights or otherwise to interfere with the status quo”,

 

in which cases

“the applicant for interdict is strictly liable for the truth of his ex parte statements and the grounds on which he obtains interdict, and is liable in damages for having obtained interdict wrongfully, if for any reason the interdict turns out to be bad or unjustificable”.

 

In my view the latter position is the one in which the respondent finds herself. 

[69]      The Lord Ordinary in the present case concluded that the respondent had been exercising a possessory remedy and that she was “vindicating her right to exclusive possession”.  He suggests that she was in a stronger position than those in the cases of Miller or Kennedy, given that she was founding on a real right.  Had she been doing so when she was actually in possession I might have agreed with that, and would have had little difficulty in concluding that a proof was necessary to consider the question of whether she had been in mala fide.  However in the present case the respondent was never in possession.  The sheriff made a finding that “Neither the pursuer nor anyone on her behalf has exercised possession over the disputed ground”.  Indeed, on the contrary, the reclaimer was in possession, and received, during the currency of the lease and until 31 January 2006, without protest from the respondent or anyone on her behalf, income for the licensing of advertising billboards on the said property.  Unopposed by the respondent he had in 2006 obtained planning permission to build on the ground in question.  Some of the arguments in favour of the respondent were effectively based on the notion that it would be unfair if she could be found liable in damages, a matter which was reflected in the opinion of the Lord Ordinary in para 29 of his opinion.  However, I cannot see that this should be so.  Quite apart from the fact that this is the result of the general rule that a person seeking interdict acts at his own risk, why should it be any fairer that she should not be responsible in damages, than that the reclaimer should suffer loss by virtue of having been interdicted from using property to which he all along had both title and possession?  What the respondent was actually seeking to do was invert the possession on the strength of an apparent title, which turned out to be unfounded.  In my view she acted at her own risk, and is liable to the reclaimer for any loss caused by her unjustified use of interdict. 

 

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2014] CSIH 51
LadyPaton LadyDorrian LordMcGhie	CA50/11   OPINION OF LORDMcGHIE   in the cause   MOHAMMED AMEED MIRZA Pursuer and reclaimer;   against   MRS FOZIA ASLAM or SALIM Defender and Respondent;   and   MESSRS MELLICKS, Solicitors Third Party: _______________

 

Pursuer and reclaimer:  JJ Mitchell QC; Beveridge & Kellas SSC (for Jeffrey Aitken, Solicitors, Glasgow) 

Defender and respondent:  Martin QC, Skinner;  Drummond Miller LLP (for Brunton Miller, Solicitors, Glasgow)

Third party:  Paterson;  Dundas & Wilson

 

3 June 2014

[70]      I gratefully adopt the opinion of Lady Paton for her full narrative of the circumstances in which this reclaiming motion arises and for her summary of the submissions of parties.  I regret that I find myself unable to agree with her conclusion.

[71]      In practical terms the critical event was when the motion for recall of interdict was refused.  At that time Mrs Salim sought interdict, well aware that there was a challenge to her right to the subjects.  She ought to have known that a successful challenge would have the same effect as a successful challenge to any similar disputed claim.  There would be a finding that Mr Mirza, then the defender, had the right to occupy and use the subjects.  His primary basis of challenge was that the lease did not include the yard.  But his alternative argument was plainly disclosed.  If he was wrong about the lease he was seeking rectification.  I am satisfied that the effect of the law as it stood in June 2008 was that rectification would operate retrospectively.  In these circumstances, I consider the emphasis placed on the difficulties of retrospective legislation in this case to be distracting, if not positively misleading.

[72]      I have no difficulty in accepting Mr Mitchell’s submission that the effect of the statutory provision was to make the correction retrospective for all purposes.  That, in my view, is the plain import of sec 9(3A) of the 1979 Act.  It is the obvious purpose of the provision.  The explicit rules as to circumstances when the rectification is not to be retrospective make the basic intention quite clear.

[73]      The substantive effect of the retrospective provision was neither unique nor particularly unusual.  The direct effect of the retrospective provision is simply to remove the so-called “Midas touch” under sec 3(1)(a).  The provision produces a result similar to that in many litigations.  A person with what seems to be a clear right, is found, on full examination of the facts and law, to hold no such right.  Mr Mitchell’s example of an executor or beneficiary relying on an apparently valid will makes the point effectively.  A party relying on a probative will or – in the days of the Sasine register – on a probative disposition might seem to have a perfectly good title.  He or she would rely on it in good faith.  But, if successfully challenged, it would be as if it had never been. 

[74]      Dicta in L’Office Cherifien v Yamashita Ltd and Percy v Hall to which Lady Paton has referred were in a very different context.  It might well be unfair to change the legal character of acts after the event.  But in the present case the challenge was before the event.  The interdict was sought at a stage when the petitioner was aware that there was a judicial challenge which, if successful, would show that she was not entitled to the right she appeared to hold.  As it turned out, her express averments in resisting the challenge, based on the assertion that she had acted in reliance on the title, were found to be unfounded.  But at this stage, it is unnecessary to place any weight on that.  The issue of principle can be addressed on the assumption that in seeking interim interdict she acted in good faith and in the honest belief that the attempt to rectify would fail.  But it is important to keep clearly in mind that, when opposing the recall she was, in effect, asserting not only that she held a right conferred by statute but that the challenge to that right was ill-founded.

[75]      I am satisfied that the normal rule is that recall of an interdict after proof on the merits gives rise to liability for any loss properly attributable to the interim grant and that the real issue in this case is the scope of any exception to that rule: in other words, the question of when the periculo petentis rule, as commonly understood, does not apply.  That issue is first addressed in Burn-Murdoch in the context of the drawing of a contrast between the use of interdict and the remedy of the “possessory judgment”.  The author says:  “Prima facie, an interim interdict is sought periculo petentis, and its recall shews that it was wrongous.”  He goes on to discuss the contrasting effect of a possessory judgment and says:

“Accordingly, where a judgment in the form of interim interdict is in substance a possessory judgment, it does not fall within the general rule, and its recall is at all events not conclusive that the judgment was wrongfully obtained.  ...  Unless the interim interdict that has since been recalled was clearly a possessory judgment in character, the ordinary rule as to liability for damages applies.”:  Burn-Murdoch, Interdict pp 80-81

 

[76]      This passage provides a clear exposition of the ordinary rule.  Unless an interim interdict can be shown clearly to have the character of a possessory judgment the ordinary rule is that recall conclusively demonstrates that the judgment was wrongfully obtained.  In the later passages at pp 470 to 473 there is some discussion of the proposition that “the exact features that make an interdict wrongous have not been comprehensively stated”:  p 471.  But the author goes on to explore the proposition that recall of an interim interdict raises a presumption that it should not have been issued.  He quotes a dictum of Lord Justice Clerk Inglis in Miller v Hunter to the effect that in the appropriate class of case the presumption is conclusive that it was wrongfully obtained and adds:  “Interdicts of a possessory kind were excepted from this dictum.”  He does not suggest any other exception.

[77]      The issue was discussed in various cases cited to us.  In Wolthekker v Northern Agricultural Co (1862) 1M 211, Lord Inglis contrasted rights to which a party was entitled in any litigation – such as diligence on the dependence  – with rights such as interdict.  The rule as to the former “does not hold in those cases where a party applies to a court for some special diligence or remedy and requires to make a statement or representation to the court to induce the court to give him the requisite authority, as in the cases of interdict, landlord’s sequestrations and warrants against parties in meditatione fugae.  In such cases the applicant must be answerable for the truth of the statement on the faith of which he obtains his warrant.  Whether that statement be made in good faith or in bad faith, if it was inconsistent with fact, and unjustifiable, he must be answerable for the consequences.” p 213.  While the use of the term “unjustifiable” might allow an argument  that fault of some sort is required, such a construction would be quite inconsistent with the plain assertion that good faith is irrelevant.  In the context, the plain import is that someone seeking a special remedy is liable if it turns out not to be justified by the verdict at the end of the day.

[78]      In Miller v Hunter 1865 3M 740 it was contended that if an application for interim interdict was made in good faith, on probable grounds, and on an accurate statement of fact, the applicant would not be liable in damages merely because the interdict was ultimately recalled.  In dealing with this contention, the Lord Inglis said:

“Now the opinion of the Court is that in this case, and in the class of cases to which it belongs, judgment recalling an interdict is conclusive that it was wrongfully obtained.  There may, no doubt, be cases in which interdicts ad interim are properly applied for and obtained under such circumstances, that although, upon the ultimate adjudication of the rights of the parties the interdict necessarily falls to be recalled, yet no claim of damages will arise to the party against whom it has stood for a time.” p 745.

 

The Court then referred to examples of such cases in the books and commented that examples would readily occur to everybody.  However, the only example actually given was one based on possession.  The importance given to possession is reflected in all the dicta and, indeed, is reflected in the present context in the provisions of the 1979 Act, sec 9(3).

[79]      It is significant that the discussion in Miller was in terms of “class of case” rather than by reference to blameworthiness or degree of fault.  It leaves no room for doubt that in some types of case, being ultimately unsuccessful is sufficient to establish that the interdict was wrong.  While the court recognised that there was another type of case where there would be no liability unless there was an element of mala fides or nimious conduct, we have not been referred to any decision indicative of any such type of case other than that based in some way on possession.

[80]      The possessory remedy has fallen into disuse.  Although we were not addressed at any length on the matter, it is clear that, in the nineteenth century, it was itself a well-recognised remedy, given where a party had an established possession.  The remedy maintained the status quo as far as possession was concerned.  It was not determinative of right.  That might fall to be decided in a separate process.  Grant of a possessory remedy was not periculo petentis.  It is understandable that familiarity with such a remedy would have influenced judges considering cases where the same effect had been obtained by way of interdict.  It is unnecessary for us to explore either the justification for the possessory exception or the precise scope of that exception.  It is enough for present purposes to say that the present case was not a case based on possession.  It was the very reverse.  Mr Mirza had possession at the point when the interdict was granted.  The pursuer’s claim to interim interdict was essentially based on title.  As noted by the sheriff, “The pursuer makes no averments that she has ever possessed the disputed land”: appendix p 71. 

[81]      Moir v Hunter 1832 11S 32, was an unusual case.  A ferryman obtained interdict to stop another ferry starting up in competition.  To modern eyes it might seem more like an unjustified restraint of trade than a preservation of possession.  However, there is no doubt that the case was decided on the basis of possession.  It may be observed, that in this case, as in Miller v Hunter, the emphasis was on the type of case inferring liability in damages rather than any issue of fault.  Lord Balgray referred to “the special case” and Lord Gillies referred expressly to the “class” to which the application belonged. 

[82]      In Kennedy v Police Commissioners, 1877 5R 302,  Lord Ormidale explained matters  as follows:

“An interim interdict is not granted as a matter of right.  It is only granted on cause shewn, that is on a consideration and in respect of the representations of the party applying for it.  If, therefore, it turns out that these representations are erroneous, or that, for any other reason, the interdict was ill founded and ought not to have been applied for, it is only reasonable and just that the party obtaining and using it should answer for the injurious consequences, without it being necessary in an action of damages to aver, and in the issue to charge, malice and want of probable cause.”

 

It is important not to overlook Lord Ormidale’s explanation of the reason for the rule as he expresses it.  It is “only reasonable and just that the party obtaining [interim interdict] should answer for the injurious consequences.”  The alternative, of course, would be that the party who was ultimately shown to be in the right carried the loss without remedy. 

[83]      In setting out his list of established propositions, at para [20], the Lord Ordinary omitted any reference to what Burn-Murdoch describes as the ordinary rule.  I am of the view that he misdirected himself by accepting instead the proposition that it was necessary to look at the whole circumstances of the case:  proposition b. in para [20].  In applying his propositions to the facts, he started by considering whether Mrs Salim had been acting in a way which could be described as “nimious or groundless”.  I am satisfied that it is only necessary to consider that matter in the context of a type of case which is an exception to the general rule.  In the context of a routine diligence or an interdict used as a possessory remedy a petitioner may be liable if acting nimiously or in bad faith but these concepts are irrelevant to the ordinary rule.  The Lord Ordinary did mention “the type of exception” figured by Lord Inglis in Miller but then appeared to consider the matter in terms of the strength of the apparent right rather than by consideration of whether that right was equal to possession.  He did not attempt to consider whether the context allowed or required title and possession to be treated as the same thing.  He said that it would be “ a strong thing to subject [Mrs Salim] to damages” but he did not go on to compare that with the proposition that the person shown ultimately to have been in the right should be left to bear his own loss.

[84]      I am satisfied that the proper approach requires recognition of the ordinary rule and explicit consideration of the question of whether the circumstances fall into a category recognised as an exception to that rule.  In the context of this case, this approach required express consideration of whether title and possession could be regarded as the same thing.  The Lord Ordinary did not attempt to equiparate  title with possession.  He simply regarded it as a stronger position.  Plainly title and possession are different concepts.  Possession is protected for practical reasons not based on right.  It cannot be said that there is any recognised exception to the ordinary rule based on assertions of right or title.  That would leave it with little content.

[85]      In its origins, the phrase periculo petentis might possibly have meant no more than that the risk was with the petitioner rather than the court: Traynor Latin Maxims p 443.  However, there is no doubt that in modern practice it has come to be understood to mean that the interdict is granted at the risk of the applicant in the sense that if the application is ultimately unsuccessful the applicant will be liable in loss caused by the interim interdict.

[86]      On any view of the authorities it is clear that there are very few exceptions to the rule that the unsuccessful party will bear liability for loss caused by the interim interdict.  The contrary view places too much emphasis on the moral implications of “wrongful”.  I am satisfied that properly understood it has, in the present context, no connotation other than that the unsuccessful party’s assertion has been shown to be incorrect.  This is the effect of the passage from Burn-Murdoch at the top of p 472.  What I take to be the ordinary rule is consistent with dicta which might appear to make liability depend on an incorrect assertion at the instance of the applicant in seeking interim interdict because such assertions may be express or implied.  The present interdict would not have been granted had Mrs Salim not been impliedly contending that the challenge to her right was unfounded. 

[87]      There is no doubt that a pursuer is not liable for losses caused by the impact of litigation or for losses attributable to the standard diligences available with such litigation, such as arrestment and inhibition:  Wolthekker, supra.  Even where no interim interdict has been sought,  prudent defenders may well  incur loss when their rights are challenged because of reluctance to rely fully on such rights until they have been determined by the court.  In other words, the mere fact of facing a claim may give rise to irrecoverable loss to the person who is proved to be right at the end of the day.  But the fact that a such a person may have no remedy does not, of itself, provide any justification for leaving the loss with him or her in every situation.  The question of who should bear the loss is at the root of the matter.  That question is only relevant in a context where it is clear that there has been a real loss: see Miller v Hunter p 746.  If there has been a loss, inevitably someone must bear it even if there is no question of wrongful conduct in any moral sense.  It is consistent with fairness and with the established general rule that the burden should fall on the unsuccessful party.  I consider  that any exception to that would need clear justification.  Although earlier authorities do show an exception in relation to cases based on established possession,  I have not yet been persuaded that there is any justification for extending that exception. 

[88]      Substantial practical support for the above view of the ordinary rule can be found at the stage of assessment of the balance of convenience.  The first stage in consideration of an interim interdict is to establish that there is a real issue or “case to try”;  thereafter it is well established that the focus shifts to the balance of convenience.  The balancing exercise normally proceeds on an assumption that the losing party will pay either for the loss attributable to the interdict or for damages for the loss that would have been prevented had interdict been granted.  Relevant considerations at the stage of assessing the balance of convenience include the question of which party can more easily quantify the loss.  In some cases, formal accounting is required by one side or other.  Caution may be offered.  The prospects of ultimate success may, occasionally, be taken into consideration.  If the court can take the view that one outcome is much more likely than the other, the balance of convenience will tend to favour an interim order regulating affairs in a manner consistent with that outcome.  However, I am not aware of any practice of taking into account the risk that the loss attributable to an interim interdict would not be recoverable because of the propriety of the applicant’s conduct.  A court considering interim interdict is entitled to assume that the applicant is acting entirely properly.  If a right to damages for interim interdict required an assessment of the whole facts and circumstances of the case to determine that the interim award was “wrongously” obtained, the balancing would be a much more complex and speculative exercise.

[89]      The current practice of granting or refusing interim interdict on the basis of an assessment of balance of convenience assuming that the loss, to one side or the other, can be matched by damages at the end of the day is a practice which has operated without difficulty for many years.  It assumes that the risk of having to pay compensation for loss caused by any interdict rests with the person seeking the interdict.  The view I take on the merits is consistent with this practice.  It seems to me to produce a fair and consistent result. 

 

Decision
[90]      For the reasons given above, I would allow the reclaiming motion; recall the interlocutor of 16 May 2013; and remit the case to the commercial court to proceed as accords.  It is clear that there will have to be a proof on the question of quantum.  However, the question of whether the defender’s claim for relief against the third party should be dealt with at the same time or by way of a separate diet can be discussed and decided in the commercial court.