MOHAMMED AMEED MIRZA AGAINST MRS FOZIA ASLAM OR SALIM AND MESSRS MELLICKS, SOLICITORS

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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] 1 AC 486 in mind.  But the 1985 Act had changed everything, and these authorities had nothing to do with the present case, where the statute expressly stated what was to happen.

[24]      The third statute (the 2012 Act, not yet in force) was of some significance.  The scheme of the 2012 Act was to provide different tests for retroactivity in land register cases.  Parliament had felt that land register cases needed further limits:  cf the Scottish Law Commission paragraphs 29.4 to 29.6, in effect suggesting that the retroactive effect of the 1985 Act should be modified.  But there would always be an element of over and under protection (paragraph 29.11).  The defender’s position was that she had relied on a clear title;  she had taken legal advice and gone to court on that basis;  and it was hard on her to have to pay for “being wrong”.  However it would be equally hard for the pursuer to have to bear the loss of being kept out of his new building, and its being unoccupied and unrented for about one and a half years.  It was the nature of interim interdict that it was periculo petentis.  In circumstances such as the present case, someone seeking interim interdict preventing another from occupying property must take into account the risk that the title might be rectified with retroactive effect.

[25]      The Lord Ordinary had referred to authorities.  The references in paragraph [18] of his opinion were not entirely in point: arrestment on the dependence was a diligence which could be obtained automatically with the warranting of a summons, whereas interim interdict always required a request to the court involving questions of a prima facie stateable case and the balance of convenience.  In relation to Miller v Hunter (1865) 3M 740, it was not the fact that the judge recalled the interdict which was important:  rather it was the reason underlying the recall (for example, an interdict might be recalled as it was no longer required;  or because the right upon which the interdict was sought did not exist, and had never existed).  In the present case, the interim interdict was recalled because the right on the basis of which interim interdict was granted no longer existed and had never existed.  The Lord Ordinary listed six propositions a) to f) in paragraph [20] of his opinion (page 41 of the reclaiming print):  but propositions e) and f) were unhelpful because the present case did not concern a possessory judgment, or the defence of an existing state of possession.

[26]      Thus the pursuer was indeed entitled to damages for wrongful interdict.  The Lord Ordinary’s interlocutor of 16 May 2013 should be recalled, and the question of quantum of damages remitted to the Outer House.

[27]      Esto the pursuer’s primary submission failed, and if the wrongfulness of the interim interdict had to be viewed from the standpoint of Miller v Hunter (1865) 3 M 740 and Kennedy v Police Commissioners of Fort William (1877) 5 R 302 (ie authorities concerning possessory interdicts), then the question of good or bad faith in the sheriff court process was relevant.  In paragraph [30] of his judgment, the Lord Ordinary noted that the sheriff held that the defender was a credible witness even although she had mistakenly come to believe certain matters.  However the pursuer’s pleadings spelled out the reasons why the pursuer would be entitled to damages on the basis that the defender had not sought the interim interdict in good faith.  The pleadings included averments that the defender had never occupied the yard;  the defender had not been “reliant” in terms of section 9, and thus able to resist rectification.  As was set out in paragraph 10) of the pursuer’s note of argument, had the defender said to the sheriff “The yard was included in my lease by mistake;  that will be rectified under the 1985 Act and I have no good answer to that;  but until it is rectified I am entitled to interim interdict to exclude the owner”, no reasonable sheriff would have granted interdict.  But she did not:  she told the sheriff that she had a good defence when she did not.  She said that she had been told that the yard would be included in the lease and that she had relied on that representation, when the truth (as the sheriff found) was that she had never been told that the yard was included in the lease, nor had she relied upon any such representation.  At the point when she entered into her obligations as tenant, no-one had addressed the question of what was included in the subjects of let.  After she had taken occupation, her then solicitor looked at the titles, noticed the problem, and explained to the defender that she might well have a right to possess the yard, whether it was a good thing or a bad thing was not clear, so it was best to “keep her head down”.  Perusal of the conveyancing file demonstrated to the sheriff that the defender had never placed any reliance upon a representation that the yard was included in the lease.

[28]      The defender’s position was set out in the Closed Record at pages 46, 48, 56, and 63.  The sheriff rejected the defender’s contention that she had relied upon Mr Khan’s pointing out the yard as being included in the lease:  findings-in-fact 6, 7, 10 to 12, 14 to 16.  The sheriff found that she had never had possession of the yard:  finding-in-fact-and-law 4.  Thus the defender’s account did not correspond with the known facts.  The defender did not think of the yard until after she had accepted her obligations as tenant.

[29]      In these circumstances, there were relevant pleadings for a proof before answer on the question of the defender’s good or bad faith.  The pursuer’s position was that the defender was not in good faith when she sought the interim interdict.  But only if the appeal court rejected the pursuer’s primary submission was a proof before answer on the question of good or bad faith necessary.

[30]      The reclaiming motion should be allowed, the Lord Ordinary’s interlocutor of 16 May 2013 recalled, the pursuer’s third plea-in-law sustained, the defender’s first and third pleas-in-law repelled, and a proof before answer restricted to quantum allowed.  Alternatively if the defender’s good faith was held to be in issue, a proof before answer all pleas standing should be allowed (but the issue between the defender and the third party possibly reserved).  The case should be remitted to the Outer House to proceed as accords.

 

Submissions for the defender

[31]      Senior counsel for the defender invited the court to adhere to the interlocutor of 16 May 2013, and to refuse the reclaiming motion.   Until the sheriff rectified the title, the pursuer’s title was defective.  The pursuer was building a shop on land which was the subject of a lease to another party.  He had the underlying ownership, but not the right to possess that land.  He claimed to have lost his right to lease out the premises as a result of the interim interdict:  but he did not have such a right, as anyone properly advised would see the lease of the land in favour of the defender.

[32]      So the starting-point was the fact that the pursuer had a defective title.  That was the position, until the title was rectified.  Whether or not it was rectified did not depend on the existence of an interim interdict, but rather on whether the defender resisted the rectification.  The pursuer’s title became “whole” only when the sheriff issued his interlocutor.

[33]      The documents in the case:  The pleadings:  In the pleadings, it could be seen that there were two bases for the pursuer’s claim.  His first plea-in-law was that the defender’s application for and use of interim interdict was “wrongous”.  The “wrongousness” was demonstrated simply by the fact that the title relied upon by the defender was subsequently rectified.  That approach took no account of the common law about when it was correct to say that interim interdict had been obtained wrongously.  The Lord Ordinary had some difficulty in seeing how rectification of the register by itself meant that the application at the time it was made was “wrongous”.  One had to enter the realm of metaphysics, and ask to what extent does rectification re-write history.  To what extent did one obliterate reality.  Did it mean that the rectification itself had not happened.  Did it mean that a finding of expenses should not have happened.  The critical issue was whether a person in possession of a land certificate was entitled to rely on it, or whether that person should state that he was placing the land certificate before the court, but he had a doubt about it, and it might be open to rectification, therefore he was not going to rely on it.  This court would have the opportunity to give guidance about rectification in the context of the land register and the wrongous use of interdict.

[34]      In fact, each party acted at his or her peril until the title dispute was resolved:  the pursuer acted at his peril by building on the land;  the defender acted at her peril by seeking interim interdict.  The pursuer’s position was that subsequent rectification was enough for an accusation of “wrongous interdict”:  the defender’s position was that such rectification alone was not enough.  An award of damages could not rely solely upon the fact of rectification.  Some sort of culpability on the part of the defender was required.

[35]      The appendix:  Pages 68 to 72 of the appendix recorded the pursuer’s motion for recall of the interim interdict on 19 June 2008.  At page 70 it was clear that the sheriff was aware of the possibility of rectification.  The defender did not mislead the court on the matter, for it was staring the sheriff in the face.  The interim interdict was granted because the sheriff exercised his discretion.  He similarly exercised his discretion when he refused to recall it.  The defender did not mislead the sheriff, or misrepresent a matter of fact.

[36]      Contrary to Mr Mitchell’s submissions, rectification alone did not render the interim interdict wrongous.  That was not the right approach.  As was made clear by findings-in-fact 15 to 17 of the sheriff’s judgment of 18 August 2009 (pages 76 and 77 of the reclaiming print), the sheriff found that the defender had been aware of the erroneous title, but had been advised by her lawyer to keep quiet about it, although she might wish to raise the matter with the pursuer at some later date.  That situation was no different from an a non domino disposition, possession on the basis of which might be said to be in bad faith, yet ten years peaceable possession would result in the possessor becoming the title-owner.

[37]      Under reference to findings-in-fact 18 to 22, senior counsel submitted that the outcome of the rectification proof had not been inevitable (contrary to Mr Mitchell’s submission).  The defender’s position was in effect an expectation of litigation, a hope that she would win, and an acceptance that she would be liable in the expenses of the action if she did not win.  In other words, a person who litigated in the hope that she would win should not be found liable in damages for an interim interdict preserving the status quo pending the outcome of the litigation.  As a matter of principle, where a party sought interim interdict, and made no misrepresentation to the court, if the judge, having taken into account the balance of convenience and other relevant matters, exercised his discretion in favour of that party, then even if that party was ultimately unsuccessful on the merits in due course, it was not wrongful to use interim interdict.  Provided that the pursuer had not misled the court, the use of interim interdict was not wrongful (cf an a non domino disposition, which was a legitimate exercise in creating a title).  It was accepted that it might be bad faith to withhold something, or to misrepresent something.  But the sheriff in this case knew precisely what the situation was.  Reference was made to the Lord Ordinary’s opinion paragraphs [21], and [24] to [26].

[38]      The law:  Statutory provisions:  The existence of a registered title was very significant (section 3 of the 1979 Act).  The result was the vesting of a real right in and to an interest in land.  Section 9, as originally enacted, contained no subsection (3A).  The consequence was as outlined in MRS Hamilton v The Keeper of the Registers of Scotland 2000 SC 271.  The phrase in section 9(3A) “shall have effect as rectified as from the date when the entry was made” referred to time future to the rectification.  The statute did not provide “shall have effect and shall be deemed always to have had effect”.  Parliament could have expressed matters more clearly if it intended to re-write history.  In a claim for damages, such as the present, even some uncertainty about the meaning of section 9(3A) was sufficient for the defender.  The situation which had occurred here was unforeseen:  the Scottish Law Commission made no reference to this type of situation in their report (ie where interim interdict had been granted, and the title subsequently rectified).  Thus for Mr Mitchell to be correct, he must be able to demonstrate that the entry in the land register “shall have effect as rectified as from the date when the entry was made”.  That would have a wide-reaching effect:  it would mean that there was no de facto land certificate before the sheriff when he refused to recall the interim interdict;  it would also mean that the court would be satisfied that, in such a situation, refusal to recall the interim interdict justified an action for damages – solely on the basis of re-writing history.  There was nothing in the statute, the travaux preparatoires, or case-law to say that section 9(3A) could have that far-reaching effect.  The effect was for the future, and not the re-writing of history.

[39]      Decided cases:  Paragraph [17] of the Lord Ordinary’s opinion contained useful authorities.  Lord Mustill in L’Office Cherifien v Yamashita Ltd [1994] 1 AC 486, at page 525A-B noted that it would often be unfair to change the legal character of a person’s acts or omissions after the event (cf Percy v Hall [1997] QB 924;  MRS Hamilton v The Keeper of the Registers of Scotland 2000 SC 271, Lord President Rodger on the need for trust in the land register at page 279E-F).  Retrospectivity could not be regarded as fair if it changed something which did not attract damages into something that did attract damages.  The Lord Ordinary’s reference to Bell’s Principles paragraph 553(4) was perhaps more relevant to diligence to which a party was automatically entitled (for example, arrestment, or inhibition, on the dependence) than to an interim remedy such as interim interdict where the party seeking that interim remedy had to justify it to the court, and if it was granted, it was granted periculo petentis.  The defender in the present case had been entitled to do everything she did – such as raise an action, resist the counterclaim, and maintain her position until after the proof and the sheriff’s ruling.  Reduction, rectification or removal retroactively of a deed relied upon was not enough by itself to justify a claim of damages.  A better concept was a “change of circumstances”.  As was stated in Bell’s Principles (quoted by the Lord Ordinary at paragraph [18]) “There can be no action of damages for merely raising or insisting in an action at law”.  That applied equally to someone defending or resisting an action.  The dicta of Lord Justice Clerk Inglis at page 745 of Miller v Hunter (1865) 3M 740 (concerning a bona fide possessor, quoted in the Lord Ordinary’s opinion at paragraph [20]) was applicable a fortiori where the defender had a real right, a registered land title.  Someone with a title seeking to preserve the status quo was not liable in damages.  Proposition e) in the Lord Ordinary’s opinion paragraph [20] did not apply solely to purely physical possession.   Reference was made to Kennedy v Police Commissioners of Fort William (1877) 5R 302, Lord Ormidale at pages 305-6, Lord Gifford at page 307-8.  The court decided interim interdict on the balance of convenience.  If there was no inaccuracy, if matters had been dealt with in good faith, there could be no liability in damages.  The defender in the present case possessed a real right, a registered title, which deserved respect (MRS Hamilton v The Keeper of the Registers of Scotland 2000 SC 271, Lord President Rodger at page 279E-F).  The interim interdict at the time it was pronounced was correct, because it was based upon a registered title. 

[40]      The defender’s propositions:  The following propositions were advanced on behalf of the defender.

(1)   Neither section 9(3A) of the 1979 Act, nor section 8(4) of the 1985 Act, had the effect of nullifying anything done on the basis of the unrectified title.  In other words, neither statutory provision had the effect that, when the defender sought interim interdict, there was not in existence a real right in her favour.  The retroactivity in terms of the statutes did not go that far.

(2)   If the court was unsure about that proposition, the court should bear in mind that to construe the legislation as having that effect would mean converting a lawful application based upon an undoubted real right into a wrongous act.  That could not be the case:  rectification was an example of a change of circumstances which did not give rise to a liability in damages.

(3)   Even if the court were to hold, as a matter of construction, that the effect of section 9(3A) was to extinguish the existence of the land certificate which was put before the sheriff, the authorities demonstrated that there needed to be something more in order to render the person who obtained the interim interdict liable in damages:  because if rectification of a certificate (i.e. removal of a real right) was itself enough, that was no more than the outcome of the substantive action – and Lord Justice Clerk Inglis at page 745 of Miller v Hunter (1865) 3 M 740 said that was not enough.  There was no additional factor upon which the pursuer could rely.  The obliteration of the right was simply the result of the substantive action.

(4)   In such a situation, it was not clear what should be the test of culpability of the person obtaining the interim interdict.  This was a case where there was no bad faith or misrepresentation (which admittedly would be a matter for proof, were a proof to be allowed):  but the court would have to wrestle with the question of what gave rise to culpability in such circumstances, where the sheriff was aware of the counterclaim, and was aware of the dispute about whether a title deed should be rectified.  The defender was aware of the letter from Messrs Holmes McKillop dated 14 March 2002.  She went ahead with litigation.  She was found to be credible but not reliable.  She lost the litigation.  What in that rendered her liable to damages?  What was the “additional factor”?  The defender had simply lost the action.

(5)   The decision, the outcome, of the substantive action should be regarded as a “change of circumstances” (rather than any responsibility of the defender) resulting in the interim interdict being recalled.

(6)   This was a debate about relevancy.  The pursuer had not identified any “additional factor” other than bad faith.  If the court were to decide that bad faith was required, a proof before answer would be necessary.  If the additional factor was something other than bad faith, then there were no relevant averments and the Lord Ordinary was right to dismiss the action.

[41]      For all these reasons, senior counsel submitted that the Lord Ordinary was correct in his decision.  This was not a situation where the pursuer had relevantly averred entitlement to damages for “wrongous” or “wrongful” interdict.  The reclaiming motion should fail.

 

Submissions for the third party

[42]      Counsel for the third party adopted all the submissions made on behalf of the defender, and invited the court to refuse the reclaiming motion.

[43]      Wrongful interdict and its recall:  The question ultimately for the court was whether the interim interdict was wrongful at the time it was granted.  Moir v Hunter (1832) 11S 32 was a helpful authority concerning an exclusive right of ferry (a type of possession) illustrating that there was no absolute rule (cf Kennedy v Police Commissioners of Fort William (1877) 5R 302, pages 305 to 308).  It was plain on the authorities that recall was not conclusive proof that the interdict had been “wrongful”.  The Lord Ordinary was correct to conclude at paragraph [28] that the defender, when she sought interim interdict, had a real right (a stronger claim than possession).   The critical issue was whether it was wrongful at the time.  The rectification had resulted in a change of circumstances.  This case was not in the territory of “who won, who lost”:  only if the conduct was wrongful should damages be awarded.

[44]      Rectification:  The effect of rectification was not such that history was re-written (L’Office Cherifien v Yamashita Ltd [1994] 1 AC 486 Lord Mustill at page 525).  Percy v Hall [1997] QB 924 (Simon Brown LJ at page 947) was of assistance, for although the byelaws under which the police officers operated were subsequently declared to be invalid, entitling a person convicted of their breach to have that conviction set aside, they were valid at the time.  The subsequent declaration of invalidity did not have the effect of transforming what was, at the time, the lawful discharge of the constables’ duty into what must later be found actionably tortious conduct.  It was accepted that the analogy with Percy could not be taken too far (as the police were not in the same category as a party asserting a private right):  nevertheless there was a serious question whether the court should apply retroactivity in such a way that an act lawful at the time became unlawful.

[45]      The case as pled:  There was nothing in the pleadings suggesting wrongful conduct.  All that was averred was:  (a) that the defender gave evidence that she was in possession of the disputed area, whereas the pursuer’s position was that she had not been in possession (paragraph 8 of the pursuer’s note of argument); (b) that the defender said that she was never told, by anyone, that the lease did not include the disputed area;  whereas the letter dated 14 March 2002 from Messrs Holmes McKillop did warn her that the landlord’s position was that only the shop was being leased, and not “any adjacent ground”.  But one searched in vain for some averment that the interim interdict was obtained on the basis of a mis-statement.  There was a significant dispute about the facts of the case (cf pages 55, 80, 138-139 of the appendix, and the defender’s note of argument pages 4-5).  The pursuer’s position was that the defender “must have known” that she had no valid defence to the rectification sought:  but the sheriff had found the defender credible.  It was not clear on what basis “wrongfulness” or bad faith was being advanced.  If ultimately the question was one of good or bad faith, a proof before answer would be necessary, and the court would not be bound by the sheriff’s views on credibility and reliability.

[46]      The impact of the defender’s conduct upon the pursuer:  Until the rectification occurred, the pursuer had suffered no invasion of his legal rights.  During the period in which the interim interdict existed, the pursuer had no right to possess the yard, and was faced with the land register which must be presumed to be accurate.  On any view, the pursuer required to have the title rectified, and the defender was entitled to resist that.  Accordingly no liability for damages would arise.

[47]      Conclusion:  The reclaiming motion should be refused.  A proof before answer on the question of good or bad faith might be required.  That could take place before a commercial judge.

 

Discussion

[48]      The consequences of a retroactive statutory provision were considered in Percy v Hall [1997] QB 924, admittedly in very different circumstances.  Police officers had, in the exercise of their duty, repeatedly arrested two persons for contraventions of byelaws which, at the time, were prima facie valid and enforceable.  The byelaws were subsequently declared void for uncertainty.  Simon Brown LJ observed at pages 947-8:

“The central question raised here is whether these constables were acting tortiously in arresting the plaintiffs or whether instead they enjoy at common law a defence of lawful justification.  This question, as it seems to me, falls to be answered as at the time of the events complained of.  At that time these byelaws were apparently valid;  they were in law to be presumed valid;  in the public interest, moreover, they needed to be enforced.  It seems to me one thing to accept, as I readily do, that a subsequent declaration as to their invalidity operates retrospectively to entitle a person convicted of their breach to have that conviction set aside;  quite another to hold that it transforms what, judged at the time, was to be regarded as the lawful discharge of the constables’ duty into what must later be found actionably tortious conduct.

    I do not understand this point ever to have been addressed before …

    In my judgment … even if these byelaws are properly to be regarded as void for uncertainty … that would not serve to deprive the constables here of a defence of lawful justification wherever they can show they were acting in the reasonable belief that the plaintiffs were committing a byelaw offence [emphases added].”

 

[49]      As already noted, the circumstances in Percy were very different.  The present case concerns a dispute over private rights, whereas Percy was concerned with the enforcement of byelaws by officers of the law in pursuance of their public duty.  Nevertheless I consider that the reasoning underlying the decision in Percy supports the proposition that a legal state of affairs subsequently declared to be inaccurate, or illegal, or void, may nevertheless provide a stateable defence for someone who relied upon the prima facie accuracy, or legality, or validity of that state of affairs at the time.

[50]      Further guidance can be found in L’Office Cherifien v Yamashita Ltd [1994] 1 AC 486, where Lord Mustill observed, at page 524:

“ …  True it is that to change the legal character of a person’s acts or omissions after the event will very often be unfair;  and since it is rightly taken for granted that Parliament will rarely wish to act in a way which seems unfair, it is sensible to look very hard at a statute which appears to have this effect, to make sure that this is what Parliament really intended.  This is, however, no more than common sense, the application of which may be impeded rather than helped by recourse to formulae which do not adapt themselves to individual circumstances, and which tend themselves to become the subject of minute analysis, whereas what ought to be analysed is the statute itself …

    Precisely how the single question of fairness will be answered in respect of a particular statute will depend on the interaction of several factors, each of them capable of varying from case to case.  Thus, the degree to which the statute has retrospective effect is not a constant.  Nor is the value of the rights which the statute affects, or the extent to which that value is diminished or extinguished by the retrospective effect of the statute.  Again, the unfairness of adversely affecting the rights, and hence the degree of unlikelihood that this is what Parliament intended, will vary from case to case …”

 

[51]      A final authority of assistance is the Scottish decision of Moir v Hunter (1832) 11 S 32, which emphasises the importance of the court’s role in assessing and weighing up all the circumstances surrounding the grant and recall of interim interdict.  The case concerned an exclusive right to ferry persons across a river.  The person with that right interdicted another from ferrying passengers.  The interdict lasted for two years, until a declarator of the other party’s right was obtained.  The interdict was then recalled.  It was held that, in the circumstances, and especially as there was no allegation that the interdicting party had obtained the interdict mala fide, he was not liable in damages, even although the interdicted party had suffered loss (Lord Balgray page 35, Lord Gillies page 36).  The question was whether obtaining the interdict was wrongful at the time, and the answer was one for the court in all the circumstances of the case.  Lord Balgray noted at page 35:

“ … Generally speaking, where a summary interdict is craved, this pretorian interposition is used periculo petentis;  and the party using it is liable to indemnify the other party, if he be wrongously interdicted.  It is not enough for a party to say, in defence against a claim of damages, that he did not proceed brevi manu, but by judicial authority, and the use of interdict.  But it is always a question of circumstances whether damages are due in the special case in which the interdict has been asked and used … [emphasis added]”

 

Lord Gillies (with whom the Lord President agreed) stated at page 36:

“The interdict was applied for periculo petentis.  In many instances, such an application may infer liability for damages against the party who makes it;  but this does not follow in all instances, and cases were ordered for the purpose of our determining to which of these classes this application for interdict belonged.  From the terms of the interlocutor which was brought under review, ‘Whether the defender illegally obtained and kept in force an interdict to the loss and damage of the pursuer?’ I thought it unfit for the Jury Court;  for there was no longer a doubt of the illegality of the interdict, as that was judicially determined, and such an issue would have left no question for the jury, except to assess the amount of damages, and I doubted whether there existed relevant grounds for damages at all.  From the additional consideration which the court has given to the case, that doubt has been increased, though I own it appears to me to be a question of very considerable nicety.  The defender had a clear right of ferry – an exclusive right – and in reliance on this, he exclusively carries passengers to the steam-boats which call off the ferry;  and he exercises this without challenge from the pursuer, from the time when steam-boats began to ply, and for a longer term than seven years.  He exercises this right bona fide;  and whilst doing so, the pursuer comes forward and interrupts his exclusive possession.  The defender then applies for an interdict.  This is not done to invert, but to continue the previous state of possession.  It is not alleged to have been done in mala fide;  and, in the whole circumstances of the case, I am of opinion that no damages can be claimed by the pursuer [emphasis added]”

 

[52]      With the guidance outlined above in mind, there is a question whether it was the intention of Parliament, in enacting section 9(3A), to supersede the court’s function of weighing up all the circumstances surrounding an interim interdict in order to assess whether damages are due on its subsequent recall following rectification of a deed – the view being that the wording of the statute makes it clear that the deed as subsequently rectified must be regarded as having always been in those terms, even at the time when the interim interdict was sought, and therefore that someone who relied upon the terms of the deed as it stood at that time will automatically be liable in damages if the deed (as rectified) no longer justifies the interim interdict.

[53]      At the outset, I accept that there are arguments suggesting that this was indeed

Parliament’s intention.  For example,

(i)   There was no need for Parliament to insert section 9(3A) in the 1979 Act unless there had been an intention to achieve that very result.  (However one possible answer might be that Parliament’s intention was to achieve that result in the circumstances outlined in paragraph [56] below.)

(ii)   There would otherwise be no purpose in the “special group” who are entitled to resist retroactive rectification on the ground that they would be prejudiced, or in the power given to the court either to refuse rectification, or to fix another date from which rectification should occur.  (Again however one possible answer might be that, while Parliament intended to protect a particular group, non constat that other persons might not be entitled to protection in certain circumstances at common law.)

(iii)   It is difficult to suggest that Parliament cannot have intended to re-write history or to remove rights from persons.  The terms of the legislation make it clear that that is precisely what Parliament did intend, while allowing some flexibility for the “special group”, thus permitting some adjustment for the particular circumstances of some cases.  (Responses to this argument might be as in (i) and (ii) above.)

(iv)   It is also difficult to accept the submission made by the defender’s senior counsel that the wording of the statute (“shall have effect as rectified as from the date when the entry was made”), properly construed, means that the deed is to have only a future effect from the date of the rectification, for all the reasons noted above.

 

[54]      Nevertheless, standing the guidance in Percy v Hall, L’Office Cherifien, and Moir v Hunter, I am unable to accept that Parliament intended to override the common law relating to applications for interim interdict and damages for wrongous interdict.  In my opinion, had Parliament intended to achieve that far-reaching result, it would have made a clear statement to that effect.  Certainly there will be circumstances in which a rectified deed must be treated as if it had always been in its rectified form in terms of section 9(3A):  for example, in questions of tax liability (Scottish Law Commission Report on Rectification 1983 Pt VII paragraphs 7.1-7.2);  in questions of succession and trust deeds (cf Hudson v St John 1977 SC 255;  Scottish Law Commission Report paragraphs 7.1-7.2);  in questions of ranking in bankruptcies and liquidations;  in questions of the order of entitlement in land disputes where the first with a registered title has the right to the land;  in questions of the validity and ranking of standard securities, and other similar cases.  But there may be other circumstances in which “precisely how the single question of fairness will be answered in respect of a particular statute will depend on the interaction of several factors, each of them capable of varying from case to case” (Lord Mustill at page 525 of L’Office Cherifien).  In my view, it would be an unfortunate outcome if the present case were to provide an unduly restrictive precedent, namely that – no matter what the circumstances – rectification of a prima facie valid deed, upon which a party had relied for the purpose of obtaining interim interdict, must automatically result in that party being liable in damages for any loss suffered by another as a result of the interim interdict.  While it has always been accepted that a petitioner seeking interim interdict does so periculo petentis, the outcome referred to above would place an almost prohibitive obstacle in the path of a petitioner relying upon a challenged deed. 

[55]      I should add that I note that the wording of section 55 of the Land Registration etc (Scotland) Act 2012, not yet in force, specifically provides for registration "in good faith” as a defence to rectification of a registered deed.  That may well clarify and focus matters in future cases.  However it does not follow from the wording of an as yet unenforced statute that section 9(3A) must be construed in the manner proposed by the pursuer.  I also acknowledge that Parliament chose specifically to protect a particular group of persons who had relied on the deed (section 9(2) of the 1985 Act).  Again however it is my view that section 9(2) is not necessarily exhaustive when the court has to consider all the facts and circumstances surrounding the obtaining of an interim interdict.

[56]      In the result therefore I have reached the view that, when a court has to decide whether or not an interim interdict was “wrongous” such that the party who obtained it is liable for damages, section 9(3A) has not affected the court’s power to weigh up and assess all the circumstances of the case, including, but not restricted to, questions of good faith and bad faith.  When the sheriff was considering and deciding the question of rectification, he was not considering the question whether the defender should, in all the circumstances, be found liable in damages if the interim interdict which she had obtained on the basis of a prima facie valid and registered land certificate were subsequently to be recalled.  Thus in my view the court in the present action can and should focus on that issue, and assess all the circumstances, before finding the defender liable in damages for wrongful interdict.  That conclusion does not detract from the fact that interdict and interim interdict are indeed granted periculo petentis.  A litigant seeking interim interdict takes the risk that he may ultimately be unsuccessful in his action and (with the benefit of hindsight) not entitled to the interim interdict granted:  Burn-Murdoch, Interdict pages 80-81, 469 et seq;  Miller v Hunter (1865) 3 M 740 at pages 745-746;  Kennedy v Police Commissioners of Fort William (1877) 5R 302, Lord Ormidale at pages 305-306, Lord Gifford at pages 307-308;  Trayner’s Latin Maxims under the heading “periculo petentis”.  Attempts to maintain the status quo or to remain in possession pending the resolution of a legal dispute (cf the 19^th century possessory actions) may result in no liability in damages;  but there may be liability in other cases.  Also if it is established that there was bad faith on the part of the litigant in seeking the interim interdict, that would certainly weigh heavily against him.  

[57]      In my opinion, therefore, the question whether or not the interim interdict was wrongous and whether or not damages should be awarded must be left as an open question to be decided by the court, taking into account all the circumstances of the case.  Thus I consider that a proof before answer at large is required.

[58]      That conclusion in effect supersedes the second issue in this case, namely whether, if the pursuer seeks to prove bad faith on the part of the defender in obtaining interim interdict, his averments on that point are sufficient. However for completeness I would add that, in my opinion, the pursuer’s averments in that context are sufficient for inquiry.  I refer to the whole of the pursuer’s pleadings and in particular article 5 of the summons (pages 10 to 11 of the reclaiming print).  I consider that these pleadings raise questions – for example about the nature of the defender’s knowledge at certain times concerning the extent of the subjects let;  about the timing of and motivation underlying the application for interim interdict (following, as it did, the virtual completion of the construction of the new building);  and about any representations made to the court when applying for interim interdict (for example concerning “reliance”).  

[59]      It will be seen that, unlike the Lord Ordinary, I have reached the conclusion that the pursuer has a sufficiently relevant case, and that it would be going too far too fast to dismiss the action.  I would therefore allow the reclaiming motion;  recall the interlocutor of 16 May 2013;  allow a proof before answer, all pleas standing; and remit the case to the commercial court to proceed as accords.  The question whether the defender’s claim for relief against the third party should form part of that diet of proof before answer, or whether it should be reserved for another diet, could be discussed and decided in the commercial court. 

[60]      However my view is a minority one.  In accordance with the majority view, we shall allow the reclaiming motion;  recall the interlocutor of 16 May 2013;  sustain the pursuer's third plea-in-law;  repel the defender's first and third pleas-in-law, and allow a proof before answer restricted to quantum.  We remit the case to the commercial court to proceed as accords.  We continue the question of the expenses of the reclaiming motion.

 

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2014] 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.