Pursuer: Mitchell, QC; Beveridge & Kellas, SSC

Defender: Martin, QC; Skinner; Drummond Miller LLP

Third party: Paterson; Dundas & Wilson CS LLP

16 May 2013

Summary

[1] In 1999 a shop and yard in Glasgow were let under a 25 year lease. Subsequently, the original parties to the lease transferred their interests. Mr Mirza became the owner and landlord and Mrs Salim the tenant. A dispute arose between them about the yard, upon which Mr Mirza had built another shop ('the new premises'). Each claimed the real right to the yard.

[2] In February 2008, Mrs Salim obtained an interim interdict against Mr Mirza in Glasgow Sheriff Court. The order prohibited him from entering the yard and opening and operating the new premises. The sheriff made the order on the basis that the yard formed part of the subjects included in the lease.

[3] The legal position changed radically in August 2009 following a proof. Having heard the evidence and studied the conveyancing files, the sheriff rectified the lease and recalled the interim interdict. He held that Mr Mirza had the real right to the yard. The interlocutor was retrospective in effect and Mrs Salim is therefore deemed never to have had the real right to the yard. On that basis Mr Mirza now claims damages for wrongful interdict. He also contends that she did not act in good faith.

[4] In my opinion, Mrs Salim was entitled to seek interim interdict. At the material time, she held the real right to the yard. That meant that she could vindicate her title against anyone who sought to encroach on her exclusive right to possession. In my view Mr Mirza's averments do not support a relevant case of absence of good faith. Accordingly, I shall dismiss the action.

Background

[5] The subjects are located at 398 Cumbernauld Road, Glasgow. They are registered in the Land Register for Scotland under title number GLA117001. In June 1999, Mr Khalil Ahmed leased the subjects to Mrs Suriya Khan. The lease was registered on 14 September 1999. Subsequently, she assigned the tenancy to Mrs Fozia Salim. Mrs Salim took entry on 1 March 2002 and registered her interest on 30 April 2002. During the course of her tenancy, Mrs Salim operated a newsagents and grocer's business from the shop. She did not occupy the yard.

[6] In March 2003, Mr Ahmed sold the subjects to Mr Mohammed Mirza. At that stage the yard was used for advertising hoardings. A ten year licensing agreement with agents was in place. When that agreement terminated in January 2006, Mr Mirza sought and obtained planning permission to erect commercial premises in the yard. Between 2007 and 2008 he built a licensed grocer's shop there at a cost of about £300,000. During the course of its construction, Mr Mirza and Mrs Salim were in dispute about the real right to the yard. Each maintained that they had the better claim.

[7] Mrs Salim consulted her solicitors. They advised her that the yard did form part of the subjects. She raised an action against Mr Mirza, seeking declarator that under the lease she had the real right to the yard as well as the shop. She also sought to interdict Mr Mirza from entering the yard or opening and operating the new premises. On 27 February 2008, the sheriff granted interim interdict in those terms. He did so "having seen the certificate of intimation on the defender and there being no appearance by or on his behalf".

[8] Mr Mirza lodged defences and a counterclaim in which he invited the sheriff to grant declarator that only the shop had been leased. In the alternative, he sought rectification of the lease to that effect. He also contended that as Mrs Salim had allowed the building to be erected, she was personally barred from maintaining her action. On 16 May 2008, the interim interdict was varied of consent to allow contractors to finish the construction of the new premises. A debate took place on 19 June 2008, where each side challenged the other party's pleadings and Mr Mirza sought recall of the interim interdict.

[9] The sheriff held that it was "abundantly clear" that the lease included the yard and excluded the averments relating to that line of defence. He also excluded the pleadings about personal bar. He summarised his reasons for refusing to recall the interim interdict as follows:

"I considered that, as the pleadings presently stand, the pursuer 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. Coupled to that I considered that there was a cogent need for interim interdict to remain in place and that the existing interdict was in accordance with the balance of convenience as affecting both parties; moreover it maintains a relatively innocuous status quo."

[10] At the proof, the main issue between the parties concerned rectification of the lease and whether or not any order should have retrospective effect. The sheriff held that the lease did not accurately reflect the common intention of the original parties. He determined that they intended to let the shop, but not the yard. In arriving at that view, he placed weight on the conveyancing files of the respective solicitors for Mr Ahmed and Mrs Khan. He refused to postpone the date upon which rectification should take effect.

[11] In the course of his judgment, the sheriff found Mrs Salim, her husband and her father to be credible but not reliable in regard to certain crucial matters. Mr Mirza only gave evidence on peripheral matters, but the sheriff stated that he "did not find him to be a straightforward witness; at times he was evasive and inconsistent". Mrs Salim did not appeal the sheriff's interlocutor and it is therefore now final.

The Legislative Framework

[12] The law relating to real rights and rectification is contained in three interlocking statutes: the Land Registration (Scotland) Act 1979, the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, and the Land Registration (Scotland) Act 2012. At the time of the events in the present case, the 2012 Act was not in force.

Land Registration (Scotland) Act 1979

[12] The 1979 Act introduced registration of title into Scots law. That means that the real rights of owners and tenants under long leases derive from the registration of an interest in the Land Register. That is in marked contrast to the former system, where real rights derived from the recording of an appropriate deed and establishing a prescriptive progress of title: see generally Short's Tr v Keeper of the Registers of Scotland 1994 SC 122, 138 per Lord President Hope.

[13] Professor Reid has set out the new law as follows (Law of Property in Scotland para. 147):

"under registration of title complete proof of right is peculiarly easy. Once land has been registered in the Land Register, the question of who is owner or, as the case may be ... tenant, is immediately and conclusively shown by an examination of the relevant title sheet. In consequence, it is both a necessary and also a sufficient condition of success in an action for protection of possession that the name on the title sheet is that of the pursuer. It is a necessary condition because the person named on the title sheet alone holds the right in question; and it is a sufficient condition because ... even ... where the defender maintains that the Register is inaccurate and that his own name should be there in place of the pursuer's - the pursuer nevertheless remains the holder of the right in question unless and until the Register is rectified against him. The only course open to an aggrieved defender is to seek rectification of the Register, for as long as the name of the pursuer remains on the title sheet he has no stateable defence to the pursuer's claim."

Law Reform (Miscellaneous Provisions) (Scotland) Act 1985

[14] Section 9 of the 1979 Act gave the Keeper limited powers to rectify inaccuracies in the Register. Such rectification operated prospectively from the date of such correction. After the 1979 Act had been in operation for some time, the Scottish Law Commission reviewed this area of the law: Scot. Law Com. No 79 Report on Rectification of Contractual and Other Documents Part 7. It recommended that rectification should in general have a retroactive effect, subject to the protection of third party interests.

[15] Sections 8 and 9 of the 1985 Act gave effect to those recommendations. Read short, they provided:

a. a court may rectify a written agreement if it is satisfied that it does not give effect to the common intention of the parties

b. the court has a discretion as to the manner of rectification

c. a rectified document shall have effect as if it had always been so rectified

d. the court can, however, specify a later date when rectification is to take effect in order to protect the interests of a third party

e. a rectification of a document involving a real right will lead to rectification of the Land Register on the same date

Land Registration (Scotland) Act 2012

[16] In February 2010, the Scottish Law Commission published a further report: Scot. Law Com. 222 Report on Land Registration. It analysed the problems to which retrospective rectification gives rise. At para 29.4, it suggested that one way of looking at matters was to consider two pasts: "the real one, Pastworld I, and the deemed one, Pastworld II". The Commission recommended a change to the law, which was incorporated in the 2012 Act. When in force, it will add a new section 8(3A) into the 1985 Act in the following terms:

"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."

Had that provision applied in this case, the enquiry would therefore have focused on Mrs Salim's good faith. If she met that test, the lease would not have been rectified without her consent.

The Scope of Retrospectivity

[17] Because this case falls to be determined under the law prior to the 2012 Act, the principal issue concerns the scope of retrospective rectification. To what extent does it "rewrite" history? In particular, can the court take into account the fact that Mrs Salim held the real right, or is that fact expunged from the chronology? Some assistance is obtained by considering the proper approach to retrospective legislation. In L'Office Cherifien Des Phosphates v Yamashita [1994] 1 AC 486, 525A-B Lord Mustill stated:

"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."

Similarly, in Stevenson-Hamilton's Exs v McStay 1999 SLT 1175, 1178 J-K, Lord Kingarth expressed a reluctance to construe the 1979 Act:

"in such a way as to convert actings of the defenders in 1996 which were accepted then to be lawful (on and in defence of their own property) into wrongs capable of founding an action of damages at a later date."

But while characterising retrospective rectification as "almost by definition, anomalous", Lord President Rodger went on to state in MRS Hamilton Ltd v Keeper of the Registers of Scotland 2000 SC 271, (at p 279) that:

"Parliament has made specific provision for rectification to work retrospectively where it follows on an order for rectification of a document ... and, whatever the difficulties, the courts must give due effect to that provision where it applies."

Damages for Wrongful Interdict

[18] In my view the cases on wrongful interdict provide guidance in deciding what is meant by "due effect" in the circumstances of this case. Although none of them feature rectification, they outline the principles that apply to the award of damages. A useful starting point is Bell's Principles, which states at para. 553 (4):

"The use of diligence (as arrestment, etc, in security) is always periculo petentis; and where injury arises, will entitle to reparation, if nimious or groundless."

Where the court pronounces an order such as interim interdict:

"the applicant is answerable for the correctness of his statements, and is liable in damages if it be simply proved that his application was wrongful or illegal. There can be no action of damages for merely raising or insisting in an action at law." (ibid)

[19] The cases illustrate when damages are available, but they must be read subject to the observation that: "The exact features that make an interdict wrongous have not been comprehensively stated": Burn Murdoch on Interdict para 460.

[20] In Miller v Hunter (1865) 3M 740, a landlord obtained an interdict to prevent his tenant from taking the crop from his farm. The court recalled the interdict and the tenant raised an action for damages, which was successful. Lord Justice Clerk Inglis stated (at p 745) that:

"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 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 certain time. There are examples of these cases in the books, and many illustrations of that proposition readily occur to everybody. A person who has been living in possession of a property, although it may ultimately turn out that his title is invalid or defective, is still entitled to defend his possession against anybody who assails it; and if he obtain an interdict for the purpose of keeping that possession, it would be a strong thing indeed to say, if he acted in good faith, and made no misrepresentation of the facts in obtaining the interdict, that he should be subjected in damages, because that long continued possession had been still longer continued by the interdict, during the discussion of the question of the legal right. In such a case as that no claim of damages would arise."

In Kennedy v Police Commissioners of Fort William (1877) 5R 302, 305-6 Lord Ormidale focussed on the quality of statements made to obtain an order:

"... I think it must be held, as a general rule applicable to the present and similar actions of damages in respect of ill founded interdicts, that an averment or charge of malice and want of probable cause is not necessary. An interdict is not granted as 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."

In the same case, Lord Gifford stated at page 307 that:

"It is often a matter of some difficulty and nicety to determine in what cases damages are claimable in respect of the wrongful or unwarrantable use of judicial proceedings, and in what cases the bona fides of the party or the possession of reasonable grounds will form a sufficient defence to him who has used or adopted the judicial proceedings although he may ultimately be found not to have been right in doing so."

He went on to consider (at page 308) cases where:

"the interdict was really of the nature of a possessory judgment continuing the possession or exclusive possession which had been lawfully had on a habile title for seven years or more, and although the question of right was finally decided otherwise, still the possessory judgment at the time it was pronounced was right, and the interdict which enforced it could not be said to be at the time it was granted a wrongous interdict. No doubt it was recalled when in the process of declarator or in other process the ultimate question of right was decided, but still the possessory judgement was the proper and just judgement at the time when it was pronounced."

In the more recent case of Dramgate Ltd v Tyne Dock Engineering Ltd 2000 SC 43, 53 Lord Cameron of Lochbroom, delivering the opinion of the court, stated that:

"the court is entitled and able to look behind the diligence and its execution to determine whether a legal wrong has been committed."

In my view, the cases support these propositions:

a. interim interdict is obtained periculo petentis

b. the award of damages, however, depends upon an assessment of the whole circumstances of the case

c. damages will be awarded if the interim interdict is nimious or groundless

d. a false statement made by the person obtaining the order is likely to fall into that category

e. a person who obtains a possessory judgment that was lawful at the time or pronouncement will not be liable in damages

f. it is not necessary for a pursuer to aver malice or ill will

Submissions

Mrs Salim

[21] Mr Martin advanced two principal arguments on behalf of Mrs Salim. First, the central and uncontrovertible fact is that between 1999 and 2009 her interest in the yard was registered in the Land Register. She therefore had the real right throughout the relevant period. Matters only changed when the lease was rectified. As the interim interdict was not wrongful at the time it was granted, no damages are available: Burn Murdoch on Interdict para 460. Mr Martin argued that it would be contrary to common sense to now hold that the sheriff had made the order on the basis of a nullity. If Parliament had intended to "unwrite" the whole history, it should have employed stronger wording in the 1985 Act. He submitted that it would have included a phrase such as "the acts done in furtherance of that entry", or "and is deemed always to have had that effect".

[22] Secondly, Mr Mirza's pleadings do not instruct a relevant case. The first plea-in-law states that there has been "wrongous application for and use of interim interdict". But it is unclear whether he founds simply upon the periculo petentis principle, or whether his case is founded upon false representations. Further, the condescendence fails to aver the basis upon which Mrs Salim was not in good faith.

Third Party

[23] Counsel for the third party, who are Mrs Salim's former solicitors, adopted Mr Martin's arguments.

Mr Mirza

[24] Mr Mitchell submitted that the court must give effect to the express terms of the 1985 Act. Retrospective rectification does involve rewriting history. It follows that the lease is treated as if it had always been rectified. In consequence, (a) Mrs Salim never had title to the yard; (b) the interim interdict was wrongful; and (c) that leads automatically to an award of damages. Proof should be restricted to calculating Mr Mirza's loss for the period that he was prevented from operating or letting the new premises.

[25] On the question of relevancy, Mr Mitchell contended that bare pleadings were all that are required for his main position that rectification acts as a scythe that cuts down all prior rights. Any reliance on the real right conferred by the 1979 Act is "trumped" by the 1985 Act.

[26] Mr Mitchell also advanced an argument that Mrs Salim consciously or innocently misled the court. Having regard to the sheriff's findings in fact, Mr Mitchell contended that she knew (i) that Mr Mirza sought rectification based upon the original conveyancing files; (ii) that she had not been told by the previous tenant that the yard was included in the subjects of let; and (iii) that she had not herself examined the lease prior to entry. Mr Mitchell submitted that as a matter of candour she should have said to the sheriff words to the effect that "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".

Discussion

[27] This case arises out of an unfortunate conveyancing error. Neither of the present parties are responsible for that mistake. The solicitors for the original parties failed to notice that the lease included the yard. For some time after he acquired the subjects, Mr Mirza and his solicitors also appear to have been unaware of the mistake. No attempt was made to cure the position before he built the new premises. Mrs Salim and her solicitors were in a different position. On the face of the lease, she had the real right to the yard.

[28] In my opinion, Mrs Salim did not act in a way which can be classified as "nimious or groundless". She had a sure foundation to seek the interdict. In doing so, she vindicated her right to exclusive possession. Indeed she had an extremely strong prima facie case against anyone who encroached upon the yard. Unless the lease was rectified, reduced, or some form of personal bar was established, her right was unassailable.

[29] I also conclude that the circumstances fit within the type of exception figured by Lord Inglis in Miller and Lord Gifford in Kennedy. Indeed Mrs Salim's position was stronger, given that she had the real right rather than founding on a lengthy period of possession. Echoing the words of Lord Inglis, I hold that it would be a strong thing to subject her to damages. In my view, rectification altered the deed and the register, but it did not airbrush history. It did not convert a rightful interdict into a wrongful one.

[30] As to good faith, the sheriff held that Mrs Salim was a credible witness even though she had come to mistakenly believe certain matters. I find no warrant to hold that she misrepresented the position either at the stage of seeking interim interdict, or when the motion for recall was heard. In my view the matters relied on by Mr Mirza were not material. In any event he was represented by counsel at the debate in June 2008 and the sheriff had a full opportunity to hear all the arguments deployed in seeking recall.

[31] Standing the views expressed by the sheriff at the end of the debate it would have been most surprising for Mrs Salim to concede that rectification was inevitable. Mr Mitchell accepted that no one would ever advise a client that he or she had a one hundred per cent chance of success. The outcome was therefore uncertain until the sheriff issued his judgment at the conclusion of the proof.

Conclusion

[32] In light of my findings, I shall sustain the defender's and third party's pleas to the relevancy and dismiss the action.