|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Rodger (Builders) Ltd v Fawdry  ScotCS CSIH_3 (23 June 1950)
Cite as: 1950 SC 483, 1950 SLT 345,  ScotCS CSIH_3
[New search] [Printable version] [Help]
23 June 1950
The circumstances under which the time limit came to be imposed, and in which it was not complied with, have been fully explored, on both sides, in the evidence. Not all of this evidence is necessarily relevant at the end of the day, but it is right that it should be summarised and that, where there was conflict, I should indicate what I hold to have been established. The matter begins with the decision of the pursuers to provide the balance of the price by means of a loan on the security of a bond over Whiteburn, another property belonging to them, and the Haining. This decision was not dictated to the pursuers by inability to provide the money otherwise but was simply a matter of choice. The lenders, Credit for Industry, Limited, had a system whereby they collected not only interest but also instalment repayments of capital, and this method of liquidating the loan appealed to Mr William Rodger, the director who was dealing with this transaction. We had evidence from the pursuers' bankers to the effect that credit to enable them to meet the balance of the price in cash was available to them at any time, and that a banker's reference for the balance of the price—and more—would have been freely granted if application had been made. It may be said here, once and for all, that the attack foreshadowed in the first defender's pleadings on the pursuers' financial stability came to nothing, or rather, never even materialised. It was not supported by either Mr Dundas, senior, or Mr Dundas, junior, the partners of Messrs Laing & Steedman, who stated that they had no grounds for doubting the pursuers' stability, and it was positively disproved by counter evidence given by the secretary of the Commercial Bank. Having decided to finance the purchase in this way, the pursuers on 27th October applied to Credit for Industry, Limited, to whom they were previously known, to lend them £7000 on the above-mentioned security. On 6th November the company wrote intimating that they were prepared to grant the loan and saying that they had advised their lawyers, Messrs Anderson, Gardiner & Company, to this effect. The pursuers notified Messrs J. & J. Herriot, who, on 10th November, wrote Messrs Laing & Steedman the letter already referred to explaining that their clients had left the arranging of the loan too late for settlement to be made on the following day and asking that the titles be sent to Messrs Anderson, Gardiner & Company. At the same time they wrote to Messrs Anderson, Gardiner & Company asking them to expedite the drafting of the bond. In reply to Messrs J. & J. Herriot's letter, Messrs Laing & Steedman, writing on 11th November, merely note that the pursuers are not in a position to settle that day and say that they will be glad to hear when the pursuers are ready to settle. They point out that the titles are not with them but with Messrs Hutton, Jack & Crawford, who acted for the first bondholders. On the day this letter was received, viz., 12th November, Messrs J. & J. Herriot wrote to Messrs Hutton, Jack & Crawford asking them to forward the titles to Messrs Anderson, Gardiner & Company, and in their reply, dated 13th November, that firm state that they have done this. On 15th and 17th November letters were exchanged between the parties' agents on the subject of the crop valuation, and no reference was made in them to payment of the price. On 20th November, Mr Tait, the sole partner in Messrs J. & J. Herriot, received a telephone call from Mr Dundas, junior, and a conversation ensued between them. I accept it from Mr Dundas that he rang up on his own initiative to find out when settlement might be expected, and I think it quite natural that he should have done so. The period of ten days, or so, since he had heard from Mr Tait on the subject, was by no means an excessive period to allow for the completion of the bond, but Mr Dundas had an interest and duty to know what progress was being made. Not yet having heard from Messrs Anderson, Gardiner & Company, Mr Tait was not able to say when he would be ready to settle, and, in that indefinite situation, Mr Dundas quite reasonably asked for confirmation of the loan from the lenders' solicitors, such confirmation to be in his hands by 24th November. Following upon this conversation, Mr Tait, on the same day, wrote to Messrs Anderson, Gardiner & Company asking them to send the desired confirmation. On receipt of this letter, Messrs Anderson, Gardiner & Company on 21st November wrote a confirming letter to Messrs Laing & Steedman and informed Messrs J. & J. Herriot that they had done so. Unfortunately, the confirming letter went astray in the post and was not received by Messrs Laing & Steedman until 27th November. In the meantime the ultimatum of 25th November had been dispatched and, turning to the first defender's side of the story, I shall now trace the steps which led up to this denouement.
At first sight it would naturally be assumed that the ultimatum was sent because of the non-receipt of confirmation from Messrs Anderson, Gardiner & Company, but, as a matter of fact, this was not the case. The first defender and his solicitors say that the time limit was put on quite apart from this apparent default, and it is all the easier for me to accept this evidence because the first defender himself, who was privy to the setting of the time limit, was totally unaware that confirmation had ever been asked for. Mr Fawdry, then resident in London, was first apprised of the pursuers' failure to settle on 11th November by a letter dated 13th November from Mr Dundas, senior. In that letter Mr Dundas reported the substance of Messrs J. & J. Herriot's letter of 10th November and said in the course of it "perhaps they (the pursuers) had difficulty in obtaining the loan." The remark, in its context, does not seem to bear any great significance, but Mr Fawdry seems to have read a good deal into it and says that the effect of the letter was to make him anxious about the pursuers' ability to pay the price and to settle up with him for the crop, &c., they were to take over. He was under the impression that land could not be bonded up to its full value and therefore thought that, even if the pursuers got the loan all right, it would still leave them short of their committments. This letter was seen by Mr Dundas, junior, who was handling the transaction. The next communication Mr Fawdry received was a letter dated 22nd November from Mr Dundas, senior, who was ill and confined to bed when he wrote it, and which Mr Dundas, junior, did not see. In it Mr Dundas reported some gossip which had come to his ears tending to show that the pursuers were financially unsound, and suggested that Mr Fawdry would do well to consider instructing the firm to intimate to the pursuers that payment must be made within three days under pain of nullity. In his evidence Mr Dundas explained that, in making this suggestion, he was influenced by the fact that payment had been delayed and by the gossip which had been reported to him, and that in selecting a period of three days for the time limit he was influenced by the fact that possession of those parts of the estate occupied by Mr Fawdry fell to be given on 28th November. Once possession had passed, he explained, restoration in the event of non-payment would have been extremely complicated. The letter concluded by saying that it was for Mr Laird, a partner in Messrs John D. Wood, the firm of property agents who had negotiated the sale for Mr Fawdry, to advise him. When Mr Fawdry received this letter he was thrown into a state of some perturbation and became more anxious than before. If Messrs Rodger & Company defaulted and left the estate on his hands, he would be in an awkward position since he had sold his farming stock and equipment and, as he put it, had "burned his boats." It would be rash, he felt, to bring matters to a head with the pursuers unless he was assured of another purchaser. If another purchaser, however, was in the field, he could impose a time limit with equanimity. In this predicament his thoughts naturally turned to Mr Bell, the second defender, who, to his knowledge, had been interested in the estate. On 23rd November Mr Fawdry got in touch with Mr Laird and they decided to find out if Mr Bell was still in the market to buy. The question of price was discussed and the figure of £18,750 was tentatively fixed as a figure which would keep Mr Fawdry clear of any loss on the switchover. At one stage in the case it occurred to me that Mr Fawdry might have been eager to be off with the pursuers in order to sell the estate at a larger figure to Mr Bell, but, having heard the evidence, I am certain that this was the last thought in Mr Fawdry's mind and that his only concern was lest he might be left with the estate on his hands. The approach to Mr Bell before bringing matters to a head with the pursuers was made, to use Mr Fawdry's own words, "in order to avoid falling between two stools." Mr Laird on 24th November telephoned Mr Firn who was known to act for Mr Bell, and he in turn telephoned to Mr Bell. As the result of this Mr Firn, on behalf of Mr Bell, on the same day sent Mr Laird a telegram offering to buy the estate for £18,750. Mr Laird communicated this to Mr Fawdry and he, fortified by the offer, telephoned to Mr Dundas, junior, on 25th November and instructed the time limit to be given. Mr Dundas, junior, accepted these instructions without demur and on the same day wrote the letter fixing noon on 28th November as the time limit for payment under pain of nullity. This letter reached Mr Tait on 26th November and came to him, as well it might, as a complete surprise because he had every reason to suppose that Messrs Anderson, Gardiner & Company's confirmation of the loan, which was all that Mr Dundas, junior, had asked for in his telephone conversation of 20th November, had duly reached him. Instead of telephoning to Messrs Laing & Steedman for an explanation of this apparently inexplicable letter, Mr Tait decided to get in touch with his clients and see whether they would get the money from their bankers and make immediate payment. With this object in view he telephoned to their office and was informed that both Mr William Rodger and his brother Adam were out. He said that he would telephone again later and left no message. In the late afternoon he rang up again and was once more informed that the brothers were both out. In the evening he telephoned to Mr William Rodger's house, but, on being informed that he was out, left no message. On the following morning, the 27th, Mr Tait rang up the pursuers from his office and was told that both the brothers had gone to Edinburgh on business for the day. Mr Tait tells us that he was beginning to worry over his failure to make touch with his clients and was about to ring up Messrs Laing & Steedman, when a call came through to him from Mr Dundas, junior. The conversation which ensued is of much importance, and, although there is a large measure of agreement as to what passed, the recollection of the two participants is not identical. It was on that morning that the missing letter from Messrs Anderson, Gardiner & Company finally reached Mr Dundas, and it is natural to connect the call which he put through with the receipt of that letter. Mr Dundas says that his purpose in ringing up was to find out what the prospects were of a settlement before noon on the 28th, but however that may be, I am satisfied that the receipt of the letter was the occasion for the call being made and I accept Mr Tait's evidence that the conversation began with a reference to it. I hold it proved that Mr Dundas reported the belated arrival of the letter, saying that it was dated 21st November but that the envelope and postmarks showed that it had gone astray and been delayed. I also hold it proved that, in reply, Mr Tait said "that explains your letter of 25th," or words to that effect. Mr Dundas thereafter inquired as to the prospects of settlement—and his inquiry may even have been as to the prospects of settlement by the 28th—and Mr Tait in reply said that the bond was not yet completed and stated that he was in the course of an attempt to get in touch with his clients with the object of getting them to pay the money from the bank. He told Mr Dundas how difficult his clients had been to get hold of and that they were both in Edinburgh for the whole of that day. The conversation then passed on to the subject of the crop valuation and terminated without any further reference to the ultimatum. Mr Tait did not ask for an express assurance that it had been withdrawn and Mr Dundas did not expressly withdraw it. Mr Tait says that he rose from the telephone under the definite impression that the ultimatum had been withdrawn, and I am prepared to believe him. His subsequent conduct tends to confirm this view because, as will be seen, he made no particular efforts to get in touch with his clients between that time and the expiry of the time limit, and left them in complete ignorance of its existence until after it had expired. The point, however, in Mr Tait's case, is not as strong as it might be on account of the lack of energy he had already shown in attempting to apprise his clients before the conversation of the 27th, but such persistent inertia on the part of someone who believed the time limit to be still in force would be difficult to credit. It was argued to me that, if Mr Tait had entertained the belief that the ultimatum had been withdrawn, he would have asked Mr Dundas, at a meeting between them on 29th November, to put this factor specifically before Mr Fawdry to whom an appeal was about to be made. He did not ask for this point to be put forward, but, having regard to the state of affairs between the parties at that moment, it is quite possible that Mr Tait may have thought it better not to raise controversial issues, and the evidence satisfies me that Mr Tait did refer to his belief in the course of the meeting. To the question of whether Mr Tait was entitled to entertain this belief, I will return later. As regards the effect of the conversation of 27th November upon Mr Dundas, with his different approach to it, I am equally prepared to believe him when he says that he rose from it under the belief that the ultimatum was still standing. The non-receipt of Messrs Anderson, Gardiner & Company's letter had, according to him, nothing to do with the dispatch of the ultimatum and so its receipt now did not, to his mind, affect the position. Returning now to the course of events, we find that on the morning of the 28th Mr Tait made another attempt to reach his clients at their office on the telephone but they were out. He was due to leave his office for the Sheriff Court at 11 A.M.,and, this time, he left a message for them to ring him back before that hour. Neither of the brothers in fact returned to their office in time to do so, and the hour of noon was thus reached without any communication having been established. Meanwhile events had been moving in the other camp. Having passed on Mr Bell's offer to Mr Fawdry and being aware that a time limit had been imposed, Mr Laird on 25th November wrote to Mr Firn confirming receipt of the offer, and suggesting that a probative offer should at once be sent to Messrs Laing & Steedman so that it might be in their hands when the time limit expired on the 28th. On this, Mr Firn got into touch with Mr Dundas, who took the view that no missives should be adjusted until after the time limit had expired, and undertook to ring up Mr Firn's office if the pursuers failed to pay by noon on 28th. At about 12.45 P.M. on the 28th Mr Firn's assistant, Mr Day, was told by Mr Dundas that payment had not been made and he arranged an immediate meeting. Motoring from Edinburgh, he picked up Mr Bell on the way and arrived with him at Messrs Laing & Steedman's office at about 3 P.M. The missives between the pursuers and Mr Fawdry were brought out and, using them as a basis, the necessary adjustments were soon made and the new missives were typed out and signed by Mr Bell on the one hand and by Mr Dundas, on behalf of Mr Fawdry, on the other, the price being £18,750. While these developments were taking place, the pursuers were proceeding calmly with their arrangements for taking possession on the 28th in complete ignorance of the storm which was about to break. In the early afternoon their farm manager, Mr Dow, arrived at the Haining with his furniture to install himself in his new home. He was refused entry by Mr Fawdry's grieve, acting on the instructions of Mr Dundas. Mr Dow reported this by telephone to Mr Adam Rodger, who at once rang up Mr Dundas for an explanation and was informed that the deal was off because payment had not been made within the time limit, of which he then heard for the first time. Mr Rodger immediately motored to Kelso, where his brother William was that afternoon, and apprised him of the situation. The brothers went at once to the Commercial Bank, and from there Mr William Rodger telephoned to head office, informed them that he was about to draw a cheque for £7000 and received an assurance that it would be met. They then motored to Messrs Laing & Steedman's office at Selkirk where they arrived a little after 3.30 P.M. and were informed that Mr Dundas was engaged. He was in fact closeted with Mr Bell and Mr Day, and the brothers were asked to wait in another part of the office. When Mr Dundas finally emerged, Mr William Rodger offered him a cheque for £7000 but Mr Dundas said that the deal was off and that he could not accept the cheque. Mr Rodger left the cheque on a table in the office, and it was subsequently posted to Mr Tait by Mr Dundas. In the course of the evening Mr Tait was informed on the telephone by Mr William Rodger of what had taken place but he does not seem to have grasped the finality of Mr Dundas's attitude, because the impression he then formed was that what Mr Dundas was objecting to was payment in the form of a cheque, and that all would be well if a banker's order was tendered in the morning. On the morning of the 29th, therefore, Mr Tait and Mr Rodger, duly equipped with a banker's order, called on Mr Dundas. In spite of their protests, Mr Dundas reiterated that the deal was off. It transpired that he was expecting a telephone call from Mr Fawdry, and, on hearing of this, Mr Tait asked him to put the pursuers' representations to Mr Fawdry and appeal to him to reconsider the matter. The points which he particularly asked should be put to Mr Fawdry were that the Rodgers had never been aware of the ultimatum, and that the money was there, in the office, then. They were not told by Mr Dundas that the estate had been resold on the previous day and that, therefore, it would not be easy for Mr Fawdry to go back on his decision. Mr Tait says that he was not then aware that the estate had been resold, and I am prepared to believe this. Mr William Rodger says that it was not until just after this meeting that, having a suspicion that Mr Bell might be involved, he rang him up and learned that he had made an offer which had been accepted. Mr Bell thinks that this conversation took place on the evening of the 28th, and it is possible that this is so. However that may be, it is clear that there was no mention of the resale to Mr Bell at the meeting of the 29th, and I am satisfied Mr Tait did not then know that a binding contract had been made with him. After leaving Mr Dundas, Mr Rodger and Mr Tait took counsel together and wrote a letter on the same day, 29th November, in which their position was fully set out. In the letter they maintained that the contract between them and Mr Fawdry was still subsisting and stated, inter alia, that Mr Tait's understanding was that the ultimatum had been sent only because of the non-receipt of Messrs Anderson, Gardiner & Company's letter and that, when Messrs Laing & Steedman intimated its arrival to him, he understood "that the matter was now in order." This letter produced no detailed reply from Messrs Laing & Steedman, or from Messrs Shepherd & Wedderburn, who acted for Mr Fawdry from about 13th December onwards, and on 22nd December Mr Fawdry executed a disposition in favour of Mrs Bell which was recorded on the following day.
The law which governs the question at issue was not to any material extent in dispute and may be shortly stated. In a contract for the sale of heritage, where it is stipulated that the price is to be paid on a particular date, payment of the price on the appointed date is not, in general, an essential condition of the contract, and failure to pay on that date does not entitle the seller to rescind. But payment of the price by a fixed date may be made an essential condition of such contract. If there is unnecessary or unjustifiable delay on the part of the purchaser in paying the price, the seller may limit a time within which payment must be made, and, provided the time limited is a reasonable one in the circumstances, failure to pay within that time will be treated as breach of an essential condition entitling the seller to rescind. This seems to be established by two Scottish cases—Black v. Dick, (1814) Hume's Decisions, 699, and Burns v. Garscadden, (1901) 8 S. L. T. 321—and by the English case of Stickney v. Keeble,  A. C. 386, which, although dealing with the converse case of a seller delaying to deliver a title, lays down principles which seem equally applicable to the purchaser's obligation. It follows from this that, where there has been delay in paying the price on the part of a purchaser, the question of whether that delay has been necessary, or whether it has been justifiable, must depend for its answer upon the particular circumstances of the case, including the previous attitude of the parties towards each other and the communications which have passed between them. The reasonableness of the time limit itself must also be a question depending on the particular circumstances. This means that the situation between buyer and seller here must be examined on the evidence—and examined objectively. I emphasise this because some of the evidence to which I listened was hardly relevant to that approach. It has been useful to look behind the scenes, and, in that way, to get an intelligible explanation of the various moves, but that is as far as it goes. Much of Mr Fawdry's evidence, for instance, was given to explaining how it came about that he instructed the ultimatum. It shows him to have been under the impression that he ran a great risk of not getting his money from the pursuers, and he explains how he came to hold this impression upon the information which had been put before him and upon the deductions he drew from it. I am not really concerned with this, however, and I do not have to decide whether Mr Fawdry's decision to send an ultimatum can be appreciated upon the facts as he understood them, but only whether the sending of an ultimatum, and this particular ultimatum, was justified on the facts as they existed. If he attached over much importance to unverified reports about the pursuers, and in other ways misunderstood the true situation, it may explain the sending of the ultimatum but it cannot be used to justify it. Looking at the matter, then, in this way, what are the relevant circumstances? The Dean of Faculty maintained, as was the fact, that the pursuers were in a financial position to have paid the money on 11th November, and argued that, by their failure to do so, they were guilty of needless delay. That is so, no doubt, but the attitude of the seller as indicated in his solicitors' letter of 11th November must also be taken into account. In that letter they acquiesced in the proposal to raise the money by means of a bond and in a measure of delay to enable that to be done. I cannot therefore regard the immediately ensuing delay as unjustifiable. The Dean of Faculty next pointed out that the acquiescence expressed by the seller's solicitors extended only to a few days, and contended that by the 25th November there again had been a period of needless delay which, he said, created a situation which justified the sending of the ultimatum. Now, even if this were the full picture, I should doubt if the time was ripe for an ultimatum or, at any rate, for an ultimatum of this drastic nature. Bonds can, no doubt, sometimes be drafted and executed with great speed, but there is the pressure of other work to be thought of, and it is not out of the way that the operation should take a week or two to complete. To the seller's knowledge, also, the titles had to be obtained from another set of agents. It is quite true that the purchasers' agent had referred only to a delay of a few days, but the seller's reply may well have been understood as conceding them a reasonable time within which to complete the bond, and it may be doubted whether by 25th November the delay had reached the stage of being unjustifiable. It must be remembered, too, that the seller had no grounds for doubting the good faith of the purchasers, who had committed themselves deeply in connexion with the estate, and no admissible grounds for doubting their ability to pay. I am not suggesting that the delay was altogether trivial, or that it would have been wrong for a seller to press for payment, or require assurances; but it seems to me that to send an unheralded ultimatum, expiring two and a half days after receipt, was going too far. But the situation which I have been considering is not the full situation. On 20th November Mr Dundas had the telephone conversation with Mr Tait already referred to. In it he made no demand for immediate payment and only asked for confirmation that the loan had been granted. This indicated, surely, that a further measure of delay would be tolerated, provided the seller could have an assurance that the money was good. It was on that footing that the parties stood when the ultimatum was issued, and in these circumstances I am quite unable to see how the purchasers, who had never been pressed, or even asked, to make immediate payment, can be treated as being in unjustifiable delay, or how the situation can be regarded as ripe for a brusque ultimatum. It will be noticed that I have been silent about the non-receipt of the letter of confirmation. There, indeed, was a circumstance which might have justified strong action. The requested assurance had not come to hand on the 24th, and this might well have raised a doubt as to the pursuers' good faith and ability to pay. But the Dean of Faculty refrained from founding upon this, and it seems to me that, in taking this course, he had good reasons behind him. In the first place, the evidence shows that the non-receipt of the letter was not among the reasons which in fact led to the dispatch of the ultimatum. I incline to think, nevertheless, that it would have been open to the Dean of Faculty to have founded upon this circumstance, if it had profited his case to do so. It would not, however, have helped him because, when the letter of confirmation did turn up on the 27th, it became clear that it had been delayed merely by accident, the reason for the ultimatum would have disappeared and it could not reasonably have been adhered to. The conclusion to which I come, therefore, is that, having regard to the attitude of the parties towards each other, as evidenced by their dealings with each other since the signing of the missives and by the communications passing between them, there had by 25th November been no unjustifiable delay and that the situation did not warrant the sending of an ultimatum. This makes it unnecessary for me to consider as a separate point the question whether, had the time been ripe for an ultimatum of some kind, the time limit itself was reasonable, but, if that question had arisen, I should have been inclined to think that the time allowed was, in the circumstances, unreasonably short. Although I have held in this case that the purchasers' delay did not justify the ultimatum, I am by no means to be taken as minimising the desirability and importance of punctual settlement. Nor do I wish it to be thought that an unpaid seller must remain indefinitely at the mercy of a dilatory purchaser. It is not always an easy matter to advise a seller who is standing out of his price, but it seems to me that there is room for a broad distinction between two possible types of case. In the one, there is no reason to doubt that the money will ultimately be forthcoming and in such cases, while pressure may be applied, it is right that patience should be shown before matters are brought to a head—it being remembered too that, after entry, interest is running on the price. In the other type of case, there is reason to doubt whether the money will be forthcoming and, in that case, the setting of a time limit may be more readily resorted to. What will justify doubt must always be a question of circumstances, but there are recognised means of seeking assurance with regard to ultimate payment, and, if these means have been tried and found wanting, the seller will be in a strong position to take action.
It must be added that, even if I had thought that the time limit had been validly imposed, I should still have decided the case in the pursuers' favour on the ground that, as the result of a misunderstanding in the telephone conversation of 27th November, Mr Tait was led to believe that it had been withdrawn. I entirely accept Mr Dundas's evidence that he did not expressly withdraw, and did not intend to withdraw, the time limit, but I have to consider the effect which the conversation was calculated to have upon Mr Tait's mind. The salient features are that the call came from Mr Dundas and was apparently made for the purpose of reporting the belated receipt of the confirming letter; that Mr Tait made it clear that he attributed the imposing of the time limit solely to the non-receipt of that letter; and that Mr Dundas did not correct that impression. In such circumstances it seems almost inevitable that Mr Tait would think that the time limit was no longer operative, and that is what he says he did think. This being the natural inference for him to draw, I consider that it was for Mr Dundas to make it plain to him that the time limit was still in force in spite of the receipt of the letter and that, since this was not done, Mr Tait was entitled to treat it as being superseded.
The remaining question relates to the pursuers' remedy. Are they entitled to have the transaction between Mr Fawdry and Mr Bell, and the title recorded on the strength of it, reduced? Mr Bell and his wife, whose name was inserted in the disposition, claim the protection of a recorded title. The pursuers maintain that these defenders are not entitled to this protection on the ground that they were not bona fide purchasers. What then, in the first place, are the facts with regard to these defenders' state of knowledge of the prior sale, and of the pursuers upholding it, at the relevant dates? That there had been a prior sale to the pursuers, Mr Bell was fully aware. He had hoped to buy the estate himself and, when he heard that the pursuers had anticipated him, he asked his agent, Mr Firn, to find out if they were willing to resell. Mr Firn, knowing that it was Mr Laird who had handled the deal for Mr Fawdry, got in touch with him. Mr Laird got in touch with the pursuers and persuaded them to have a meeting with Mr Bell at the Haining on 13th July. At that meeting the pursuers made it clear that they were unwilling sellers and that nothing short of £25,000 would interest them, and nothing more came of it. There matters rested until 24th November when, as we know, Mr Laird, after his conversation with Mr Fawdry, inquired of Mr Firn whether Mr Bell was still interested, and received an affirmative reply in the shape of a telegram offering £18,750. On 25th November Mr Laird wrote to Mr Firn confirming the telegram and giving some particulars of the situation. With this letter before him Mr Firn, whatever his state of knowledge had been before, was made aware that a time limit expiring on the 28th had been laid down for the pursuers, and that Mr Fawdry's intention was to treat the sale as null in the event of failure to pay. A copy of this letter was posted by Mr Firn to Mr Bell on 26th November. On 28th November Mr Bell, accompanied by Mr Firn's assistant, called on Mr Dundas, and Mr Bell accepted Mr Dundas's statement that the previous contract was at an end and signed the new missives. During the negotiations, a member of the office staff announced to Mr Dundas that Mr Rodger had called to see him, but Mr Bell says that this did not arouse any suspicion in his mind that Mr Rodger had called to dispute the cancellation of his contract, and I see no reason to disbelieve him. On the evening of the 28th, or on the following morning, Mr Bell had a telephone conversation with Mr William Rodger, and from that time it became abundantly plain that the pursuers were contesting the rescission of their contract and intended to hold Mr Fawdry to it if they could. Thereafter Mr Bell's solicitors kept in touch with developments, and finally prevailed on Mr Fawdry's solicitors to get him to execute a disposition in Mrs Bell's favour on 22nd December.
The law applicable to this situation is, I think, well established. It is that, where there has been a prior purchase and a second purchaser comes on the scene, the second purchaser is, if he has knowledge of the first sale, put upon his inquiry. This means that he is not in safety simply to accept the seller's statement that he is free to sell, but must make inquiry of his own—and the natural direction for him to turn is towards the previous purchaser. If he does not do this, he is not treated as a bona fide purchaser and, in the event of the prior sale turning out to be a subsisting one, he is not entitled to the protection of his title. It may seem hard for someone, like Mr Bell, who has been guilty of no fraud and who has implicitly accepted the seller's statement, to find that he is not treated as a bona fidepurchaser; but in the eyes of the law he is put upon his inquiry and, by proceeding without inquiry, he proceeds at his own risk. For these propositions it is sufficient to refer to the cases of Marshall v. Hynd, 6 S. 384; Petrie v. Forsyth, 2 R. 214; and Stodart v. Dalzell, 4 R. 236. Applying these principles to the facts here, it seems clear that the missives between Mr Bell and Mr Fawdry cannot stand. Mr Bell knew of the prior sale and made no inquiry to satisfy himself that the pursuers were not maintaining it. He was not under legal advice at the time and no doubt did not appreciate the need for taking this step, but the result was that he took the risk of things turning out as they have done. Since the missives cannot stand, the disposition which proceeded upon them must also be reduced. Indeed, there is a separate, and even clearer, ground of reduction in this case because, by the time the disposition was recorded, Mr Bell knew not only of the prior sale but also that the pursuers were maintaining it. In such circumstances, the recording of the deed could not be allowed to make his position better and the pursuers' position worse.
The second-named and third-named defenders reclaimed, and the case was heard before the Second Division on 1st, 2nd, 6th, 7th and 8th June 1950.
At advising on 23rd June 1950,—
There is little or no dispute regarding the facts which led up to the second missives being entered into. Mr Bell had been anxious to buy the Haining, and, prior to the sale to the pursuers, Mr Firn, an estate agent in Edinburgh, had been negotiating on his behalf. On learning that the estate had been sold to the pursuers, Mr Bell instructed Mr Firn to ascertain whether the pursuers might be willing to resell. With that end in view, Mr Firn got in touch with Mr Laird, a member of the firm of J. D. Wood & Company, estate agents in London, who had acted for Mr Fawdry in negotiating the sale to the pursuers. Mr Laird arranged the meeting at the Haining on 13th July. The upshot of the meeting was that an offer of £21,000 was made to the pursuers on behalf of Mr Bell, but the pursuers made it clear that they did not want to resell, but that, if they were offered a sum of £25,000, they might consider doing so. The evidence as to what took place at that meeting is of importance only in so far as it is claimed by the reclaimers that Mr Laird was acting on behalf of the pursuers, and that this throws light on his position at a later date. While it is true that he acted as messenger between Mr Bell and Mr Firn on the one hand and the brothers Rodger on the other, it is clear he was not employed by the latter, that he had arranged the meeting at the instigation of Mr Firn, and that his interest there was to earn a commission for himself in the event of the pursuers being made an offer which they might be tempted to accept.
The balance of the purchase price due by the pursuers was not paid on 11th November, as there had been some little delay in their solicitor arranging a loan, and a letter from the lenders' solicitors on 21st November confirming that the money would be forthcoming went astray and was not received by Mr Fawdry's solicitors till 27th November. I think, partly because of that and also for other reasons, Mr Fawdry had, quite erroneously, become apprehensive of the pursuers' ability to pay. He saw Mr Laird on 24th November and asked whether he could find a purchaser in the event of the pursuers' failure. Mr Laird at once got in touch with Mr Firn, who communicated with Mr Bell, with the result that Mr Fawdry's solicitors were informed by Mr Laird on the phone on 25th November that Mr Bell was offering £18,750 for the property in the event of the sale to the pursuers not going through. Secure with that offer, on the same day Mr Fawdry's solicitors, on his instructions, sent the ultimatum to the pursuers' solicitors giving them till noon on the 28th to pay.
On 25th November Mr Laird wrote to Mr Firn. The terms of that letter make it clear that he was acting for Mr Fawdry alone, that it had been arranged that the pursuers were to be given a time limit, and that that fact must already have been known to Mr Firn. A copy of that letter was sent by Mr Firn to Mr Bell with the suggestion that he and Mr Firn's assistant should call on Mr Fawdry's solicitors "and peruse the holograph offer submitted by Messrs Rodger and amend the price to £18,750."
Having been told by Mr W. T. Dundas that payment had not been made by noon on the 28th, Mr Bell, accompanied by Mr Day, Mr Firn's assistant, called on Mr Dundas that afternoon. The pursuers' missives, or a copy, were used as a draft, amended to suit the new contract, and a clean copy typed out and signed there and then, although it was known both to Mr Bell and Mr Dundas that Mr William Rodger was then in the office desiring to see Mr Dundas.
That evidence establishes that Mr Bell not only knew of the pursuers' contract but must have known of its terms. Further, he knew that the pursuers had been given an ultimatum, and that, failing their paying within the stipulated time, they had been notified that their contract would be rescinded. An attempt to rescind it was not in fact made till later in the day. He took no steps to ascertain whether the pursuers acquiesced in the position, or whether in the circumstances rescission was legally justifiable. He jumped at the opportunity of getting an estate which he had always wanted, relying on what was said by Mr Dundas and by his own agent, Mr Firn, who in turn gives the inexplicable reason that because he thought, contrary to the facts, that, as Mr Laird had at one time acted for the pursuers, all must be in order.
In such circumstances the law is not in doubt. If an intending purchaser is aware of a prior contract for the sale of the subjects, he is bound to inquire into the nature and result of that prior contract, and his duty of inquiry is not satisfied by inquiry of the seller and an assurance by him that the contract is no longer in existence. If he merely obtains such an assurance, he cannot rely on the missives or on a disposition following thereon. Mr Clyde argued that, in order to have the missives reduced, it must be shown that Mr Bell acted fraudulently and that he was, in consequence, barred from insisting in his contract. But fraud in the sense of moral delinquency does not enter into the matter. It is sufficient if the intending purchaser fails to make the inquiry which he is bound to do. If he fails he is no longer in bona fide but in mala fide.
The law was clearly laid down in the case of Marshall v. Hynd . Glengarry had sold certain woods to Marshall, and subsequently entered into a second contract with Hynd. There, as here, the second purchaser was aware of the prior contract, and, although I do not think this was essential to the judgment, aware of its terms. There, as here, an ultimatum, unjustifiable in law, was given to the first purchaser. There, as here, the second purchaser relied on what he was told by the seller and made no inquiry of the first purchaser whether his contract was at an end. It was held that the second purchaser was not in bona fide and was not entitled to enter into the second contract. I quote two short passages from the opinions. The Lord Justice-Clerk said (at p. 390):
"Now I think that he (Hynd) was not in bona fide to make an offer without making himself aware of what were the terms of the bargain with Marshall, and whether it was at an end. According to every principle of fair bona fide dealing, this was the course he was bound to take, and he was not entitled to rest on Glengarry's simple statement; and as he did not do so, he has no pretence to say that he was in bona fide."
Lord Pitmilly put the matter thus (at p. 391):
"It comes to this, whether Hynd was in bona fide or in mala fide?—for, if in mala fide, his taking possession will not do. In one sense, in for conscientiæ, he was not in mala fide, as he trusted to Glengarry; but the question is, whether in law he was in bona fide? And looking to the circumstances, it is clear that he was not."
Marshall v. Hynd was followed in Petrie v. Forsyth, and Stodart v. Dalzell was to the same effect. In my view, therefore, the pursuers are entitled to have the missives reduced.
It follows that the disposition in favour of Mrs Bell also falls to be reduced. The right to rely on the register does not extend to one in knowledge of prior obligations or deeds affecting the subjects. In Stodart v. Dalzell, Lord Gifford, after saying that an important principle was involved, went on to say (at p. 242):
"That principle is that a singular successor is entitled to be free from the personal obligations of his predecessor, and to take the subject unaffected by any burden not appearing on the title or on the records. But the singular successor has only this right if he was in ignorance of the existence of any obligations or deeds granted by the seller relative to the subject, and if he was in all respects a bona fide purchaser, without notice of any right in any third party or of any circumstances imposing a duty of inquiry."
In Petrie v. Forsyth the Court reduced a disposition already recorded.
Even if I had taken a different view of the missives I would not have been prepared to hold that the disposition could stand. It was prepared in the full knowledge of Mr Bell and his advisers that the pursuers were asserting their rights, and his agents accepted a disposition drawn, contrary to the usual practice, by the seller's agents and had it registered, under threat of an action by the pursuers, for the purpose of defeating the latter's rights. In so doing, they were clearly not acting in good faith, and cannot obtain any protection from having got the disposition placed on the register.
In my opinion we should adhere to the judgment of the Lord Ordinary.
The appellants assumed that their title would be safe once the goal of the Register House was reached. But in this branch of the law, as in football, offside goals are disallowed. In certain states of knowledge a purchaser is regarded as not being in good faith and goes to the Register House at his peril. Where, as here, Mr Bell and his advisers knew that a prior contract had existed and that the Rodgers were asserting that it still existed, they took the risk of the Rodgers being right when they themselves went to the Register House. The Rodgers having been shown to have been right, Mr Bell is not allowed to rely on the registration which in the knowledge which he possessed he succeeded in obtaining.
That is enough for the decision of the case, but the same principle applies at the missives stage. Mr Bell and his advisers knew that a prior contract had been entered into. So long as that contract subsisted, any contract entered into by Mr Bell could be provisional only. He assumed that the contract had been brought to an end. His assumption was wrong. He took the risk but, as things turned out, there never was any room for his contract at all as the property had already been sold, a matter as to which he could well have certiorated himself, and in the circumstances of this case ought to have certiorated himself, by means more satisfactory than reliance on the seller or the optimism of his own belief.
The permission for BAILII to publish the text of this judgment
was granted by Scottish Council of Law Reporting and
the electronic version of the text was provided by Justis Publishing Ltd.
Their assistance is gratefully acknowledged.