|Judgment - Clydesdale Bank Plc v. Davidson (A.P.) and Others (First Appeal)
Clydesdale Bank Plc v. Davidson (A.P.) and Others (Second Appeal) (Scotland) (Consolidated Appeals) continued
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It is well established that no person may enter into a contract with himself. If authority is needed for that proposition it can be found most directly in Church of Scotland Endowment Committee v. Provident Association of London Limited 1914 S.C. 165. The same proposition holds good in English law. To use the language of Stuart V.-C. in Grey v. Ellison (1859) 1 Giff. 438, 444 it is whimsical that a man should grant a lease to himself. In Lord Blantyre v. Dunn (1858) 20 D. 1188 the tenant of lands under two long leases acquired the ownership of them. While there were differences of opinion expressed on the question whether confusio operated to extinguish the rights and obligations or only effected a temporary suspension of them it was perfectly clear that the subordinate right of tenancy had merged with the higher right of property.
It is of course possible to create a valid lease where one of the parties is a member of a group comprising the other party, where that group constitutes in itself a separate person in law. Thus a partnership may validly grant a lease to an individual who is a member of the partnership. As was held in Mair v. Wood 1948 S.C. 83, since a partnership is a legal persona distinct from the individuals who compose it, there is no conflict with the doctrine of confusio in allowing a partner to take a decree against the firm of which he is a partner. As Lord President Cooper pointed out (p. 87) "the partner's liability for a firm debt is not a primary liability, and it is one in respect of which he enjoys a right of relief against his co-partners."
In Barclay v. Penman 1984 S.L.T. 376 an attempt was made to establish that one of several proprietors of a house held it under a lease to him by all the proprietors and as a secure tenant with a view to resisting an action for division and sale. In response to an argument that no one could be creditor and debtor in the same obligation the defender sought to argue that the body of pro indiviso proprietors constituted a legal persona separate from each individual proprietor. That solution was held by Lord Stewart to be erroneous and he held that no lease had been created. The basis on which he proceeded was a consideration of the basic principle of multiple ownership that all of the proprietors must agree to any transaction involving the property except in cases of necessity. He held that that principle was inconsistent with the existence of a separate legal persona. A consideration of the possibility of distinguishing the identities of the creditor and the debtor in respect of the contractual rights and obligations involved was evidently not raised in the case. Counsel for the appellant sought to argue that the present case was closely analogous to a joint adventure. But analogy here will not suffice.
Such an approach is in any event unnecessary. Looking at the matter as one of contract law it does not seem to me that there is the necessary coincidence of creditor and debtor to prevent effective rights and obligations from being created. Rights and obligations could be created between the appellant on the one hand and his parents on the other. As Lord Mackay of Clashfern pointed out in Pinkerton v. Pinkerton 1986 S.L.T. 672, 676:
So where an obligation is sought to be constituted as a joint obligation on two or more persons in favour of one of them it may not be an enforceable obligation. On the other hand, if it is constituted as a joint and several obligation on them, then one of them should be able to enforce it against the others. And where a right of exclusive possession can only be enjoyed with the consent and co-operation of several acting together, as is the case with co-proprietors, they should be able to create a valid right to exclusive occupation in favour of one of their number. The distinction between the identities of the respective parties to such an arrangement which saves it from the rule that a person may not contract with himself was noted by Professor Reid and Professor Gordon in the passages of their works to which I have already referred.
There is then in my view no objection in law to the making of a contract between persons who are co-proprietors regarding the use or management of the common property on any terms which they may choose. There is nothing unlawful in their agreeing that one of their number should carry out some particular services for them all on the lands, such as, to take up one of the examples put forward by Lord McCluskey, gardening work. In such a case their liability would be in solidum. Nor would it be unlawful for them all to consent that one of their number should have an exclusive occupation of the lands for such period and on such terms as they may agree. Such consent could be express or even, in particular cases, implied.
But while on the basis of a contractual arrangement among themselves co-proprietors may arrange for one of their number to have the sole occupation of the lands it is a distinct question whether such agreement can constitute a lease. It is at this point that I turn to consider the matter from the point of view of the law of property, and in particular the law with regard to common property.
There is now an accepted distinction between "joint property" and "common property." But while a consistent nomenclature may now be expected it has to be noticed that the terms may be interchangeably used in older texts. The former holds where the co-owners are inter-related by some common bond such as a trust or an unincorporated association. In such a case the property is vested in them pro indiviso, but, as has been recognised in successive editions of Gloag and Henderson's The Law of Scotland, currently paragraph 40.35 in the 10th ed.:
On the other hand in the case of common property:
But while each co-proprietor may alienate his share without the consent of the other co-proprietors, matters of the use and disposal of the lands are matters in which they are all required to take part. The general rule was expressed by Professor Bell (Principles 1072) in these words:
The reason which lies behind this is that the rights of each proprietor extend over the whole of the lands. The principle is, as Lord President Dunedin put it in Grant v. Heriot's Trust (1906) 8 F. 647, 658, "all the owners hold together in common, and they have, if I may so express it, a metaphysical right in every minutest atom of which the property is composed." It was held in that case that one pro indiviso proprietor could not create a servitude non aedificandi over the common subject. Thus the consent of all of them is required for the granting of a lease of the lands. In Campbell and Stewart v. Campbell 24 Jan. 1809 F.C. it was held that while one co-proprietor might be entitled to allow friends to shoot on the common lands the letting out of the shootings was not an ordinary use of the lands and was not effectual without the express consent of both proprietors. In Schaw v. Black (1889) 16 R. 336 it was recognised that the consent of all the co-proprietors was necessary for recovery of the rents. And the same principle was stated by Erskine to lie behind the necessity for all to co-operate in the removal of a tenant. He observed (Institute 2.6.53):
Thus in Grozier v. Downie (1871) 9 M. 826 it was held that the absence of one of the three co-proprietors was a radical and fatal objection to the title of the others to sue a removing. Since the consent of all is required for the management of the subjects the rule in re communi melior est conditio prohibentis applies, whereby one co-proprietor may prevent any changes occurring in respect of them.
In light of that basic characteristic of common property it does not seem to me that any or all of those who are co-proprietors can validly create a lease of the lands in favour of one of their own number. In the present case the appellant was by virtue of his co-ownership entitled to the use of the lands, albeit along with the other co-proprietors. He needed no grant of a right to use or occupy the lands. He already had that right. If the others chose to surrender their rights of use so as to leave him in exclusive possession that did not create in him a right of tenancy but simply removed a qualification on the rights which he enjoyed as a co-proprietor. He thereafter occupied the land not by virtue of a right granted to him by the proprietors but by virtue of the right which he had possessed all along as a co-proprietor. A right of sole occupation cannot co-exist with a right of ownership, albeit co-ownership, in the same person. The greater right must absorb and extinguish the lesser right. The narrow path which Lord Mackay of Clashfern identified in Pinkerton v. Pinkerton 1986 S.L.T. 672 whereby a lease could validly be constituted between a sole proprietor and several persons including himself as tenants is not available where the greater right is held in its entirety by the landlord. By virtue of that right he can grant the lesser right of occupation to others along with himself. But the co-proprietors in the present case can grant nothing to the appellant as sole tenant when he already has a right of occupation to the whole lands. Counsel for the appellant sought to overcome the general rule which requires all the co-proprietors to act together by developing an exception to it. Two points arise in this connection. Firstly, it is certainly correct that one co-proprietor may establish a title and interest to defend the common property against encroachment by a third party. It was so held in Lade etc. v. Largs Baking Co. (1863) 2 M. 17 where one of the co-proprietors was a shareholder in the company alleged to be encroaching. In so defending the common property one co-proprietor would no doubt be entitled to eject a third party encroaching upon it. But as Lord Cringletie observed in Ure v. Ramsay and Johnstone (1828) 6 S. 916, 919, there is "a great and manifest distinction between the right to do any thing, and the right to prevent." That one co-proprietor may have title and interest to prevent encroachment or to resist intrusion does not mean that he can act independently in the administration or control of the lands. Moreover while a co-proprietor may have title and interest to prevent injury to the common property even where the party allegedly committing the injury is one of his co-proprietors it does not follow that he can remove that person from the lands which they hold in common.
Secondly, there is one exception to the rule that one co-proprietor may not make any significant change or extraordinary use of the lands. That exception arises in cases of necessity. Bell recognises the one exception in para 1075 of his Principles "that necessary operations in rebuilding, repairing, etc. are not to be stopped by the opposition of any of the joint owners." But it does not seem to me that the exception goes wider than cases of necessity. The somewhat delphic observation in para 1077, unilluminated by authority, that "Where parties cannot agree, either the will of the majority rules, or the ordinary state must be continued" does not advance the matter. Counsel for the appellant sought to develop the exception to support an argument that one co-proprietor might act for the common advantage of all and that it would be equitable to allow a remedy to one co-proprietor which could benefit the property even although it was opposed by the other. In Deans v. Woolfson 1922 S.C. 221 the rebuilding of an outside stair was treated as a necessary work of restoration. The Lord Justice-Clerk in that case observed that the exception which Professor Bell recognised was "a most proper and equitable consideration." But that comment does not seem to me to have been intended to introduce considerations of equity into the definition of the exception. While, as can be seen in A. v. B. 1680 M. 2448, considerations of the common advantage may entitle one adjudger to remove a tenant without the consent of the others, the rights and interests of adjudgers are, as Hunter points out in his Landlord and Tenant, 4th ed. vol. II p. 13, different from those of co-proprietors. I am not persuaded that the exception can be extended in the way for which counsel for the appellant contended.
Returning then to the general rule of the necessity for all to consent it seems to me that the appellant's case can be tested by considering the remedies available in the event of a failure by the alleged tenant to comply with the arrangement. If he was a tenant under a lease and was in breach of the terms of the lease, for example by failing to pay the rent, the landlord would be entitled, subject to complying with any relevant statutory procedures, to remove him and recover possession for himself. The tenant would, in the time-honoured phrase, be obliged to leave the lands void and redd. But in the present case the would-be landlords can do no such thing. The appellant would presumably refuse to consent to his removal. The others would not be able to remove him from the lands altogether since he has a perfectly good right to possession as a co-proprietor. The remedy for the other co-proprietors would then have to be found in an action for division and sale.
The point can be seen in some of the cases to which reference was made. In Murdoch v. Inglis 1679 3 Brown's Supplement 297 a removing was refused where the other co-proprietor was consenting to the tenant continuing to occupy. In Bruce v. Hunter and Leisk 16 Nov. 1808 F.C. where one co-proprietor objected to the use made of part of the lands by the other it was held that he had no title to sue for a removing and the right was reserved to either party to bring a process for ascertaining the extent and obtaining possession of their respective properties, presumably by an action for division. In Price v. Watson 1951 S.C. 359 a co-proprietor sought summarily to eject two persons who had purchased the other original pro indiviso share of the property from the original co-proprietor and had taken occupation of part of the whole subjects. The court held that the proceedings should be sisted in order to allow the bringing of an action for division and sale as the appropriate remedy in the circumstances. Lord President Cooper refrained from affirming that one co-proprietor could never eject another but the observations which prompted his hesitation do not seem to me to go so far as to raise serious doubt on that matter and I consider that the view taken by Lord Keith is to be preferred. Lord Keith, at p. 366 stated with reference to an ejection "That it can be used against a co-owner who has a right to possess, flowing from his property title, is, in my opinion, a plain impossibility."
The case of Higgins v. Assessor for Lanarkshire 1911 S.C. 931 was founded upon as an example of a lease by pro indiviso proprietors to one of their number. In that case all that the Lands Valuation Appeal Court required to hold, as they did, was that the figure of £16 for which the two appellants were contending should be entered in the valuation roll as the rent was not the rent under a bona fide lease. They did not require to consider whether the arrangement which had been made was a lease by pro indiviso proprietors to one of their number. Certainly the facts were somewhat curious. The appellants were Higgins as owner and Steel as tenant. They were the owner and tenant respectively entered in the valuation roll. It evidently emerged before the valuation committee that the property was jointly owned by Higgins, Steel and a Mrs. Rennie, the widow of a former tenant. There was no formal lease and no formal written agreement. Lord Johnston observed:
I do not regard this case as supporting the appellant in the present appeal. The removal to which Lord Johnston refers is a removal from occupation as "tenant." But, as he recognises, Steel retained a right of occupancy as co-proprietor.
There must of course be reasonable limitations on the agreed use of the common property so that, as Lord M'Laren put it in Governor's of George Watson's Hospital v. Cormack (1883) 11 R. 320 at p. 323 "one proprietor may not obtain an excessive benefit at the expense of his co-proprietors." If the one does with the consent of the others take the whole fruits of the lands, then it is reasonable that he should make some payment to the others in that regard. But the payment which he would make to them would not be a rent but a compensation for their loss. The distinction is made by Lord Keith in Price, at p. 366:
One essential of a lease is the payment of a rent, but what in substance was arranged to be paid in the present case, despite the language of the Minute of Lease, was not a rent but a compensatory payment.
I am accordingly of the view that the appellant did not acquire a right of tenancy of the lands. His right to occupy was attributable not to any grant by his parents but to his own right as co-proprietor. His rights as co-proprietor were such as to defeat any attempt by the so-called landlords to remove him altogether from the lands. What was described as a rent was truly a compensation for the surrender of his parents' rights to share in the use of the lands. What was achieved by the consent of the three co-proprietors was that the appellant obtained as an act of management and administration the sole possession of the lands. But that did not secure for him a real right as tenant nor did it create a valid lease.
Counsel for the respondents gave notice of his desire to raise a new argument to the effect that even if there had been a valid lease the result of the vesting of his whole estate in his trustee in the sequestration, the occupation of the lands by his trustee and the absence of any payment of rent since at least 1989 was that there was now no tenancy and any occupation he might now have was precarious. If this approach is sound it may be that the whole debate has been somewhat academic. As the point had not been raised in the pleadings and had not been advanced in any of the courts below leave to develop the argument at this stage was refused.
I would refuse the appeal.
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