Armia Ltd v Daejan Developments Ltd

A seller of heritable property must tender a title free from undisclosed conditions which materially diminish the property's value. A contractual assurance that nothing in the title prevents redevelopment supplements that obligation where it protects the purchaser. It does not abridge the purchaser's ordinary rights without clear wording.

Waiver requires the express or objectively inferred abandonment of a right. A purchaser does not ordinarily waive objections to title merely by taking entry, accepting performance of another contractual obligation or negotiating to remove the difficulty. The whole course of conduct must be assessed, including whether the purchaser continued to insist upon the right.

The sellers sought specific implement of missives requiring the purchasers to pay £150,000 in exchange for a disposition of commercial subjects in Kirkcaldy. The title reserved access rights over a valuable passage in favour of neighbouring premises and prohibited building upon the passage. Those burdens had not been disclosed to the purchasers, who intended to redevelop the site.

The Lord Ordinary granted implement on the basis of personal bar. A majority of the First Division held that the contractual redevelopment condition alone regulated the burdens which the purchasers could reject and that the purchasers had, in any event, waived their right to resile. The questions before the House were whether the purchasers could refuse the burdened title and whether their subsequent conduct amounted to waiver.

1. The appeal was allowed unanimously. Lord Fraser of Tullybelton delivered the leading speech. Lord Keith of Kinkel gave concurring reasons, while Lord Diplock, Lord Edmund-Davies and Lord Russell of Killowen agreed with Lord Fraser.

2. Per Lord Fraser and Lord Keith, a seller of heritable property must tender a title free from undisclosed conditions which materially diminish the property's value. Such conditions prevent the seller from conveying the full right of property contracted for. The access and building restrictions affected a significant part of the most valuable frontage and materially diminished the subjects' value, particularly because the contemplated redevelopment was known to both parties.

3. Per Lord Fraser and Lord Keith, condition 6, stating that nothing in the titles would prevent demolition and redevelopment, did not supersede or abridge the purchasers' ordinary rights concerning title. It emphasised the importance of freedom to redevelop and treated a non-trivial restriction preventing redevelopment of part of the subjects as material. The prohibition against building on the passage therefore breached condition 6, even though some profitable redevelopment elsewhere might have remained possible.

4. Per Lord Fraser, the requirements for a “valid marketable title” and “clear searches” did not alter that conclusion. Marketability concerned protection against eviction or reasonable challenge, while clear searches referred to financial encumbrances. The burden was also referred to in a disposition within the prescriptive period, which would have directed a searcher to the earlier deed containing its terms.

5. Per Lord Fraser and Lord Keith, waiver connotes abandonment of a right. It may be express or inferred objectively from all the facts and circumstances. The purchasers neither expressly abandoned their objections nor acted inconsistently with them. Their request that the sellers terminate an occupier's licence, their arrangements concerning continued occupation, and their preparation of a disposition did not waive their title rights. Throughout the correspondence they maintained that the price would not be paid until the access problem had been resolved satisfactorily.

6. Per Lord Keith, taking entry under a contract of sale does not generally imply waiver of conditions concerning title. Nor did insistence upon vacant possession under other conditions imply abandonment of the distinct right to an unburdened title. No agreed contractual variation was concluded.

7. The First Division's second interlocutor of 1 March 1978 was recalled. The purchasers were assoilzied from the conclusions of the action and awarded their costs in the House and expenses in the Court of Session.

1. House of Lords: Allowed the purchasers' appeal unanimously, recalled the First Division's second interlocutor, and assoilzied the purchasers from the conclusions of the action.

2. First Division of the Court of Session: By a majority comprising the Lord President and Lord Cameron, held that condition 6 governed the relevant title burdens and that the purchasers had waived their right to resile. Lord Avonside dissented on the construction of condition 6.

3. Lord Ordinary: Following proof, sustained the sellers' pleas for specific implement and personal bar.