Morris v Rae (Scotland)

A threat of eviction can engage an obligation of absolute warrandice even though the challenger does not yet hold the real right to the property. The purchaser must objectively have no realistic alternative but to accede to an unquestionably effective threat.

An incomplete title may suffice where the challenger has an unqualified and immediately enforceable personal right to obtain the real right and would then inevitably prevail against the purchaser. The purchaser may settle without awaiting pointless litigation, provided the settlement is with the person entitled to make good the threat. A merely arguable defence does not defeat the claim if that defence would inevitably fail.

The appellant was the assignee of a property developer which had purchased land from the respondent under a disposition containing absolute warrandice. Part of the land was outside the respondent’s title. A company threatened the developer with eviction and received £70,000 in return for curing the defect, although the registered title was then held by another person.

A temporary judge allowed a proof before answer. By a majority, the Extra Division allowed the respondent’s reclaiming motion and dismissed the action: [2011] CSIH 30; 2011 SC 654. It held that the challenger needed an unquestionable title when eviction was threatened.

The central issue was whether warrandice could be engaged where the challenger lacked the real right when making the threat but had an immediately enforceable entitlement to obtain it and would then inevitably prevail.

1. Appeal allowed unanimously. The Extra Division’s interlocutor was recalled, the temporary judge’s interlocutor was restored, and the case was remitted to the Outer House for proof before answer.

2. Lord Hope and Lord Reed held that absolute warrandice creates a contingent contractual obligation of indemnity against defects in title. A defect alone does not constitute a breach. The obligation takes effect upon actual or constructive eviction, including an unquestionably effective threat which the purchaser reasonably settles to avoid inevitable eviction.

3. The challenger need not invariably possess the real right when making the threat. It is sufficient that the challenger has an undoubted, unqualified and immediately enforceable personal right to obtain that title from its holder and, once it is obtained, will inevitably prevail against the purchaser. Insisting upon an existing real right would cause pointless delay, expense and litigation and would impair the practical purpose of warrandice.

4. The purchaser must show objectively that there was no realistic alternative to acceding to the threat. The purchaser must transact with the person having title and interest to make the threat effective. The existence of a stateable argument is insufficient to defeat the purchaser’s claim where that argument would inevitably fail.

5. The observations in Clark v Lindale Homes Ltd 1994 SC 210 suggesting that a threat could come only from the holder of the competing title went beyond what was necessary to decide that case and were obiter. The formulation in Holms v Ashford Estates Ltd 2009 SLT 389, requiring the purchaser’s position to be incapable of any proper dispute or argument, imposed too demanding a standard.

6. On the assumed averments, the challenger could have required the registered proprietor immediately to grant a corrective disposition, and the developer would then have had no defence to eviction. Those averments stated a relevant case and were entitled to proof. Lord Walker expressed reservations about the pleadings and documents but considered that they afforded no principled ground for dissent. Lord Sumption and Lord Carnwath agreed with Lord Hope and Lord Reed.

1. United Kingdom Supreme Court: Allowed the appeal unanimously, recalled the Extra Division’s interlocutor, restored the temporary judge’s interlocutor and remitted the action to the Outer House for proof before answer: [2012] UKSC 50.
2. Extra Division of the Inner House: By a majority, allowed the reclaiming motion and dismissed the action because the challenger lacked title to demand immediate possession when the threat was made: [2011] CSIH 30; 2011 SC 654. Lord Bonomy dissented.
3. Outer House: The temporary judge held that the pursuer was entitled to proof of his averments.