Armia Ltd v Daejan Developments Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Diplock,Lord Edmund-Davies,Lord Fraser of Tullybelton,Lord Russell of Killowen,Lord Keith of Kinkel |
| Judgment Date | 21 February 1979 |
| Judgment citation (vLex) | [1979] UKHL J0221-1 |
| Docket Number | No. 3 |
| Court | House of Lords |
| Date | 21 February 1979 |
[1979] UKHL J0221-1
House of Lords
Lord Diplock
Lord Edmund-Davies
Lord Fraser of Tullybelton
Lord Russell of Killowen
Lord Keith of Kinkel
My Lords,
I have had the advantage of reading in draft form the speech prepared by my noble and learned friend, Lord Fraser of Tullybelton. For the reasons that he gives I agree that the appeal should be allowed.
My Lords,
I have had the advantage of reading in draft form the speech prepared by my noble and learned friend, Lord Fraser of Tullybelton. I am in respectful agreement with it, and accordingly concur that the appeal should be allowed and in the order he proposes.
My Lords,
This is an action by sellers (respondents in the appeal) for specific implement by purchasers (the appellants) of their obligation under missives to pay the agreed price of £150,000 in exchange for a valid executed disposition of the subjects of sale. The missives consist of an offer on behalf of the appellants by their solicitors, dated 20th December 1973, to purchase the subjects on the conditions stated in the offer, and an unqualified acceptance on behalf of the respondents by their solicitors, dated 24th December 1973. The appellants refused to pay and on 24th September 1975 they resiled from the contract. They say that the subjects are burdened with rights in favour of a neighbouring property and that they were unaware of the burdens when the missives were exchanged. The respondents at first maintained that they had informed the appellants of the existence of the burdens before the contract was entered into, but at the end of the proof the respondents' counsel conceded that that had not been proved. Two questions now arise. The first is whether the appellants were bound to accept a title which included the undisclosed burdens. If not, the second question is whether they have waived their right to refuse the title.
The subjects are described in the offer as "forming 243A and 245/249 High Street, Kirkcaldy, together with the ground effeiring thereto and being the subjects shown within red boundary lines in the plan" annexed to the offer. They lie to the north of High Street and form a rough rectangle with its south frontage running along the High Street, except that a portion at the south-west corner is not included. The excluded portion, which is roughly square, is No. 243 High Street, occupied as a shoe shop belonging to Messrs. William Smith, Shoe Merchants Ltd. The subjects are only partly built upon. At the south- east corner there are buildings forming Nos. 245/249 High Street. These now form one shop which, at the date of the contract and of the appellants' resiling, was occupied by a butcher named Mr. Stahly. It extends along the High Street for approximately 45 ft. westwards from the eastern boundary of the subjects. Immediately to the west of this shop is a passage approximately 10 ft. wide which is included within the subjects of sale, and beyond the passage is the excluded shop, No. 243. Behind and to the north of No. 243, and separated from it by the passage, is No. 243A, which was occupied by Mr. and Mrs. Sharkey as a sauna bath under a lease from the respondents not due to expire until 27th August 1983. The lease included a right of access to No. 243A from the High Street for vehicles and pedestrians by the passage to which I have referred until such time as a proposed new service road along the northern boundary of the subjects should be in operation. The service road was required because of a plan to "pedestrianise" the High Street.
The dispute which has led to this litigation is centered on the passage. It arises because in the title offered by the sellers for No. 243A, certain rights, including a right of access by the passage, are reserved in favour of No. 243, and the owner of No. 243A is precluded from building on the ground forming the passage. The area of the passage is not large, but it is valuable because it includes about 10 ft. of the main shopping frontage on High Street, and of course runs back behind that frontage for the whole depth of the shoe shop, No. 243. The restrictions were imposed in a disposition granted in 1924 by the trustees for the firm of William Smith to Miss J. C. Birrell and others and are as follows:
"The subjects hereby disponed [that is No. 243A and adjacent ground] are so disponed, and shall be accepted and held … with and under the reservation of a right to us, as proprietors of said excepted subjects, [that is No. 243] and to our successors therein of first access to said excepted subjects at all times when necessary by the passage or entrance and footpath on the east and north of said excepted subjects, as the same are coloured yellow on said plan and second of erecting at any time on the ground towards the north-west corner of said excepted subjects a staircase …; and it is further specially provided and declared that our said disponees and their foresaids shall not be entitled to erect any buildings on the ground forming the said passage or entrance and footpath and coloured yellow on said plan, which reservations and provisions are hereby constituted real burdens on the subjects hereby disponed…."
The conditions in the appellants' missive offer of the 20th December 1973 included the following:
"2. Entry and vacant possession shall be given to the said subjects (with the exception of that part leased to Mrs. Margaret Sharkey and George Sharkey forming 243A High Street, Kirkcaldy) on the 1st day of March 1974.
3. In exchange for payment of the price there will be delivered a valid executed Disposition in favour of our clients or their nominees and valid marketable title with clear Searches in the Sasine and Personal Registers and the Register of Charges for the prescriptive periods will be delivered or exhibited.
4. It is understood that your clients will terminate the Minute of Agreement entered into between yourselves and Charles Frederick Stahly and that vacant possession of the subjects occupied by Mr. Stahly will be given at the date of entry.
5. …
6. There is nothing in the titles of the said subjects which will prevent demolition and redevelopment."
The first question is one of construing the conditions in the missives. Were the appellants in terms of the missives entitled to require a title free from the burdens in favour of Smith? The First Division by majority, consisting of the Lord President and Lord Cameron, answered that question in the negative—that is in favour of the respondents. Lord Avonside would have answered it in favour of the appellants. The majority held that the sellers' obligation to convey the subjects free from undisclosed burdens was regulated solely by condition 6 and that that condition superseded any obligation implied by the general law or expressly imposed by condition 3 of the offer. The majority further held that, in the words of the Lord President, condition 6 contemplated only "burdens which are obstacles which would defeat any worthwhile or profitable redevelopment of the subjects of sale" and that the appellants had not proved that the burdens in favour of Smith were obstacles which would render any worthwhile development impracticable. I agree that that was not proved, and indeed no attempt was made to prove it, but I do not think that matters because I am with respect unable to agree with the majority on the other two points. I agree with Lord Avonside's construction of condition 6, and with his view that condition 6 did not prevent the appellants from continuing to rely on condition 3 or (I would add) on the normal implied condition that a seller is bound to convey the subjects free from burdens that were unknown to the purchaser at the date of the missives if these burdens materially diminish the value of the subjects.
I begin by considering the words of condition 6 itself. It provides that there is "nothing" in the titles that will prevent redevelopment. In my opinion the Dean of Faculty was right in saying that the condition had not been satisfied here because there was something in the title offered by the respondents which prevented redevelopment, namely the restriction against building on the passage. The restriction has the effect of preventing redevelopment of the part of the subjects to which it refers and it is therefore contrary to condition 6. True, the restriction does not apply to the whole subjects, but it does apply to over one-sixth of the most valuable frontage and it cannot be disregarded under the de minimis rule. This construction depends upon a literal reading of condition 6, and does not involve reading in any words not already there. Not only is it literally correct but it gives to condition 6, in the context of the offer, a meaning which is satisfactory and which does not require condition 3 to be treated as superseded. The relevant part of condition 3 is the first, which requires delivery of "a valid executed disposition" in favour of the appellants. That clearly means a disposition of the subjects contracted to be sold—that is of the whole subjects. A disposition which included only a part of the subjects, or which included the whole subjects under a burden, would not comply with the sellers' obligation. This part of condition 3 does no more than express the normal obligation which is implied upon any seller of heritable property, in the absence of express stipulation to the contrary. The sellers' obligation is "to give a valid disposition to a free and unfettered subject, and it is a subject totus teres atque rotundus, which he must give. Now he does not perform this, if he only gives the subject affected with all these burdens"—per Lord Balgray in Urquhart v. Halden (1835) 13 S.844, 849. Any undisclosed burden which...
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