HABERSTICH v McCORMICK & NICHOLSON
| Jurisdiction | Scotland |
| Judgment Date | 23 October 1974 |
| Date | 23 October 1974 |
| Docket Number | No. 1. |
| Court | Court of Session (Inner House - First Division) |
FIRST DIVISION.
ContractSolicitor and clientBreach of contractFailure to secure for purchaser of heritable property valid and marketable titlePurchaser ignorant of defect in titleSale of property four years later at a price lower than would have been offered had title been untaintedLoss arising naturally from breach of contract or reasonably in the contemplation of parties at the time of contract.
DamagesBreach of contractFailure to secure for purchaser of heritable property valid and marketable titleMeasure of damagesSale of property four years later at a price lower than would have been offered if title not defective.
In 1968 solicitors, acting on the purchasers' instructions, concluded missives for the purchase of a cottage. The missives provided that in exchange for the price there would be delivered to the purchasers a valid disposition with a good and marketable title. The disposition delivered was defective in that it bore to be granted by persons who did not have title to the subjects and there was no clause of deduction of title. The solicitors were aware of the defect but did not advise the purchasers of it. The purchasers carried out certain improvements to the cottage and in 1971 offered it for sale. The cottage was sold at a price which was 1,500 lower than would have been offered had the title not been defective. The defect in title could have been cured at a small expense.
Held (1) that a subsequent sale of the property at a reduced price because of the defective title was a consequence arising naturally from the solicitors' breach of contract, and (2) that the difference between the price which the property would have fetched untainted by the defective title and the price actually realised was the correct measure of damages.
George Louis Haberstich and Mrs Agnes Thorburn orHaberstich brought an action of damages for breach of contract against M'Cormick & Nicholson, Solicitors, and the partners thereof.
After a proof in the Sheriff Court at Wigtown the Sheriff (Ramsay) made,inter alia, the following findings in fact:"(3) In 1968 the defenders were acting for the executors in the estates of the late Robert Allison who died on 27th October 1967 and of the late Mrs Elizabeth Margaret Hornell or Allison, his wife, who died on 23rd July 1955. (4) Comprised in the said estates were the heritable subjects known as Mill Cottage, Minnigaff, in the County of the Stewartry of Kirkcudbright. During their lifetime the said Robert Allison and the said Mrs Elizabeth Margaret Hornell or Allison were infeft proprietors of the said subjects and they left a Mutual Will dated 2nd February 1943. (5) After the death of the said Robert Allison the defenders advertised the said subjects for sale. They were approached by a Mr Eric Hyslop (now deceased) a building contractor in Newton Stewart who was acting for Mr Haberstich and an offer of 2,050 was made for the said subjects. This offer was refused, but on 22nd January 1968 the defenders sent to Mr Haberstich a formal offer by James Allison as Executor of the late Robert Allison to sell the said subjects at the price of 2,200. It was a term and condition of the offer that in exchange for the price there would be delivered a valid Disposition together with a good and marketable title. Mr Haberstich accepted the offer and instructed the defenders to draw the title in the names of himself and his wife. (6) In February 1968 Mr Haberstich met Mr Mackenzie (one of the defenders) in Newton Stewart, and Mr Mackenzie said that the title deeds were in Edinburgh and that there was some small matter that would be settled in due course. He did not explain to Mr Haberstich what this matter was. (7) By letter dated 20th May 1968 Mr Mackenzie wrote to Mr Haberstich in Switzerland and informed himinter alia, The title difficulties are practically resolved and the Conveyance in your favour will certainly be completed by the time you return to this country. (8) Mr and Mrs Haberstich took up residence at said subjects in July 1968. (9) In a letter to Mr Haberstich dated 16th October 1968, Mr Mackenzie referred to work outstanding by the said Eric Hyslop and the letter contained the following paragraph:As requested I enclose your Title Deeds, herewith. The Title Deeds should be kept in a safe place because if the originals are damaged or destroyed it could mean an expense to you to obtain an indemnity in the event of a re-sale of the property. Among the said Title Deeds were (a) a Disposition of the said subjects in favour of Mr and Mrs Haberstich dated 19th and 26th June and 6th July 1968 and recorded in the General Register of Sasines for the County of the Stewartry of Kirkcudbright on 12th July 1968 and (b) an Indemnity by the National Guarantee and Suretyship Association Limited in favour of Mr and Mrs Haberstich dated 16th July 1968. (10) By the said Indemnity the grantors agreed to indemnify Mr and Mrs Haberstich from and against any loss they might sustain through eviction from the said subjects in the event of any person or persons substantiating a preferable right or title, but subject to the condition inter alia that the total liability of the grantors other than for expenses should not exceed 2,200. (11) Neither Mr Mackenzie nor any of the defenders then or at any time explained to Mr and Mrs Habersnitch the title that had been given to them nor did they draw their attention to the Indemnity or to the reason why it had been granted. (12) Mr and Mrs Haberstich carried out substantial improvements to the said subjects with the aid of an Improvement Grant, but in October 1968 they made up their minds to sell the said subjects as Mrs Haberstich did not like the house. They spoke to Mr Mackenzie about this and discussed with him the effect a sale would have on the improvement grant. At that time they were negotiating with a prospective purchaser for a sale at the price of 4,500, but they decided not to proceed with the negotiations. (13) In 1970 the pursuers put the sale into the hands of a firm of Estate Agents, Messrs Galloway Hills. They asked at first for a price of 7,000 but later reduced it to 6,000. On or about 16th August 1971, Mr Haberstich agreed informally with a Mr Thomas Stoddart Cowan to sell him the said subjects at the price of 5,500. (14) Mr Cowan instructed Mr Baird Matthews of Messrs A. B. & A. Matthews, Solicitors, Newton Stewart, to make a formal offer of the said price and he left Newton Stewart for Glasgow the same day en route to return to Canada where he was then residing. (15) Mr Baird Matthews carried out these instructions, and by a letter to the defenders dated 16th August 1971 Messrs A. B. & A. Matthews made a formal offer on behalf of Mr Cowan and his wife to purchase the said subjects at the price of 5,500. By Condition 6 of the said offer, the seller was required inter alia to grant a valid Disposition and to deliver an unexceptionable and marketable title. (16) On 17th August Mr Mackenzie met Mr Haberstich at Mill Cottage and was instructed to accept the offer. They discussed the effect that a sale would have on the conditions that still attached to the improvement grant and the qualifications to be inserted in the acceptance, but no mention was made of any possible defect in the title. (17) In accordance with the instructions, the defenders sent a missive letter of acceptance dated 18th August 1971 accepting the said offer. It contained the following qualification:4. With reference to your Condition 6 your clients will take the Title tantum et tale. The Title Deeds are enclosed. You will note that the sellers to Mr and Mrs Haberstich were all the known beneficiaries of the late Mr and Mrs Allison and that a Title Indemnity was obtained from the National Guarantee and Suretyship Association Ltd in favour of our clients for the prescriptive period from the date of recording of their Title. The amount of the coverage is only 2,200 and the appropriate increase in cover would have to be adjusted for your clients. (18) The said missive letter of acceptance was received by Mr Baird Matthews on 18th August 1971 and he sent or caused to be sent to the said Mr Cowan a letter advising him inter alia that the condition was unusual, that the risk of challenge was probably not high and that it was difficult to know how to advise him, but he suggested that a special offer of 5,000 be made for the subjects. (19) Messrs A. B. & A. Matthews also wrote a letter to the defenders dated 19th August 1971 in which it was stated that the title appeared to be vulnerable, that they were taking their clients' instructions and that they would be glad to hear if Mr and Mrs Haberstich could in the circumstances be prepared to accept a reduction in the price and if the sale were to proceed to pay the increased premium for a similar indemnity in favour of the purchasers. (20) By letter dated 20th August the defenders replied that they could see no reason why there should be a reduction in price and that the only question must be the amount of cover provided by the Indemnity. (21) By letter also dated 20th August 1971 the defenders wrote to Mr and Mrs Haberstich reporting on the position and stating that in their opinion the title backed by an appropriate indemnity was unexceptionable and suggesting that the matter be discussed with them. (22) The discussion took place on Monday 23rd August at Mill Cottage, and Mr Mackenzie advised the pursuers as to the position with regard to the title. (23) The pursuers, however, were concerned lest the sale to Mr Cowan should fall through, and the following day (24th August) they went to Mr Baird Matthews for advice. Mr Baird Matthews declined to discuss the matter with them. They then went to see Mr Mackenzie. He advised them again and said he would be happy to debate the matter with Messrs A. B. & A. Matthews and that his firm would do anything that was required. The pursuers, however...
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Preliminary sections
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