Reputed Ownership in Scots Law: An Historical and Doctrinal Analysis

DOI10.3366/elr.2021.0672
Published date01 January 2021
Date01 January 2021
Pages23-47
Author
INTRODUCTION

In Scotland, the doctrine of reputed ownership is one means of protecting third parties in transactions with non-owning possessors of goods. It is the purpose of this article firstly to discuss the foundations of this doctrine, more specifically its doctrinal and judicial development and its requirements. The article will then provide an evaluation of the underlying legal basis of the doctrine, as well as its possible relevance in modern times. Reputed ownership is, and always has been, the subject of little academic analysis in Scotland. The historical development of the doctrine lies largely with the institutional writers of Scots law and with 19th and 20th century cases. There are, however, elements of the law found in other legal systems relevant to reputed ownership, such as the law of England and of South Africa, which help to provide clarity on the underlying legal basis of the doctrine. This article, therefore, seeks to consolidate all of these sources in order to assess the modern relevance of reputed ownership to those concerned with its possible applicability. As will become clear, such applicability is in the context of diligence. Those concerned are creditors, their debtors and the owners of corporeal moveable property in the possession of such debtors.

In certain circumstances a person who has possession but not ownership of property is treated as a “reputed owner” of that property. It is unclear whether the doctrine applies solely to moveable property, although nearly all of the authorities are concerned with moveables and, as will be explained, it is difficult to see how the doctrine could apply to heritable property. Traditionally, the effect of reputed ownership has been for the moveable to be exposed to the diligence of the possessor's creditors, in the same manner in which the property would be exposed if the possessor were the owner of the goods.1 Thus, in cases like this there are three parties: the owner; the possessor; and a third party (typically a creditor), seeking to acquire rights in the property through the possessor.

THE INSTITUTIONAL WRITERS Stair to Hume

Stair does not engage directly with reputed ownership. He does, however, speak of “collusion” being committed when creditors are misled by the conduct of their debtor into poinding the moveable(s) in the debtor's possession, suffering loss as a result.2 Stair describes this situation as “import[ing] direct fraud”, giving rise (in principle) to the remedy of reparation against “the actor of the fraud” (i.e. the debtor).3 This reparation is granted “to all that are damnified thereby”,4 which presumably refers to the particular misled creditor who has suffered loss. As we will see, this is rather different from the specific law of reputed ownership.

However, regard for the position of the poinding creditor was to be developed. Erskine discusses the ability of creditors to poind goods in the possession of their debtors in the belief that the goods belong to such debtor. According to Erskine, the creditor “may proceed in the poinding” even when the debtor alleges that the goods in fact belong to another5 or when the claim of a third party to the goods (prior to the poinding) appears to be “patched up and collusive”, following investigation by the creditor.6 However, these comments are made in the wider context of the presumption of ownership from possession which, as a procedure of the law of evidence, is separate to reputed ownership.7 Hume also states that, in the absence of evidence to the contrary, such as a “written title to the goods”,8 the diligence may proceed if the creditor is not convinced as to the claim of such third party9 or if it is clear that such third party has “pretend[ed] right of property in the effects”.10

Bell

It was not until the publication of the works of Bell, in the early nineteenth century, that reputed ownership was developed most extensively and it is from Bell's works that a coherent exposition of the doctrine can be derived. In his Principles, Bell speaks of “collusive” possession as being “a natural ground on which the creditors of the person allowed so to possess may attach it for debt”, on the basis that such creditors have “trust[ed] to the apparent ownership in their debtor”.11 Therefore, the trust that creditors have placed upon the possession held by their debtor entitles them to poind. In Bell's account, however, the doctrine is rather restrictive, and cannot be relied upon by creditors in situations where the debtor's bare possession is obvious, such as “legitimate contracts” of deposit or pledge.12

For collusive possession to exist, Bell requires: (1) “the appearance of uncontrolled possession and power of disposal”; and (2) “acquiescence [by the owner] in something beyond the possession requisite to a fair contract”.13 Thus, it is not enough for a creditor to assume that their debtor is the owner; the debtor themselves must have suggested as much by demonstrating some of the facets of ownership (e.g. an unlimited power of disposal). Possession is not collusive where it is apparent that another party is the owner.14

Acting upon such “appearance” of ownership, the creditor was able to poind. This, in turn, entitled the true owner “by civil process”15 to the remedy of restitution against the possessor16 (to make a claim for its value – the owner could not physically recover his goods as the possessor's creditors were able to poind) or, if restitution was not possible, to damages against the possessor as “the party by whose fault or delict he has lost it”.17

In Commentaries, Bell expressly restricts the doctrine to corporeal moveables.18 Secondly, Bell requires “unequivocal [possession] to justify credit”.19 He explains that a creditor must be certain (i.e. must believe) that the goods which he seeks to poind belong to the debtor, taking into account “the many honest occasions of possession independently of property which the varied business and connections of life require”.20 However, there was no requirement to identify the actual owner. Bell merely seems to be warning creditors of the dangers of relying upon possession alone. Indeed, if identification was a requirement, the doctrine of reputed ownership would not be necessary. This is because it would become clear, either (1) that the debtor is not the owner of the goods in his possession, in which case the creditor (if proceeding to poind) would be in bad faith and any subsequent diligence would be void, or (2) that the debtor is the owner, (the actual owner, and not a reputed owner).

“FRAUD” AND THE NATURE OF THE POSSESSION HELD Fraud and Collusion

The mention of “collusion” implies that some form of “fraud”, or fraudulent act, has been committed. In Commentaries, Bell notes that the institutional writers before him (although only Stair is cited) placed the doctrine entirely upon the “fraud” of the true owner.21 That might seem to be going too far. Erskine defines fraud as “a machination or contrivance to deceive”.22 Similarly, Forbes describes fraud as “any unfair way, that is used to cheat another”.23 Of course, it may be that the owner has placed another into possession of his goods so as to exclude the goods from the reach of his own creditors. Such creditors may believe that the possessor (and not the owner) has ownership of the goods. Forbes describes this exact scenario as a “fraudulent deed”.24

However, can it be said that the owner is at fault where he has innocently delivered his goods to another (i.e. with no intention to deceive his creditors)? The answer may depend upon the “necessity” for the delivery. Bell regards the owner as committing “gross negligence” when he places another “unnecessarily” into possession of his goods.25 According to Bell, this is sufficient to bring a case within the scope of reputed ownership. For Bell there needed to be either a “fraudulent” state of possession, or a state of possession that had resulted from “careless” or “unnecessary” conduct. In Principles, for example, Bell differentiates between “legitimate” possession and “such as may be needlessly, carelessly or fraudulently given to, or left with, one who is not the owner”.26 He continues, in Commentaries, by stating that creditors are entitled to exercise diligence when the possession is “fraudulent, or at least careless or collusive, as not being necessary in the course of honest contracts”.27

Delivery is, of course, “necessary” for the constitution of certain real rights such as pledge.28 These are among the so-called “legitimate contracts” referred to by Bell. However, in situations outside these legitimate contracts, placing another into possession cannot be said to be entirely “necessary”. Moreover, the creditors of the owner may not be the only persons deceived by such behaviour. The creditors of the person entrusted with possession may also rely upon the possession held by their debtor. Bell claims that “the true owner ought to be aware” of the possibility of such reliance.29 Thus, where such creditors of the possessor are deceived, the owner is at fault vis-à-vis the creditors.

However, the owner is not the only person who is at fault. As we have seen, the institutional writers also mention the terms “collusion” and “collusive possession”.30 These terms suggest a degree of cooperation between the owner and the possessor intended to deceive third parties. In many cases, there may be a degree of fault on the part of the possessor for allowing the property to be attached without protest and for making no admission to his creditors that such goods are not his own. This “collusion” is perhaps analogous to the collusion committed by a seller and a second purchaser in an offside goals context, in which the first purchaser (who is said to be defrauded) has the remedy of reduction (of the second purchaser's title); the latter is held to be “an accomplice in the fraud” with the seller.31

Reliance
...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT