LORDS DECISIONSLORDS DECISIONS >>LORDSLORD BROWNE-WILKINSONLORD KEITH OF KINKELLORD JAUNCEY OF TULLICHETTLELORD STEYNLORD CLYDELORDS OF APPEAL FOR JUDGMENT IN THELORD BROWNE-WILKINSONLORDS,LORD JAUNCEY OF TULLICHETTLE AND LORD CLYDE.LORD KEITH OF KINKELLORDS,LORD JAUNCEY OF TULLICHETTLE AND LORDLORD JAUNCEY OF TULLICHETTLELORDS,LORD ORDINARY GRANTED DECREELORD PRESIDENT CONCLUDED THAT SINCE IN THE LAW OFLORDS SUTHERLAND ANDLORD FULLERTON GIVING THE JUDGMENT OF THE MAJORITY OF THE WHOLELORD PRESIDENT COOPER OBSERVED, AT P. 239:JUSTICE CANNOT STAND IN THE WAY OF A DECISION IN FAVOUR OF THE RESPONDENTS. IT MUST THEN BE FORLORD PRESIDENT EMSLIE), AND THE BUYER HAS MERELY ALORD ADVOCATE 1953 S.C. 151).LORD HERSCHELL SAID, AT P. 44:LORD WATSON IN A LONG AND CAREFULLY REASONED SPEECH AFTER REFERRING TO SECTION 102 OF THELORD WATSON HAD EARLIERLORD WATSON SAID, AT P. 50:LORD PRESIDENT IN RELATION TO MILLAR EXPRESSED THE OPINION THAT THE EXCEPTION WHICH EXCLUDEDLORDLORD MACNAGHTEN OBSERVED, ATLORD WATSON'S OBSERVATIONSLORD JUSTICE CLERK MONCREIFFLORD M'LAREN SAID, AT P.LORDS IN THE CASE OF THE HERITABLE REVERSIONARYLORDLORD PATRICK, AFTER POINTING OUT, AT P. 161, THAT ONCE A DISPOSITION HAD BEEN DELIVERED BYLORD JUSTICE CLERK AND LORD PATRICK APPROACHED THE MATTER IN A PRAGMATIC WAYLORD PRESIDENT, ONLY RESIDE IN THE HOLDER OF THE RECORDED TITLE THERETO THESE TWOLORD PRESIDENT EMSLIE OBSERVED, AT P. 27:LORD PRESIDENT CLEARLY THOUGHT THAT THERE WAS A SIGNIFICANT ALTERATION OF THE POSITION AS BETWEEN THE FIRST AND SECOND STAGES. A VIEW, WITH WHICH I ENTIRELY AGREE, BUT WHICH WAS NOT SHARED IN THIS CASE BY LORD PRESIDENT HOPE WHO CONSIDERED THAT THE RIGHT OF OWNERSHIP REMAINED VESTED IN THE SELLER SO LONG AS HE RETAINED THE REAL RIGHT AND THAT HE WAS MERELY RESTRICTED IN THE EXERCISE OF HIS RIGHTS OF OWNERSHIP BY HIS CONTRACT WITH THE PURCHASER (1995 S.L.T. 837, 848J).LORD WATSON IN MILLAR 19B. (H.L.) 43 WHEN, AFTER REFERRING TO A NUMBER OF AUTHORITIES WHICH INCLUDED MITCHELLS V. FERGUSON HE SAID, AT P. 48:LORDSHIPS' NOTICE BY COUNSEL; BUT, IN MY OPINION, THEY HAVE LITTLE, IF ANY, BEARING UPON THE POINT WHICH YOUR LORDSHIPS HAVE TO DECIDE, BECAUSE IN ALL OF THEM THE COMPETITION RELATED, NOT TO ESTATE HELD BY THE BANKRUPT UNDER A BARE TRUST, BUT TO ESTATE OF WHICH HE WAS THE BENEFICIAL PROPRIETOR."LORD FULLERTON WHO GAVE THE JUDGMENT OF THE MAJORITY SAID, AT P. 937:LORD MACKENZIE OBSERVED, AT P. 373 "BUT AN UNREGISTERED SASINE CAN BE GOOD ONLY AGAINST A MAKER AND HERE THERE IS NO MAKER." THE LORD PRESIDENT 1995 S.L.T. 837, 846J SAID:LORD FULLERTON, IT IS, I THINK, CLEAR BEYOND QUESTION THAT THE JUDGES IN THAT CASE WERE INTENT IN RESOLVING THE ISSUE OF WHAT WAS REQUIRED TO DIVEST THE GRANTER OF HIS RIGHT OF PROPERTY AND TO INVEST A RIGHT IN THE GRANTEE."LORD PRESIDENT INTENDED TO REFER TO THE REAL OR HERITABLE RIGHT OF THE GRANTER I WOULD RESPECTFULLY AGREE WITH HIM. BUT IF HE WAS INTENDING TO REFER TO PROPERTY IN THE WIDER SENSE AS INCLUDING BENEFICIAL INTEREST I MUST DISAGREE. YOUNG V. LEITH WAS CONCERNED SOLELY WITH WHETHER REAL RIGHTS COULD BE CREATED BY DEEDS DEPENDENT UPON PRIOR UNREGISTERED SASINE. IT DID NOT HAVE OCCASION TO CONSIDER PROPERTY IN THE WIDER SENSE NOR TO CONSIDER WHAT EFFECT AN UNRECORDED DEED HAD VIS-à-VIS THE GRANTER. LORD COULSFIELD 1965 S.L.T. 837, 861H WAS CORRECT IN SAYING THAT IT DID NOT RULE THIS CASE. INDEED IT DID NO MORE THAN LAY DOWN WHAT THE APPELLANTS ACCEPTED, NAMELY, THAT AN UNRECORDED SASINE DOES NOT CREATE A REAL RIGHT GOOD AGAINST THE WORLD.LORD SHAW OF DUNFERMLINE AFTER REMARKING, AT P. 15 THAT THE DOCTRINE OF CONVERTING A PROMISE TO TRANSFER INTO SOMETHING WHICH EFFECTS A TRANSMUTATION OF REAL OWNERSHIP INTO MERELY APPARENT OWNERSHIP IS LEGALLY INDEFENSIBLE AND REFERRING TO FORBES'S TRUSTEES V. MACLEOD 25 R 1012 SAID, AT PP. 15-16:LORDS, THE RESPONDENTS' AUTHORITIES DO NOTHING TO DETRACT FROM THE FORCE OF THE APPELLANTS' ARGUMENT. INDEED THE APPELLANTS WERE NEITHER SEEKING TO ELEVATE THE DELIVERY OF A DISPOSITION PER SE INTO THE CREATION OF A REAL RIGHT NOR TO QUALIFY THE RULE THAT RECORDING IS NECESSARY TO PERFECT A TITLE GOOD AGAINST BONA FIDE THIRD PARTIES. FURTHERMORE THE APPELLANTS ACCEPTED THAT THE RIGHTS CONFERRED BY ALBYN'S DISPOSITION WOULD HAVE YIELDED TO A DISPOSITION IN FAVOUR OF A BONA FIDE PURCHASER FOR VALUE RECORDED PRIOR TO 21 AUGUST 1990. THEY WERE ACCORDINGLY NOT SEEKING TO CHALLENGE ANY OF THE PROPOSITIONS ANENT FEUDAL RIGHTS CONTAINED IN THE RESPONDENTS' AUTHORITIES, WHICH PROPOSITIONS DID NOT ASSIST IN RESOLVING THE ISSUE WHICH I POSED AT THE OUTSET. THERE IS IN MY VIEW NO PRINCIPLE WHICH REQUIRES THAT THE WORD PROPERTY OCCURRING IN RELATION TO CRYSTALLISATION OF A FLOATING CHARGE MUST BE GIVEN THE RESTRICTED MEANING SOUGHT BY THE RESPONDENTS. THERE IS ON THE OTHER HAND EVERYTHING TO BE SAID FOR GIVING IT A PRACTICAL COMMON SENSE MEANING WHICH IS LIKELY TO PRODUCE FAIR AND EQUITABLE RESULTS BETWEEN THE PARTIES AFFECTED BY THE CRYSTALLISATION.LORD WATSON IN MILLAR AT P. 50 TO WHICH I HAVE ALREADY REFERRED ARE HERE PARTICULARLY APPOSITE. HAD THE LEGISLATION INTENDED TO CONFER CONFISCATORY POWERS UPON RECEIVERS SUCH AS ARE GIVEN NEITHER TO TRUSTEES IN BANKRUPTCY NOR TO LIQUIDATORS IT IS MORE THAN REMARKABLE THAT THERE IS NO SPECIFIC PROVISION TO THAT EFFECT. IN MY VIEW WHEN THE PROVISIONS ABOVE QUOTED REFER TO PROPERTY AND UNDERTAKING THEY MUST BE GIVEN THE PRACTICAL MEANING OF PROPERTY WHICH IS AVAILABLE FOR THE USE OF THE COMPANY, IN WHICH IT HAS A BENEFICIAL INTEREST, AND WHICH IT IS IN LAW ENTITLED TO DISPONE OR SUBJECT TO HERITABLE SECURITY. THESE PROVISIONS ARE CONCERNED WITH WHAT IS LAWFULLY AVAILABLE TO SATISFY A COMPANY'S OBLIGATIONS TO THE HOLDER OF A FLOATING CHARGE AND NOT WITH FORMALITIES OF FEUDAL TITLE.LORDS I SUMMARISE THE POSITION. AT THE TIME WHEN THE FLOATING CHARGE CRYSTALLISED BY THE APPOINTMENT OF THE RESPONDENTS ALBYN HELD THE RECORDED TITLE TO THE FLAT BUT HAD NO BENEFICIAL INTEREST THEREIN. THE ABILITY TO GRANT DEEDS IN FRAUD OF THE DISPOSITION TO THE THOMSONS DID NOT AMOUNT TO A RIGHT OF PROPERTY IN LAW. THE EFFECT OF SECTION 53(7) OF THE ACT OF 1986 WAS TO MAKE AVAILABLE AS SECURITY ALL THE PROPERTY IN WHICH ALBYN HAD A BENEFICIAL INTEREST. SINCE ALBYN HAD NO SUCH INTEREST IN THE FLAT AT THE DATE OF CRYSTALLISATION IT FOLLOWS THAT THE FLOATING CHARGE DID NOT ATTACH THERETO. I WOULD FOR THESE REASONS ALLOW THE APPEAL.LORD STEYNLORDS,LORD JAUNCEY OF TULLICHETTLE AND LORD CLYDE IN THEIR PRINTED SPEECHES I TOO WOULD ALLOW THE APPEAL.LORD CLYDELORDS,LORD ORDINARY GRANTED THESE DECLARATORS AND THAT DECISION HAS BEEN UPHELD BY THE FIRST DIVISION OF THE COURT OF SESSION. THE SECOND DEFENDERS HAVE NOW APPEALED.LORD WATSON IN HERITABLE REVERSIONARY CO. LTD. V. MILLAR (1892) 19R. (H.L.) 43, 49.LORD ADVOCATE 1953 S.C. 151, THE DELIVERY OF A DISPOSITION WAS HELD TO HAVE THE EFFECT OF REMOVING THE SUBJECTS OF THE GIFT FROM THE PROPERTY WHICH PASSED ON THE DEATH OF THE DECEASED. THESE CASES ARE OF COURSE CONCERNED WITH DIFFERENT QUESTIONS FROM THAT WHICH ARISES IN THE PRESENT CASE. BUT THEY SERVE TO EMPHASISE THE POINT THAT "PROPERTY" AND FEUDAL TITLE MAY NOT BE SYNONYMOUS. THERE IS NO GENERAL REQUIREMENT TO EQUIPERATE "PROPERTY" WITH REAL RIGHT OR FEUDAL TITLE SO AS TO MAKE THESE TERMS EQUALLY CO-EXTENSIVE.LORD HERSCHELL SAID, AT P. 44, OF THE PHRASE "THE PROPERTY OF THE DEBTOR":LORD WATSON STATED, AT PP. 49-50:LORD MACNAGHTEN ALSO EXPRESSED THE VIEW THAT THE WORDS "PROPERTY" AND "BELONGING TO HIM" IN THE STATUTORY PROVISION THERE UNDER CONSIDERATION WERE TO BE UNDERSTOOD IN THEIR ORDINARY SIGNIFICATION. HE STATED, AT PP. 53-54:LORD WATSON'S SPEECH WHICH I HAVE ALREADY QUOTED "WOULD SEEM TO EXCLUDE THE PROPERTY SOLD BY THE BANKRUPT UPON A DELIVERED CONVEYANCE WHICH HAS REMAINED UNRECORDED". COUNSEL FOR THE RESPONDENTS ALSO POINTED TO THE DISTINCTION DRAWN IN THAT CASE BETWEEN THE SITUATION OF ONE WHO IS A BARE TRUSTEE AND AN OWNER WHO HAS COME UNDER A CONTRACTUAL OBLIGATION TO CONVEY THE PROPERTY TO ANOTHER. BUT WHILE THE SUBJECTS IN THE LATTER SITUATION MAY WELL REMAIN WITHIN THE PROPERTY OF THE DEBTOR THE SITUATION IN THE PRESENT CASE IS DISTINGUISHABLE IN RESPECT THAT ALBYN HAD LOST THE BENEFICIAL INTEREST IN THE FLAT AS WELL AS THE POWER LAWFULLY TO DISPOSE OF IT.LORD FIELD IN HERITABLE REVERSIONARY CO. V. MILLAR 19R. (H.L.) 43, 55 SUCH A RESULT "WOULD INVOLVE THE GREAT INJUSTICE OF APPLYING ONE MAN'S PROPERTY IN SATISFACTION OF ANOTHER MAN'S DEBT". MOREOVER ON THE RESPONDENTS' ARGUMENT THE RECEIVERS ACHIEVE BY VIRTUE OF THE FLOATING CHARGE A POSITION SUPERIOR TO THE DEBTOR IN THAT THEY HAVE A POWER TO MAKE A LAWFUL SALE OF THE SUBJECTS ALTHOUGH THE DEBTOR BY VIRTUE OF HIS BARE TITLE ONLY POSSESSED AN ABILITY TO SELL WHICH HE COULD NOT LAWFULLY EXERCISE. FURTHERMORE THE RECEIVERS OBTAIN THIS PRIVILEGE WITHOUT THE NECESSITY WHICH MAY AFFECT A LIQUIDATOR OR A TRUSTEE IN BANKRUPTCY OF RECORDING THEIR TITLE AND PERHAPS ENGAGING IN A RACE TO DO THAT. ALL THIS SUPPORTS A NARROW RATHER THAN A GENEROUS CONSTRUCTION OF THE TERMS OF THE CHARGE.LORD MACNAGHTEN OBSERVED OF THE QUESTION DISCUSSED IN HERITABLE REVERSIONARY CO. V. MILLAR 19R. (H.L.) 43, 53:LORD PRESIDENT IN GIBSON AND INDEED THE JUDGES WHO HAVE FOLLOWED HIS DICTA IN THAT CASE NOT TO BE INTENDING TO ERODE THE DISTINCTION BETWEEN A JUS IN RE AND JUS AD REM OR A JUS CREDITI BUT, WITHOUT ANALYSING IN ANY DEPTH THE POSITION OF A HOLDER OF AN UNREGISTERED DISPOSITION, TO BE RECOGNISING THAT CHANGES MAY OCCUR IN THE SUBSTANCE OF THE RIGHT ACQUIRED BY A DISPONEE EVEN ALTHOUGH THE ESSENTIAL QUALITY OF HIS RIGHT MAY REMAIN CONSTANT. COUNSEL FOR THE APPELLANTS RECOGNISED THAT BY DELIVERY OF A DISPOSITION THE DISPONER HAS IN FEUDAL TERMS ENABLED THE DISPONEE TO OBTAIN ENTRY WITH THE SUPERIOR. UNDER THE FEUDAL LAW, BEFORE THE VARIOUS STEPS BECAME SUBMERGED BY THE ACT OF RECORDING IN THE REGISTER OF SASINES, IT WOULD SEEM THAT THE DISPONER SHOULD BE TAKEN TO HAVE GRANTED A PROCURATORY OF RESIGNATION IN FAVOREM, OR, AS IT LATER CAME TO BE, A CLAUSE OF RESIGNATION, WHEREBY THE FORMER VASSAL ENABLED THE SUPERIOR TO PASS THE FEU TO THE NEXT VASSAL. THE DISPONEE WAS THUS ABLE TO OBTAIN ENTRY WITH THE SUPERIOR AND ESTABLISH HIS FEUDAL TITLE. IT MAY BE NOTED THAT CRAIG (JUS FEUDALE 3.1.6., VOL II P. 891), WHILE HE RECOGNISES THAT THERE MAY BE COMPETING RESIGNATIONS DESCRIBES THE POSITION IN CONTRAST WITH A RESIGNATION AD REMANENTIAM, IN THESE TERMS:LORD WATSON OBSERVED IN HERITABLE REVERSIONARY CO.LTD. V. MILLAR 19R. (H.L.) 43, 47:LORD MCLAREN'S OBSERVATION IN THE LOWER COURT (18R. (H.L.) 1175):