Sequestration — Rights of trustee — Ownership of land — Sale and disposition of flat to appellants — Appellants failing to record disposition in register — Trustee in vendor’s sequestration registering own title — Whether flat part of “whole estate” of vendor — Whether trustee’s right having precedence over that of appellants — Section 31(1) of Bankruptcy (Scotland) Act 1985 — Appeal dismissed
The appellants entered into a contract to purchase a flat from B for £45,000. On the same day, B executed a disposition of the property in favour of the appellants and had it delivered to them in exchange for the purchase price. However, the appellants’ agent neglected to record the disposition in the Register of Sasines. The appellants took possession of the flat on the following day.
B subsequently executed a trust deed in favour of her creditors, and the respondent was appointed trustee. On the petition of the respondent, B’s estate was sequestrated pursuant to section 5(1) of the Bankruptcy (Scotland) Act 1985, and the respondent was appointed permanent trustee in the sequestration by act and warrant of the sheriff. Consequently, as provided by section 31(1) of the 1985 Act, “the whole estate of the debtor” was vested in the respondent for the benefit of B’s creditors as at the date of sequestration. The debtor’s “whole estate” was defined in section 31(8) as “his whole estate at the date of sequestration, wherever situated”. The respondent recorded a notice of title to the flat in the register. The appellants’ agent subsequently recorded the earlier disposition from B.
The respondent brought proceedings craving a declarator that: (i) the appellants were not entitled to occupy the flat; and (ii) the flat was, and had been since the date of sequestration, vested in him as the permanent trustee. The sheriff granted the orders sought. His decision was overturned by the sheriff principal on appeal, and the orders were restored on a further appeal by the respondent.
The appellants appealed. By that time, they had moved out of the flat, which meant that only the second declarator was in issue. The central question was the correct interpretation of the phrase “the whole estate of the debtor” in section 31(1).
Held: The appeal was dismissed.
1. At the time when B was sequestrated, the appellants were the disponees to whom the disponer had delivered the disposition, but they had not yet recorded it in the register and were accordingly not yet infeft. Although the execution and delivery of the disposition had vested in them most of the essential attributes of ownership, an uninfeft owner held only a personal fee, and the corresponding obligations on the disponer were personal obligations: Earl of Fife v Duff (1862) 24 D 936 considered.
In terms of bankruptcy legislation, heritable property that the debtor had sold and disponed, but upon which the purchaser was not infeft, formed part of the debtor’s estate that vested in the trustee in sequestration: Buchan v Farquharson (1797) M 2905 and Wylie v Duncan (1803) M 10269 considered. The respondent, as trustee, was in the position of an adjudged creditor, since the act and warrant from the sheriff had the same effect as if a decree of adjudication in implement of sale had been pronounced in his favour. The trustee had been entitled to proceed to infeft himself as owner by recording a notice of title on the register. Knowledge of a previous sale did not prevent a creditor from completing his diligence and acquiring a real right; he was entitled to proceed on the basis of the feudal right of the debtor to heritable subjects as recorded in the register and to disregard any personal right relating to those subjects. Adjudged creditors took the subjects free of any personal obligation on the part of the debtor: Heritable Reversionary Co Ltd v Millar [1892] AC 598 applied. Accordingly, the trustee’s right and the rights of the appellants, as purchasers, were “two independent rights running a race against each other”: Tod’s Trustees v Wilson (1869) 7 M 1100 considered.
2. In the result, B’s right to the flat vested in the respondent as part of her “whole estate” under section 3(1) of the 1985 Act. Since the respondent had recorded his notice of title and had become infeft before the appellants had recorded their disposition, his infeftment was to be preferred to that of the appellants. The respondent was therefore entitled to the declaration sought.
Stuart Gale QC and Andrew Webster (instructed by Simpson & Marwick, of Edinburgh) appeared for the appellants; Patrick Hodge QC and Andrew Young (instructed by Balfour & Manson, of Edinburgh) appeared for the respondent.
Sally Dobson, barrister
