Transfer of Incorporeal Property in Scots Law, Study notes of Property Law

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The Edinburgh Law School PROPERTY LAW (ORDINARY) Session 2014/ LECTURE HANDOUT SEMESTER 1

PART A

ROW(S)A, 1995- Introduction The general rule is that transactions are not needed to be in writing. There are however some transcations where writing is required. FOR WHICH JURIDICAL ACTS IS (FORMAL) WRITING NEEDED? (s 1) Rules set out in 1995 Act s 1(2). Six categories: (A) Wills and codicils (s 1(2)(c)). Provide how a person’s estate are to be distributed. Codicils are documents that alter or amend an existing will or testamentary disposition. These are all deeds mortis causa. (B) Creation, transfer, variation or extinction of real right in land: s 1(7)) except for leases for a year or less (s 1(2(b))). Documents relating to the rea right in question i.e. a deed of constitution e.g. lease, standard security (hereafter SS). A document that transfers a real right is a deed of transmission e.g. a disposition. There are deeds of variation as well. Other deeds are inter vivos (between living persons) (C) Contract or promise (“unilateral obligation”) for (B) (s 1(2)(a)(i)). Standard example is a contract for the sale of land (usually known as missives of sale)- these documents create personal rights in relation to real rights in land e.g. missives (agreement for the transfer of real rights of ownership in land for payment). Writing is not required if the real right to which the personal right relates is for a year’s lease or less- s1(7). (D) Gratuitous promise, except in the course of business (s 1(2)(a)(ii)). E.g. if a wife guarantees her husband’s debts than writing is required. (E) Truster-as-trustee trust (s 1(2)(a)(iii)). (F) An agreement under s 66 of the LRA 2012 (opting out of alluvion). In all other cases writing is not required (s 1(1)). So eg most contracts do not require to be in writing. But parties may elect to use formal writing. Consequences if formal writing not used when required? In general the purported right is void. But in the case of contracts, promises and trusts (only) the right is valid in cases where the person seeking to deny the contract etc is personally barred as a result of the actings of the other party (s 1(3)-(5)). Reasons for writing- it provides evidence, it purports the seriousness of the transaction, it facilitates registration and it helps prevent fraud.

(ii) Informal method. Any other name or description or initial or mark. So James or Graham or Jimmy or J or Dad or Grandpa. But note (a) must satisfy either (i) or (ii) of s 7(2)(c), and (b) cannot be used for probative (ie s 3) deeds. (iii) Longstop method. The full name by which granter is identified in deed. Method of signing: juristic persons Juristic persons cannot write. Special provision is made in 1995 Act Sched 2. (i) Partnerships (para 2(1),(2)). Signature of partner or of authorised person. May use either own name or firm name. So Dorothy Murray or Dundas & Wilson. (ii) Companies (para 3(1)). Signature of director or secretary or authorised person. (iii) Limited liability partnerships (para 3A(1)). Signature of member of the LLP. (iv) Local authorities (para 4(1)). Signature of proper officer of the authority. (v) Other bodies corporate (para 5(1),(2)). Signature of member of governing body or secretary or authorised person. Wide category which includes building societies, trade unions, universities, foreign companies. PART C PROBATIVITY (s 3) Meaning of “probative” “Probative” is a tricky word, avoided by the 1995 Act. As used here, probative means presumed to be validly executed. This is a presumption from the law of evidence, and is important mainly in the context of litigation.

• Thus if A sues B on the basis of a probative deed he need not prove that the deed was validly executed. That is presumed. If B wishes to challenge the validity of execution the evidential onus rests on him to show why the deed is invalid.
• Conversely, if A sues B on the basis of an improbative deed A must aver and prove (unless validity is admitted by B) that the deed was validly executed. Sometimes this evidential burden is impossible to discharge, particularly if the deed is old. In that case A’s action fails.

A deed which is merely subscribed under s 2 is valid but improbative. For a deed to be probative, something further must be done. Probativity by attestation (ie witnessing) Usually a traditional document is made probative by having the granter’s subscription witnessed. (For electronic documents see later.) The procedure is set out in s 3: (1) The granter subscribes (s 3(1)(a)), but only by methods (i) (standard) or (iii) (longstop) (see above). Immediately he does so the deed is formally valid under s 2. The only purpose of doing anything more is to make the deed probative. In addition, a will (“testamentary document”) must be signed (NB not subscribed) on every sheet (s 3(2)). In practice wills are usually signed on every page. (2) A witness is to hand. Positively, the witness must (i) be 16 or over (ii) be of normal mental capacity (iii) “know” the granter (s 3(4)(c)). For (iii) see s 3(5). Negatively, the witness must not be another granter (s 3(4) (b)). (3) The granter must either sign in the witness’s presence, or (having signed earlier) he must acknowledge his signature to the witness (s 3(7)). Lindsay v Milne 1995 SLT 487 McLure v McLure’s Exr 1997 SLT 127 (4) The witness signs (NB not subscribes). He may sign either by method (i) (standard) or method (iii) (longstop) above (s 7(5)). The same person may witness the signatures of more than one granter, and in that case need only sign once (s 7(5)). The signature must be “one continous process” with the event witnessed (ie either subscription or acknowledgement). This means that the witness must sign at once. See eg Thomson v Clarkson’s Trs (1892) 20 R 59. Note that in acknowledgement cases the timetable could be (a) year 1: granter subscribes (b) year 25: granter acknowledges subscription (c) year 25 + 2 minutes: witness signs. (5) Witness is designed in the testing clause (or in the deed itself) (s

Note: (i) The presumptions are confined to questions of execution. But a deed may be invalid for all kinds of reasons which have nothing to do with execution, eg lack of legal capacity, lack of title to grant the deed, errors in the text of the deed, and so on. There are no presumptions as to these matters. (ii) They are presumptions only, and may be rebutted by contrary evidence - see below. Attacking the deed A probative deed is presumed to be validly executed. But of course it may be nothing of the sort. Nonetheless the onus of showing invalid execution rests on the person seeking to challenge the deed. How, in a court action, might that onus be discharged? The validity of a deed’s execution may be attacked in two different ways: (i) Direct attack. Lead evidence to show that the granter did not in fact subscribe. Result if successful: deed is void. (ii) Indirect attack. Lead evidence to show that the attestation (or equivalent) was not properly carried out. Section 3(4) sets out the possible lines of attack. Result if successful: deed becomes improbative but not invalid (why not?) and the evidential burden passes to the person seeking to found on the deed to show that it was in fact subscribed by the granter. If he can then demonstrate subscription he may enforce the deed. If he cannot demonstrate subscription he may not enforce the deed. Probativity by a method other than attestation

• Attestation is the only method of attaining probativity in cases where the granter is a natural person or a partnership (except by recourse to the court under s 4, for which see below).
• Attestation is one of the two available methods of attaining probativity in all other cases.
• In the case of local authorities and of bodies corporate other than British companies the alternative method of attaining probativity is by sealing the deed with the common seal. This must be done by a person with authority, and on the same day as the subscription. See Sched 2, paras 4 & 5.
• In the case of British companies the alternative method of attaining probativity is by having the deed subscribed by a second signatory. Thus in total what is

required is the subscriptions of (a) 2 directors or (b) a director and the secretary or (c) 2 authorised persons. See Sched 2, para 3(5). Note: no mixed doubles.

• In the case of limited liability partnerships the alternative method of attaining probativity is by having the deed subscribed by 2 members of the LLP. See Sched 2, para 3A(5). Making the choice: s 2 or s 3? A granter can opt for bare subscription under s 2. Or he can go for subscription + attestation (or equivalent) under s 3. There are three reasons why a granter might choose s 3: (i) Probativity. Only a deed which is attested (or equivalent) is probative. A granter is likely to want probativity if the deed is more than just ephemeral. In 20 years time it might be very difficult to prove subscription: probativity removes the need for such a proof. In practice most deeds and documents prepared by solicitors are probative. (ii) Registration. Subject to minor exceptions, only probative deeds can be registered in the Land Register, Register of Sasines or (for preservation) in the Books of Council and Session or sheriff court books (s 6). (iii) Confirmation of executors. An executor cannot receive confirmation by the court unless the will is probative. See Succession (Scotland) Act 1964 s 21A (added by 1995 Act Sched 4 para 39). CONVERTING IMPROBATIVE DEEDS INTO PROBATIVE DEEDS Suppose that a deed is executed by simple subscription under s 2. Such a deed is valid but improbative. And further suppose that it becomes desirable or necessary that the deed should be made probative, eg in order to allow registration or confirmation. How can this be done? There are two possibilities:
• If the granter is still alive and readily available, he can acknowledge his subscription to a witness who can then sign. The deed is then probative by attestation under s 3.
• Alternatively, an application can be made to the sheriff court under s 4 to have the deed endorsed with a certificate stating that it was subscribed by the granter. For procedure, see Act of Sederunt (Requirements of Writing) 1996 (SI 1996/1534). Evidence of valid subscription must be produced - but

subscription alteration. See s 5(4), (5). EXECUTION BEFORE 1 AUGUST 1995 G L Gretton & K G C Reid Conveyancing ( 1 st^ edn) chap 15 Two types of formal writing (compare here 1995 Act): (i) Attested writing. Governed by the authentication statutes (the Subscription of Deeds Acts 1540, 1579 & 1681, and the Deeds Act 1696). Deed must be subscribed by granter + 2 witnesses. Rules of attestation almost identical to 1995 Act rules. (ii) Holograph writing. Common law. Deed must be subscribed by granter and either (a) substantially in his handwriting or (b) executed with the handwritten docquet “adopted as holograph”. Roughly speaking - holograph writings = s 2 writings (subscribed) attested writings = s 3 writings (attested or equivalent) Holograph writings are improbative. Attested writings are probative (or, more strictly, writings which appear to be attested are probative). Note that under the pre-1995 law attestation conferred not merely probativity but also validity. Thus a deed subscribed by the granter without witnesses was not valid under pre-1995 law; and errors in the attestation process could lead to the invalidity of the whole deed, although minor errors (“informalities of execution”) were forgiven by virtue of s 39 of the 1874 Act. DELIVERY McBryde Contract (3rd edn, 2007) chapter 4. Unilateral inter vivos deeds ineffective until delivered to grantee. Delivery requires acceptance by grantee. Obligations then binding on him. Esoteric and doubtful exceptions, eg family deeds. An electronic document is ‘may be delivered electronically or by such other means as are reasonably practicable’ (1995 Act s 9F(1)).

HEAD 2: RIGHTS AND THINGS

Gretton & Steven pp 1- Reid, The Law of Property in Scotland paras 1-6; 11-14; 16 [note this is a reprint of vol 18 of the Stair Memorial Encyclopaedia and can also be consulted in that form, including electronically on LexisNexis Butterworths] Paisley, Land Law pp 1- Reid & Zimmermann (eds), A History of Private Law in Scotland vol 1 pp 185-210 (for history and general intellectual background) In Scotland property law is civilian (Roman), although complicated by a protracted dalliance with feudalism, which ended on 28 November 2004. Property law is concerned with things ( res ) and with the rights ( jus, jura ) which exist in respect of them. PATRIMONIAL RIGHTS Patrimonial rights = assets. (Are there also non-patrimonial rights?) Patrimonial rights divide into (i) real rights and (ii) personal rights. (a) Rights in Things Right directly in a thing ( jus in rem ). Usually called a real right. Probably fixed list: principal real right ownership ( dominium ) subordinate real rights ( jura in re aliena ) right in security lease of land (but not hire of moveables) proper liferent (but not improper or trust liferent) servitude real burden (negative but not affirmative)

Right of a beneficiary under a trust Rights in private law Patrimonial rights Non-patrimonial rights Real rights Personal rights Other? Real rights Ownership Subordinate real rights Servitude Security Etc (c) Why does the difference matter? Personal rights are enforceable against a particular person or determinate group of people. Real rights are enforceable against ‘the world’ ( erga omnes ). THINGS More usually called property. On a traditional (but not undisputed) analysis, things may incorporeal as well as corporeal. Incorporeal property = (i) rights (both personal and real) + (ii) some odds and ends. Gases? Electricity?. Crypocurrencies? And since one has rights in things, it follows that one can have rights in rights (ie in incorporeal property). Example. A has a lease over land belonging to B. What right does B have in the land (corporeal property)?

What right does A have in the land (corporeal property)? What right does A have in the lease (incorporeal property)? Thus A's position can be expressed in this way: A has the real right of ownership in the lease, which is itself a subordinate real right in the land. (A lease is also a contract, resulting in personal rights.) The method of expressing A's position will depend on which thing you are concerned with (ie the land or the lease). Personal rights are also incorporeal property. The only right which, on this view, is not considered to be property is ownership. Thus one can ‘own’ (in normal speech ‘have’) a contract or a right in security, but to say that one owns ownership itself is meaningless. There is also a second classification of things, into things heritable (immoveable) and things moveable. Thus 4 classes of things: (a) Corporeal heritable property Land, and things which form part of land ( partes soli ) either naturally (eg soil, minerals and stones) or by accession. (b) Corporeal moveable property All other corporeal property. (c) Incorporeal heritable property Two categories: (i) ‘All rights connected with or affecting any (corporeal) heritable subject’: Erskine II.2.5. (ii) ‘Permanent’ rights not however connected with corporeal heritable property. Eg titles and coats of arms rights which have a tract of future time ( tractus futuri temporis ) (d) Incorporeal moveable property All other incorporeal property.

HEAD 3: BECOMING OWNER

Gretton & Steven pp 27- Reid, Property paras 597- ORIGINAL AND DERIVATIVE ACQUISITION How does someone become owner of property? The traditional distinction is between: Derivative acquisition = acquisition from an existing owner. The right is acquired from a previous owner i.e. the right of ownership is handed over. Original acquisition = acquisition without reference to previous ownership. The right of ownership is acquired by some legal process that gives the right to the beneficiary of that process, regardless of the consent of the previous owner if any. The main examples of original acquisition are:

• positive prescription
• registration under the LRA 1979
• occupancy – where an ownerless object is taken into possession
• accession - where one object becomes a part of another
• specification – when an object is altered so that it loses its identity and ownership rests in the person carrying out that process e.g. barley into ale. All will be dealt with later. But for quite a long time to come we will consider only derivative acquisition. This is acquisition by transfer , ie Alan, the current owner of property, transfers that property to Betty, who becomes owner in turn. Usually the transfer is voluntary (ie the transfer is carried out by Alan, and without compulsion), but occasionally it is involuntary. Involuntary transfer is considered at the end of semester 1. For the moment our only concern is with voluntary transfer. VOLUNTARY TRANSFER: SOME GENERAL FEATURES (1) Requires (a) some public act or acts + (b) mutual intention. The requirement for a public act arises out of the publicity principle. Generally speaking, the intention is legally effective even when it has been wrongly induced, eg by fraud or force and fear. Ownership is not transferred by mere agreement, but by delivery or registration i.e. the publicity principle. (2) The property in question must be sufficiently identified. This is the specificity principle. Only what can be identified can be transferred. (3) Most transfers are preceded by a contract. But the contract is distinguished

from the “conveyance”. Traditi….n on ibn u dis pactis dominia rerum transferuntur. (Codex 2,3,20 ) The former confers a personal right, the latter a real right. And intention occurs twice: for a valid contract, A and B must intend to enter into contractual relations; and for a valid conveyance, A and B must intend that the property be transferred from A to B. An obligation to transfer is not the same as a transfer, any more than an obligation to pay Is not the same as a payment. Sale is a contract and thus is a reason for transfer. A conveyance’s validity does not depend on a contract. (4) There is no ‘in-between’ right, ie a right intermediate between a personal right and a real right. Until B becomes owner, he has only a personal right. As we will see, this issue has created controversy in the recent past. [T]he disponee who has not registered his title enjoys no real right in the subjects. Scots law does not recognise a right which lies between a real right and a personal right ..There is no such thing as a ‘quasi-real right’. ( 3052775 Nova Scotia Ltd v Henderson [2006] CSOH 147 per Lord Hodge at para 11) (5) Effect of the conveyance is instantaneous. A is divested and simultaneously B is invested. There is no time when both A and B are owners. If A is owner, B is not; and if B is owner, A is not. Scots law is unititular. (6) The transferor (A) must be owner or act, as agent, with the authority of the owner. Obviously. This is sometimes called the nemo plus rule: a mercifully shortened version of its articulation, by Ulpian, in Justinian’s Digest 50.17.54. The full version is: nemo plus juris ad alienum transferre potest quam ipse haberet. A ‘popular’ briefer version, which has found favour in England, is nemo dat quod non habet. As we will see later, this rule has some exceptions. (7) The transferor (A) must have legal capacity. Obviously. Otherwise there could no intention to transfer (see (1) above). (8) Transferee B hopes for a valid title. But he will not necessarily receive an unencumbered title, ie a title free from (subordinate) real rights. Disappointed transferees are likely to have a remedy in warrandice. The general features of transfer also apply in principle to the creation of subordinate real rights. For example, the creation of a real right in a short lease (not exceeding 20 years in length) requires the mutual intention of the parties, plus the public act of the tenant entering into possession of the subjects.

Ownership ( dominium ) was therefore divided, contrary to the usual rule in civilian legal systems. So it was necessary to specify the type of ownership held. There were in fact two types: (a) dominium utile and (b) dominium directum (superiority). For any one piece of land there could only be one estate of dominium utile , which carried the right to use the land. But there was no limit to the number of estates of dominium directum , because land could be repeatedly subfeued. In practice, dominium utile was very like a perpetual lease. Indeed historically a periodical payment known as feuduty was paid to the superior, like rent. The whole feudal system was rather like a system of multiple leases, ie A leases land to B, who subleases to C, who subleases to D etc. The Crown was always at the top of the feudal chain. The holder of the dominium utile was always at the foot. 28

Crown A (superior) (holder of dominium directum ) B (vassal) (holder of dominium utile ) The feudal system was slowly dismantled over the centuries. It was finally abolished when the Abolition of Feudal Tenure etc (Scotland) Act 2000 came fully into force, on 28 November 2004. By s 2 of that Act (i) all estates of dominium utile were converted into ‘ownership of the land’ and (ii) all estates of dominium directum were abolished. Until abolition, there could be no transfer of land as such but only of one of the feudal estates of land. So one talked of transfer of the dominium utile or of dominium directum (superiority). And sometimes sales were given effect to by subinfeudation, ie by creating a new feudal link so that the purchaser became a vassal of the seller. For example, this often happened in sales of council houses, or of new houses by volume builders – mainly because subinfeudation was a handy means of imposing real burdens. Subinfeudation required (1) a deed (feu disposition, feu charter, or feu contract) (2) the giving of sasine (symbolical delivery) (until 1845) (3) (notarial) instrument of sasine (until

1858. (4) registration (after 1617). Transfer of dominium utile or superiority involved largely this process as well, although the deed was a disposition. Today one talks only of transfer of (the undivided) ownership of land. TRANSFER: IN OUTLINE Transfer requires (1) execution and delivery of disposition + (2) registration of disposition in Land Register. See LRA 2012 s 50(2). NB: an unregistered disposition does not transfer ownership: LRA 2012 s 50(3). SALE: THE THREE STAGES Gretton & Steven pp 56- Reid, Property paras 640- (1) Conclusion of contract Missives of sale or articles of roup. These have to be in writing. Missives means exchange of letters i.e. by way of offer to buy and must be met with an unconditional