Division and sale - disposal inter se

It may be said to be trite that where heritable subjects are held in common by parties as pro indiviso owners, each has an absolute entitlement to insist on their division and sale. This was decided in the Inner House in Upper Crathes Fishings Ltd v Bailey's Executors 1991 SLT 747 and has been applied repeatedly since.

Lord Clyde in the Outer House (1990 SLT 4) had accepted that unless they were bound by contract, parties had such a right, averments in relation to motive or bad faith being irrelevant. In so deciding he expressly approved the dictum of Lord Salvesen in Morrison v Kirk 1912 SC 44 that, unless bound by contract, “if it should turn out that division is impracticable or would operate unfairly, then the [my emphasis] remedy is to have the properties sold and the price divided”.

Whether parties might be so bound was discussed in Burnett v Menzies Dougal WS 2006 SC 93.
Qualifications to that absolute entitlement can, however, arise where there may be issues not only of supervening contract (see later), but also unjustified enrichment, such as from any sources of funding for purchase etc arising (as evidenced in cases such as Grieve v Morrison 1993 SLT 852, through the groundbreaking Inner House decision in Shilliday v Smith 1998 SC 725, as applied in Satchwell v McIntosh 2006 SLT (Sh Ct) 117), or the possible application of the principles relating to financial provision on divorce (Family Law (Scotland) Act 1985, s 9), dissolution of civil partnership (Civil Partnership Act 2004, s 10) or separation of cohabiting couples (Family Law (Scotland) Act 2006, s 28; see now Gow v Grant [2012] UKSC 29).

Claims might also cease to be available by reason of personal bar (Bush v Bush 2000 SLT (Sh Ct) 22) or under mora, taciturnity and acquiescence (in Michael v Carruthers 1998 SLT 1179, the question whether a proprietor can be bound by acquiescence on the part of his predecessor in title was thought not to be authoritatively decided: see “Acquiesence and the Singular Successor” 2010 Juridical Review part 3).

Whether division is to be regarded as impracticable or inexpedient is not only a matter of physical possibility: regard can be had to the interests of the parties and the state of the market etc (Thom v McBeth (1875) 3R 161). Family issues could remain relevant, with possible further reference to article 8 of the European Convention (Manchester City Council v Pinnock [2010] UKSC 45; and see 2011 SLT (News) 45), though it is difficult to see any further implications from article 1 of Protocol 1 in relation to protection of property (cf Axa Insurance v Lord Advocate 2010 SLT 197; 2011 SLT 439; 2010 SC 1061). In McLeod’s Trustee v McLeod 2007 Hous LR 34, in the context of applying s 40 of the Bankruptcy Act 1985, neither what was contended under article 8 nor under A1P1 were considered by the sheriff to be sufficient for relevancy.

As discussed in Macphail on Sheriff Court Practice, para 23-38, if division is considered practical and expedient, a report from a surveyor is to be asked for, but otherwise sale and division of the proceeds is to be sought. In relation to any report required by the court, parties are entitled to be heard on any objections (Williams v Cleveland Holdings 1983 SLT 398), but the reporter's conclusions are usually to be “accepted as conclusive on the matters referred” (Thom v McBeth (1875) 3R 161).

The implications of agreeing the terms of any remit to the reporter – in what would be a supervening agreement by the parties to proceed thereunder – are not to be forgotten; nor is the extent to which there may have been any such agreement (Harvey v Wilson 2004 SCLR 313 (Note)); and, of course, agreement between the parties in joint minute – whether approved through the court or not (Jongejan v Jongejan 1993 SLT 596) – will supersede all that has gone before, whatever the limitations of Scots common law.

Private treaty or public roup?

In The Miller Group Ltd v Tasker 1993 SLT 207 parties were agreed that the property should be sold, but disagreed on whether the sale should proceed by way of public roup or private bargain. After the sheriff had allowed a proof before answer – which neither party had asked for – the Inner House, on appeal, held that the court was exercising an equitable jurisdiction and had to have regard to the interests of all the co-proprietors, with the aim being to effect a sale which was fair to all parties.

Specifically the court accepted (at 208H-K) that while “The effect of the case of Campbells [v Murray 1972 SLT 249] was to displace what might have been regarded as a presumption based on practice in favour of sale by public roup… it did not… substitute for it a presumption in favour of sale by private bargain.” It is apparent that the court, while sanctioning sale by private bargain, did not exclude the possibility of sale by public roup in suitable cases.

It was not thought to be “helpful to approach what is essentially a practical question by reference to presumptions”. In a judicial sale of this kind, the court was exercising an equitable jurisdiction (Upper Crathes Fishings Ltd). This might be concerned not only with whether there should be a division or a sale, but also with the manner in which the sale was conducted.

“The common goal of all parties obviously is to achieve the best bargain which can be obtained in all the circumstances. It is to be assumed that in conducting a judicial sale, the court will have available to it all the expert advice which is necessary and it is a well recognised practice to remit to a valuer to examine and report on all questions which may arise in connection with that sale. It may well be the case that in modern times a sale by private bargain will in most cases prove to be the best way, as was recognised in Campbells v Murray. On the other hand, for all the court knows, there may be situations in which a sale by public roup is to be preferred. These are questions upon which the court may wish to inform itself, not least when the co-owners have, as in this case, expressed different views on the proper way in which to proceed”.

As the court concluded (at 208K): “We wish to emphasise that the matter is basically a practical one and accordingly there is everything to be said for flexibility of approach rather than the court creating presumptions to which adherence may be required.”

The court said it was clear that submissions seeking to insist on public roup were “not based on law but were of the nature of ex parte statements concerned with the practical mechanics of a sale of property. In our opinion such problems are properly for the court, acting upon the advice of a reporter, to resolve” (at 209A).

Applying such an underlying approach may clearly have wider implications for how related issues are to be determined in the future. In particular, if only as a matter of practicalities, the current preference for the use of private bargains both allows and facilitates possible disposal between parties – if that is accepted as legally competent.

Disposal inter se: the authorities

What does appear, however, to remain undecided is whether, or in what circumstances, any pro indiviso proprietor might be able to insist on disposal directly to them of the share of another pro indiviso proprietor. Subsisting judicial thinking remains equivocal in this connection.

Macdonald, Conveyancing Manual, part 2, para 7-11, sees this as a “somewhat unresolved issue on which further Court of Session authority is awaited”. The following (contrary) approaches to the position exist.

Scrimgeour v Scrimgeour

In the undefended Outer House action Scrimgeour v Scrimgeour 1988 SLT 590 Lord McCluskey was prepared to grant the pursuer’s amended motion for warrant to purchase her former husband’s one-half pro indiviso share in the matrimonial home, the price to be fixed at the open market value by a reporter appointed by the court.

As he saw it (at 591F), the pursuer was seeking “an unusual remedy in an unusual form”. On the view that to grant the remedy in that form was, as far as he was aware, unprecedented, and in view of the well researched submission for the pursuer, he thought it would be helpful to give his reasons for acceding to the motion although it was unopposed.

Counsel for the pursuer accepted that the modern practice in Scotland in respect of heritage to which two or more parties had pro indiviso title was for the party who sought to withdraw from the arrangement to bring an action of division and sale. The practice was to expose the subjects to public sale and to have the net proceeds divided pro rata between the proprietors. In the normal case any individual pro indiviso proprietor could join in the competition to purchase. For a long time an open and fair competition was secured by having the subjects exposed for sale by way of public roup. Since Campbells v Murray 1972 SLT 249 it was not necessary to expose the subjects for such sale. The more usual method for marketing heritable property, namely advertisement of the subjects followed by acceptance of the highest of sealed offers, would be adequate.

His further submission was, however, that “a public and open sale of this kind was not necessary and was not required by Scots law”. It was perfectly consistent with principle that it should be competent for the court to order another form of sale, one which would have the effect of ensuring that one of the pro indiviso proprietors would acquire title to the whole, while simultaneously ensuring that the other would be fairly compensated for parting with his share. In this action the pursuer sought such a remedy because she wanted to continue to live in the former matrimonial home along with the child of the marriage (at 592F).

The starting point for these submissions was Rankine, Land-ownership in Scotland (4th ed), 591 et seq, where the right of a co-owner to demand division of the subject, if divisible, or sold followed by division of the price, if not, was said to be traced back to the actio communi dividundo of the Roman law. The authorities quoted for that included the opinion of Lord Rutherfurd in Brock v Hamilton (1852) 19D 701n. Rankine's formulation of the rules of the Roman actio included the following statements (at 591, 593 and 595 respectively):

(a) “If the subject were... indivisible, it was allotted to that one of the socii who should first bid its value, beginning with him who had the largest interest, and so on – failing which, it was put up to public sale, or disposed of otherwise so as to be best for all parties”.

(b) “In so far as these rules are applicable to the mode of sale, they are not binding in Scots law... but the inherent liability of a common subject to division, and in certain cases to sale, depends on no peculiarity of process”.

(c) “The sale must be by public roup, and power may be reserved in the articles to anyone interested to bid”.

Supporting reference was made to the Institutes of Justinian, IV, vi, 20, which said of the actio communi dividundo and of two other actiones: “in these three actions the Judge has the power to award the thing, on an equitable basis, to one of the litigants and, if the share of one be disproportionate to require him to pay a certain amount of money to the other”; and title xxxii of the Codex Justinianus, in which there could be found imperial decrees requiring the owner of a common property to bring an action for division of the property against the co-owner, with a view to obtaining the whole tract of land by making an offer to the joint owner for his share.

These approaches were seen as having “the advantage of protecting the interest of the one who wants to keep the property while simultaneously protecting the financial interest of the other or others. It is in effect a closed auction among the co-owners supervised by the court”. The “essential point is that the court in such an action would sanction something short of a sale in the open market and would sustain a fair method of ascertaining and obtaining the market price while allowing the property to remain in the hands of one of the pro indiviso owners” (1988 SLT at 593C-F).

Further reference was made to Stair, I.vii.l5, Bankton, I.vii.40, Erskine, III.iii.56 and Bell, Commentaries, II, Chapter I, which were said to “illustrate how the possibility of a sale by public roup arose but they recognise the survival, and indeed the pre-eminence in earlier times, of the ancient remedy of prescribing some form of regulated sale restricted to the co-proprietors before, and instead of, going on to the open market. A sale by public roup was seen as the remedy of last resort” (at 593F).

Under reference to Brock v Hamilton, the judgment of Lord Rutherfurd was said to have been treated as authoritative both by textbook writers and by the courts ever since. He had said: “The Roman law looked in the first instance to division, and that was the leading conclusion and object of the action, de communi dividundo, but when that could have no effect from the nature of the subjects, or where the parties could not agree, that one should take the subjects, paying the other the value of his share, and especially where the different estimates of value excluded any similar adjustment, public sale, under authority of the Court became plainly the only course".

It was noted that its authority had been upheld by the Inner House in Campbells v Murray, although no specific reference was made to the possibility of a form of process to allow for the situation where one of the parties wished to take the subjects, paying the other the value of his share. In Thom v Macbeth (1875) 3R 161 the Lord Justice Clerk was noted to have said (obiter): “The deduction which I draw from the judgment of Lord Rutherfurd in the case of Brock is that when division is not reasonably practicable without sacrificing to an appreciable extent the interests of some or of all of the parties the only resort is a sale and division of the price”. While this observation was recognised to “not fully acknowledge, as Lord Rutherfurd was careful to do, that there may be a form of process for safeguarding the interests of the parties other than by public sale and division of the price in circumstances when a division which safeguards all interests is not reasonably practicable”, Lord McCluskey accepted that there were (then) “no other Scottish authorities dealing with this matter than those referred to” (1988 SLT at 593I-K).

The submission for the pursuer was that “Scots law on the matter is in fact not just derived from the Roman law but is taken in its entirety from the Roman law… The practice of the court in Scotland has simply been an application of the principles of Roman law although the adjectival forms have been necessarily Scottish. No court in Scotland has ever ruled out the remedy, which used to be the principal remedy, whereby the court itself would supervise a transaction in which the co-owners would, in effect, bid against each other for the right to own the whole property” (at 593L).

Accordingly it was said to be “competent for a co-owner to offer to purchase his fellow owner's pro indiviso share at the market price and that the court in an action of this kind could sanction such a remedy” (at 594A).

Approaching his decision, Lord McCluskey accepted (a) “the view that a remedy short of exposing the subjects to public sale has existed in Scots law and has never been abolished”; (b) “No court has ever said it was incompetent to allow such a remedy to one or more of the co-owners”; (c) “If one of two co-owners were to raise an action seeking the court’s sanction of and a supervision over such an arrangement and the other co-owner were to appear as defender in the action and ultimately settle upon the basis of a joint minute which invited the court to sanction such an arrangement the court could plainly... sanction the arrangement upon which the parties agreed and pronounce a decree based upon the parties’ agreement”; (d) “Similarly, if in fact the co-owner were to come into the process as defender seeking to oppose the arrangement but ultimately defaulted”, there was “no reason why a decree giving such a remedy to the pursuer should not be granted”; and (e) “if it were competent to grant a remedy of the kind sought in a defended action it must equally be competent to do so in an undefended action” (at 594B-D).

It appeared to him to be “prima facie competent and fair and equitable” to proceed as he did (at 594I).

(Subsequently in Upper Crathes Fishings Ltd v Bailey’s Executors 1990 SLT 46, in his approach to the historical development of the position, Lord Clyde made reference to “the brieve of division” in Scots law, which Rankine (at 593) had noted to be “the old mode of division – still competent – but practically superseded” by the action of declarator.)

Berry v Berry (No 2)

In the later Outer House action Berry v Berry (No 2) 1989 SLT 292, Lord Cowie, distinguishing Scrimgeour, held that the interests of both parties would be best served by sale, and applying Campbells v Murray, sale by private treaty. Here there was no dispute that the appropriate method of sale of the subjects was the one which, in the absence of any agreement as to how the subjects should be disposed of, reflected the best interests of both parties.

It was again noted that under the common law of Scotland that method had been considered for many years to be sale by public roup, but since Campbells v Murray it had been considered that the most appropriate method of sale was by private treaty.

Lord Cowie did not regard Scrimgeour as providing any assistance. As he saw it, “The circumstances there were very special and do not support the general proposition that I have a wide discretion enabling me to lay down, in the absence of agreement between the parties, how the subjects should be disposed of.”

Specifically, he said: “The method of sale sought by the defender [an order for the sale of the pursuer’s share at a valuation fixed by the reporter] is not one which is referred to in textbooks, nor is it supported by any of the authorities to which my attention was directed and I am not prepared to countenance it” (1989 SLT at 293E-F).

Beyond that, even if he had thought himself to have such a “wide discretion to lay down the method of sale”, he did “not regard it in the best interests of both parties that the method sought by the defender was the most appropriate one”, but rather that “the best interests of both parties would be properly served by obtaining the highest price for the property, and that, as the Lord President pointed out in Campbells v Murray is by sale by private treaty in the open market” (1989 SLT at 293F-G).

He thereafter refused an alternative motion that the sale be by public roup, on the view that “in this modern age the best interests of both parties would be better served by sale by private treaty since that is likely to obtain the best price” (at 293H-I).

Gray v Kerner

In Gray v Kerner 1996 SCLR 331, an action in Falkirk Sheriff Court (between cohabitees in a former shared home), the pursuer wished the property to be transferred to her in return for payment to the defender of half the reversionary value, subject to a deduction of one-half of the total mortgage payments she had made since the breakdown of the relationship, while the defender wished a sale on the open market and an equal division.

After a proof the sheriff noted (at 331F) that “Although it is not unusual to encounter actions of division and sale craving the court to have subjects sold judicially and the proceeds divided among interested proprietors, in the present action the pursuer seeks an order for the sale to her of the defender’s one-half pro indiviso share in the heritable property owned by them”.

Based on his findings in fact that the defender was “single, unemployed and not in a position to
service a loan”, he saw “no prejudice by the court ordering the sale of his half share to the pursuer”, and no grounds to “oblige the pursuer to bid for the property and possibly deprive her and her four children, of whom she presently has custody, of remaining in what is the family home” (at 332B-C).

Accordingly, he came to the conclusion that it was fair, equitable and appropriate that the pursuer became the sole heritable proprietor of the property in question, on the basis that “it was not necessary, in implement of the action of division and sale, to insist on a sale on the open market” and, further, “that where one pro indiviso proprietor wishes to acquire title to the whole of the heritable subjects and the other pro indiviso proprietor is not in a position to acquire title and is not seeking to acquire title but can be fairly compensated, it is appropriate for the court to order a sale or transfer in another form” (at 332D). Supporting reference had been made for the pursuer to Scrimgeour. (Related issues of recompense dealt with in this action are outwith the concern of this contribution.)

Ploetner v Ploetner

In Ploetner v Ploetner 1997 SCLR 998, an action of division and sale (of a farm) before Sheriff McInnes QC in Perth, both parties sought an order for the sale of the subjects to themselves at valuation. In allowing a proof before answer on the question of whether a division was possible and, if not, on whether there ought to be an order for sale of one party’s share to the other, he gave his views on what the editor of the report describes as the “appropriateness” of the latter approach.

As the sheriff saw it (at 999): “Before the court could reach a conclusion on the matter of what order should be made for the sale of the property, consideration would have to be given to the question whether there can and should be a division of property”, but he expressed what he said were “some tentative views” on the competence of that latter approach.

He said: “This is not an action of division and sale. It is an action of sale in which part of the defence is that the farm is capable of division. If the defender were to establish that that was so, it could result in the declarator sought and the order for sale being refused, in whatever form that might be sought. Whether it did have that result would depend on factors which could only be taken into account after evidence had been led. The fact that the property could be divided would not necessarily mean that the court would make an order for division. Where the property consists of or includes land, as here, the consequences of a division may be that the land is divided into two or more units which are not viable as separate holdings. If they were sold separately they might each realise much less than the shares would be worth on the sale of the property as a whole. As I have said, division would probably have to be considered on its merits and rejected before a decision was taken as to the form of any order for sale” (at 999-1000).

In relation to any possible order for sale by one party to the other, his views are recorded as being: “While there is authority for the proposition that the court has power to make an order for the sale of one pro indiviso share to the proprietor of the other such share, that authority applies where there is consent to that course of action (see Scrimgeour) or possibly implied consent... I assume that that is what Lord McCluskey had in mind when he said in that case: ‘Similarly, if in fact the co-owner were to come into the process as defender seeking to oppose the arrangement but ultimately defaulted I see no reason why a decree giving such a remedy to the pursuer should not be granted’” (at 1000B). But, he recognised, “there are no authorities which support the proposition that, where there is no question of consent, the court can none the less order the sale of the share of one of the parties to the action to the other. I am inclined to think that Lord Cowie went further than he need have done” (in Berry).

Referring to Bell, Commentaries (vol I, 62) on the alternatives where the subjects be not naturally divisible, he thought: “Professor Bell clearly envisaged that a fair price would be agreed or fixed and that both parties would have an opportunity to offer for the other’s share or shares at that price. If one side offered and the other did not, the share would be transferred to the offeror at that price (Gray 1996 SCLR 331). If neither did so, or if both did, the matter could not be resolved in that way.

“A similar impasse could arise if, despite the fixing of a price, it was persuasively argued that a better price would be obtained by sale on the open market. In such event the court might conclude that there should be an order that the property be sold on the open market with a view to obtaining the best price for the benefit of all the pro indiviso owners. The net proceeds would then be divided pro rata. The result of an open-market sale, in which the pro indiviso proprietors would all be potential buyers, could be that at least one of them would be prepared to pay over the odds to ensure that he or she did not lose the property in question.

“Lord Cowie in Berry envisaged that such a sale might be necessary in order to achieve the highest price. He also decided that the best means of achieving the highest price in that case would be sale by private treaty in the open market. The court therefore does have, or at least may have, a discretion to exercise, in the absence of agreement between the parties, how the subjects should be disposed of. How that discretion will be exercised will of course depend on the circumstances of the individual case.

“There appears to be no authority for the proposition that the owner of the larger pro indiviso share is in a better position than the owner of the smaller share by reason of the size of the share. There also appears to be no authority which would support the view that the court can properly order the sale of one pro indiviso share to the owner of the other unless there is consent or implied consent or there is an agreed valuation of the property and only one party wishes, or is in a position, to buy out the share of the other. That is not to say that there will never be such authority. An attempt may be made to widen in a general way the types of case in which a sale of a share by one proprietor to the other would be ordered. But in the absence of agreement as to a fair price or in other cases in which both or all pro indiviso proprietors wished to buy, it is difficult to see how a court could avoid ordering the sale of the property on the open market. It would also be difficult, if considerations of such a nature applied, to establish a rationale as to the circumstances in which the court would or would not order the sale of the share of one proprietor to another as opposed to making an order for sale in the open market” (1997 SCLR at 1000E-1001B).

The Matrimonial Homes Act

Finally, for what it may be worth in this debate, it is to be noted that s 19 (rights of occupancy in relation to division and sale) of the Matrimonial Homes (Family Protection) (Scotland) Act 1981 – with similar provision extended to civil partnerships and cohabitees under the 2004 and 2006 Acts respectively – continues to provide:

“Where a spouse brings an action for the division and sale of a matrimonial home which the spouses own in common, the court, after having regard to all the circumstances of the case including–
(a) the matters specified in paragraphs (a) to (d) of section 3(3) of this Act; and
(b) whether the spouse bringing the action offers or has offered to make available to the other spouse any suitable alternative accommodation,
may refuse to grant decree in that action or may postpone the granting of decree for such period as it may consider reasonable in the circumstances or may grant decree subject to such conditions as it may prescribe.”

It has been said that:

1. s 19 has made “very material inroads into the rights of pro indiviso proprietors where they happen to be husband and wife” (Crow v Crow 1986 SLT 270) – and, there, occupancy rights were held not to cease on divorce; but

2. the onus of establishing rights under the Act remains with the pursuer seeking to vindicate them (Berry v Berry (No 1) 1988 SLT 650, as applied by Sheriff Horsburgh in B v B 2010 GWD 24-454, on which see “A burden discharged”, Journal, August 2010, 49); and

3. the courts have “not yet made any systematic analysis” of the relationship between the common law right to division and sale, the 1981 Act and the general provisions of the 1985 Act for financial provision on divorce (Milne v Milne 1994 SLT (Sh Ct) 57); though

4. in Crow v Crow the approach to division and sale from Anderson v Anderson (1857) 19D 700 and Morrison v Kirk 1912 SC 44 continued to be approved.

Both within and outwith these parameters it does not, however, seem there is sufficient power to prescribe conditions under this provision to allow sale by one party to the other to be thus sanctioned.

Conclusions

We can be grateful that the decision in Scrimgeour discussed the Roman law roots of the Scots action of division and sale, though it may be remembered, albeit in other contexts, that Roman law has been “received” only by coming to be regarded as Scots law (cf Cantiere San Rocco v Clyde Shipbuilding and Engineering Ltd 1923 SC (HL) 105, where Lord Dunedin commented: “After all, however, the Roman law, though interesting, is only of service in showing the foundation on which the Scots law rests”).

Equally we can recognise the limitations in the older Scottish authorities which led Lord Cowie to express the reservations he did in Berry.

As suggested in Thom v McBeth and in Ploetner, there would seem no objection to one or other of the parties making an offer to purchase the other’s share of the subjects after they have been exposed for sale. In Adams v Adams 2010 SLT (Sh Ct) 2 at 3I, the sheriff noted that: “Although an order for sale is normally followed by an offer from a third party, there is nothing to prevent one of the spouses offering”; he referred expressly to Scrimgeour, though in so far as that offer was to follow the order for sale it does not seem to develop the possible position further. Nonetheless, precluding the party concerned from seeking that solution within rather than only following that stage in an action might, in that context, be seen as somewhat anomalous.

What does, indeed, seem evident from the modern approach of the Inner House in The Miller Group v Tasker 1993 SLT 207, followed through by the specific approaches of the sheriffs in Gray and Ploetner, is that practicalities and the wish for “fair” treatment of the parties in the individual case seem likely to prevail in the future. That, however, specific decisions might only follow after the need for proof seems unfortunate where there remains an absence of authoritative guidance on the point in question; that such uncertainty remains may, it is speculated, have led parties more readily to agree terms of settlement or to seek to invoke other legal remedies. That there appear to have been no further – at least reported – decisions since 1997 either confronting or resolving the subsisting Scrimgeour/Berry dichotomy would seem to support that view. In the real world the wish to thereby avoid such continuing uncertainty cannot be surprising or be subject to criticism.

Only in that broad context, where the division of the common property may be the only question between the parties (or in the unusual circumstances where the court might decide to make no order in relation to the matrimonial home in an action for financial provision on divorce etc, as in Jacques v Jacques 1997 SC (HL) 20 when that case was originally before the sheriff), may the related requirements of the action of division and sale continue to come into play, and the issues here discussed be judicially resolved.