Sharp v Thomson
Encyclopedia
Sharp v Thomson 1997 SC 66 is a United Kingdom House of Lords
decision regarding the status of an unrecorded disposition in Scots Property Law. The case was brought by Sharp as receivers for Albyn Construction Ltd, a building company who had sold a house in Aberdeen
to the Thomsons, a brother and sister. Albyn had agreed to sell the house to the Thomsons leading to the completion of the missives and the delivery of the disposition and the payment of the purchase price. However, before the disposition was registered by the Thomsons, Albyn defaulted on a loan taken by them from the Bank of Scotland
. The default lead to the Crystallization of a floating charge
held by the bank over all of Albyn's "Property and Undertaking", and Sharp was appointed Receiver to collect this for the Bank.
Sharp raised an action before the Court of Session
contesting that, since the disposition hadn't been registered, the ownership of the house remained with Albyn at the time of Crystallization and that it and the purchase price was available to the Bank as holder of the charge. The Thomsons responded that the act of delivering the disposition divulged Albyn of any "Beneficial Interest" in the house and that this was enough to remove it from the scope of the charge. The Inner House of the Court of Session found in favour of Sharp. In giving the leading opinion, The Lord President (Hope) drew on historical sources to argue that Scotland has, and has always had, a unitary system of property law
and that ownership could only lie with the holder of the recorded title. As the Thomsons had not recorded the disposition, title remained with Albyn and so the house was available to Sharp.
The Thomsons appealed to the House of Lords. The Court over-ruled the Inner House
and found in favour of the Thomsons. The House gave two main reasons for its decision. Lord Jauncey upheld the Thomsons argument that, because in delivering the disposition, Albyn could no longer make use of or sell the house, it had no "Beneficial Interest" in the house and this was enough to remove it from being part of its property. Lord Jauncey commented that the ability to sell the house in fraud of the disposition did not amount to a right in property. Lord Clyde
offered different reasoning. He said that the term "Property and Undertaking" used in the Charge Agreement and the legislation had to be construed in its context. He said the Court of Session was wrong to ascribe it a technical meaning. He said that a proper construction of the term was to include only what the company could make use of in its day to day business dealings and not all its property in a strict legal sense.
The case caused great confusion in Scottish Conveyancers and academics who saw it as over-turning the long established Scots law principle that Ownership could not be divided. However, the effect of the case was greatly reduced by the House of Lords in 2004 in Burnett's Trustee v Grainger [2004] UKHL 8 where the Court held that Sharp v Thomson was authority only for holders of floating charges. For all other sales of property where the seller goes bankrupt or into sequestration
, the rule that applies is that owner is the holder of the registered title.
House of Lords
The House of Lords is the upper house of the Parliament of the United Kingdom. Like the House of Commons, it meets in the Palace of Westminster....
decision regarding the status of an unrecorded disposition in Scots Property Law. The case was brought by Sharp as receivers for Albyn Construction Ltd, a building company who had sold a house in Aberdeen
Aberdeen
Aberdeen is Scotland's third most populous city, one of Scotland's 32 local government council areas and the United Kingdom's 25th most populous city, with an official population estimate of ....
to the Thomsons, a brother and sister. Albyn had agreed to sell the house to the Thomsons leading to the completion of the missives and the delivery of the disposition and the payment of the purchase price. However, before the disposition was registered by the Thomsons, Albyn defaulted on a loan taken by them from the Bank of Scotland
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...
. The default lead to the Crystallization of a floating charge
Floating charge
A floating charge is a security interest over a fund of changing assets of a company or a limited liability partnership , which 'floats' or 'hovers' until conversion into a fixed charge, at which point the charge attaches to specific assets...
held by the bank over all of Albyn's "Property and Undertaking", and Sharp was appointed Receiver to collect this for the Bank.
Sharp raised an action before the Court of Session
Court of Session
The Court of Session is the supreme civil court of Scotland, and constitutes part of the College of Justice. It sits in Parliament House in Edinburgh and is both a court of first instance and a court of appeal....
contesting that, since the disposition hadn't been registered, the ownership of the house remained with Albyn at the time of Crystallization and that it and the purchase price was available to the Bank as holder of the charge. The Thomsons responded that the act of delivering the disposition divulged Albyn of any "Beneficial Interest" in the house and that this was enough to remove it from the scope of the charge. The Inner House of the Court of Session found in favour of Sharp. In giving the leading opinion, The Lord President (Hope) drew on historical sources to argue that Scotland has, and has always had, a unitary system of property law
Property law
Property law is the area of law that governs the various forms of ownership in real property and in personal property, within the common law legal system. In the civil law system, there is a division between movable and immovable property...
and that ownership could only lie with the holder of the recorded title. As the Thomsons had not recorded the disposition, title remained with Albyn and so the house was available to Sharp.
The Thomsons appealed to the House of Lords. The Court over-ruled the Inner House
Inner House
The Inner House is the senior part of the Court of Session, the supreme civil court in Scotland; the Outer House forms the junior part of the Court of Session. It is a court of appeal and a court of first instance...
and found in favour of the Thomsons. The House gave two main reasons for its decision. Lord Jauncey upheld the Thomsons argument that, because in delivering the disposition, Albyn could no longer make use of or sell the house, it had no "Beneficial Interest" in the house and this was enough to remove it from being part of its property. Lord Jauncey commented that the ability to sell the house in fraud of the disposition did not amount to a right in property. Lord Clyde
Lord Clyde
Lord Clyde may refer to*Field Marshal Colin Campbell, 1st Baron Clyde , Scottish soldier*James Avon Clyde, Lord Clyde , Scottish Conservative politician and judge...
offered different reasoning. He said that the term "Property and Undertaking" used in the Charge Agreement and the legislation had to be construed in its context. He said the Court of Session was wrong to ascribe it a technical meaning. He said that a proper construction of the term was to include only what the company could make use of in its day to day business dealings and not all its property in a strict legal sense.
The case caused great confusion in Scottish Conveyancers and academics who saw it as over-turning the long established Scots law principle that Ownership could not be divided. However, the effect of the case was greatly reduced by the House of Lords in 2004 in Burnett's Trustee v Grainger [2004] UKHL 8 where the Court held that Sharp v Thomson was authority only for holders of floating charges. For all other sales of property where the seller goes bankrupt or into sequestration
Sequestration
In law, sequestration may refer to:* Sequestration , the seizure of property* the isolation of a jury in order to ensure they are not prejudiced by external contact* In Scottish law, the term for bankruptcy* In U.S...
, the rule that applies is that owner is the holder of the registered title.