Outer House case considering a motion for recall of inhibitions served on Cordelt Limited and Mako Property Limited by Playfair Limited. Mako and Cordelt argued that the inhibitions prevented them showing clear searches to purchasers in implement of a contract to sell properties in Edinburgh.
An important issue for the court was whether s160 of the Bankruptcy and Diligence (Scotland) Act 2007 changed the law regarding the effect of an inhibition on a pre-existing contract to convey property. Under the prior law it was clear that an inhibition did not prevent the transfer of property in implementation of a contract that pre-dated the inhibition. After detailed consideration of the 2007 Act and Scottish Law Commission’s Report on Diligence, Lord Hodge found that the law had not changed in this respect. He also noted that if (and he doubted that it had) advice from Registers of Scotland had indicated otherwise then he would respectfully disagree with that advice. Although s160 defines a breach of the inhibition as occurring when a debtor delivers a deed conveying property over which the inhibition has effect, it does not strike at a deed in implement of a pre-existing obligation.
“I conclude that an inhibition does not strike at a transaction which the inhibited person is bound to carry out as a result of a pre-inhibition obligation. The reforms of the 2007 Act did not create a statutory code which excluded that common law characteristic of the diligence. Had the 2007 Act had that effect it would have created a diligence which forced the inhibited person either to breach the inhibition or break his contract. That would not have been good law reform”
The full judgement is available from Scottish Courts here.