It is in my view important to identify precisely the question which is raised in the present case. The question here is not as to the effect of the crystallisation of the floating charge nor is it a question of any race to the register between the purchaser and the holder of the floating charge. The question is whether the flat at Whinhill Road was within "the property . . . comprised in our property and undertaking" of Albyn when the floating charge crystallized. That is a question of the construction of the terms of the floating charge or, in so far as those terms echo the statutory language, the words of section 462(1). The whole approach however taken by the Scottish courts was based on the proposition that the floating charge required to be construed against a background of the law relating to heritable securities and the Scottish system of property law. But it is at that stage that I would respectfully diverge from the path which the judges in the lower courts have taken at least to the extent that it restricts attention to the law relating to property and heritable securities. It also seems to me that the effect of the floating charge on the property to which it attaches is a matter secondary to the critical question which is raised in the case, namely whether on crystallisation the floating charge attaches to the flat at all. A like distinction was noted by Lord Watson in Heritable Reversionary Co. Ltd. v. Millar (1892) 19R. (H.L.) 43, 49.

          As the argument before this House developed it became clear that no challenge was being made of the careful analysis made by the judges of the First Division of the basic concepts of Scottish law which apply in the area of heritable property. A basic distinction between real rights and personal rights was not questioned. It was not suggested that there is any kind of hybrid right somewhere between a real right and a personal right. It was accepted that Scottish law holds to a unitary theory of ownership by which only one real right of ownership can exist in respect of any one thing at any one time. The principles recognised in Young v. Leith (1847) 9D 932 were not disputed.

          The appellants' argument before this House does not seek to answer the critical question by founding upon considerations of the law of property but rather rests on the ordinary use of language. This approach leaves aside any analysis into real or personal rights or formal title but looks to a definition of property for the purpose of the terms of the floating charge which relates to the substantial beneficial interests of the purchaser as opposed to the bare title retained by the seller. On that approach it is said that at the moment of crystallisation the flat did not belong to Albyn and in that sense was not comprised in its property and undertaking.

          The word "property" is not a technical term of Scots law. It can take its meaning from the context in which it occurs. It is not disputed that the holder of an unrecorded disposition does not have a real right to the subjects of the conveyance. But it is accepted that for some purposes he may be recognised as an owner or proprietor. Examples can be found in the jurisdiction cases which were canvassed in the First Division, such as Bowman v. Wright (1877) 4R 322. In the context of estate duty, in Thomas v. Lord Advocate 1953 S.C. 151, the delivery of a disposition was held to have the effect of removing the subjects of the gift from the property which passed on the death of the deceased. These cases are of course concerned with different questions from that which arises in the present case. But they serve to emphasise the point that "property" and feudal title may not be synonymous. There is no general requirement to equiperate "property" with real right or feudal title so as to make these terms equally co-extensive.

          Heritable Reversionary Co. Ltd. v. Millar is particularly instructive. In that case the bankrupt was a bare trustee holding the title to the subjects for the benefit of the company and it was held that the subjects did not form part of the "the whole property of the debtor" so as to vest in the trustee in his sequestration. The view was taken that although the bankrupt had an unqualified feudal title to the heritable property it nevertheless did not belong to him. Lord Herschell said, at p. 44, of the phrase "the property of the debtor":

"The expression is not a technical one, but is obviously intended to comprehend all that would ordinarily be understood as covered by it. It cannot be doubted that it includes all beneficial interests possessed by the bankrupt, even though the property be vested in other persons as trustees for him. On the other hand, I cannot think, unless compelled by authority to take that view, that it includes, or was ever intended to include, estates of which the bankrupt was a bare trustee, and in which he had no beneficial interest."

Lord Watson stated, at pp. 49-50:

"An apparent title to land or personal estate, carrying no real right of property with it, does not, in the ordinary or any true legal sense, make such land or personal estate the property of the person who holds the title. That which, in legal as well as in conventional language, is described as a man's property is estate, whether heritable or moveable, in which he has a beneficial interest which the law allows him to dispose of. It does not include estate in which he has no beneficial interest, and which he cannot dispose of without committing a fraud."

Lord Macnaghten also expressed the view that the words "property" and "belonging to him" in the statutory provision there under consideration were to be understood in their ordinary signification. He stated, at pp. 53-54:

"They are, in fact, convertible terms--you can hardly explain the one except by using the other. A man's property is that which is his own--that which belongs to him. What belongs to him is his property. No one in ordinary parlance would speak of lands or funds held only in trust for another as the property of the trustee. Lands or funds so held are not the trustee's property in any real sense any more than a bankrupt's sequestrated estate is the property of the trustee in bankruptcy. It is true that in the present case the complete feudal title was in the bankrupt. It is true that in a strict legal view the right of the beneficiaries was only a personal claim against their trustee. But for all that the bankrupt could not have applied the property to his own purposes, or used it for his own benefit, without committing a fraud for which he might have been made criminally responsible. The beneficiaries were the true owners all along. The bankrupt, though he had the feudal title, though he might have given a perfectly good title to a person dealing with him on the faith of the register without notice of the trust, was in reality only nominal owner without any property or proprietary right."

          Counsel for the respondents stressed that in Heritable Reversionary Co. Ltd. v. Millar there was a trust and he pointed out that the element of trust runs through the speeches in that case as a material consideration. That is of course correct. Indeed a like comment can be made of Hinklebein v. Craig 1905 13 S.L.T. 84 where a proprietor had undertaken to hold the subjects in trust for others and the subjects were held not to fall into his own sequestration. But while the element of trust is a point of difference from the present case the decision remains instructive in relation to the approach taken by this House. That approach involved a construction of the word "property" in its legal and conventional sense. It involved a consideration of the substance and reality of the debtor's interest and the recognition that only what belongs to the debtor should be available to satisfy the debtor's creditors. Heritable Reversionary Co. Ltd. v. Millar is an illustration of these principles, not an exceptional case restricted to consideration of trusts. Indeed the editor (T.A. Fyfe) of the fourth edition of Goudy's Treatise on Bankruptcy edited in 1914 comments, in a footnote (c) on p. 251, that the definition of property in the passage in Lord Watson's speech which I have already quoted "would seem to exclude the property sold by the bankrupt upon a delivered conveyance which has remained unrecorded". Counsel for the respondents also pointed to the distinction drawn in that case between the situation of one who is a bare trustee and an owner who has come under a contractual obligation to convey the property to another. But while the subjects in the latter situation may well remain within the property of the debtor the situation in the present case is distinguishable in respect that Albyn had lost the beneficial interest in the flat as well as the power lawfully to dispose of it.

          In my view there are sound reasons for preferring a construction of the floating charge which looks to the ordinary use of language rather than a strict application of the principles of property law. The property over which the charge extends is property comprised in the company's property and undertaking. The final word of that phrase seems to me to take one away from any exclusive concentration on the word property, to look to the variations in the identity of the property which may occur during the continuing course of the company's business, and to invite a less strict construction which may take account not only of title but of beneficial interest. Even if the subjects must be in the legal ownership of the company for the charge to attach, it does not follow that everything over which it has a real right falls within its property and undertaking. In particular when the company has, as here, sold a heritable subject and delivered a disposition of it to the purchaser so that the company only retains the bare title, has no right and obligation to do anything more as regards the subjects beyond the negative obligation of refraining from conveying them to anyone else, and indeed no longer has the right of lawful disposal, I do not consider it correct to regard the subjects as part of the company's property and undertaking.

          As I have already observed the creation of a floating charge was something alien to Scottish law. Not only is this true of the nature of the security before its attachment but the fact that it can on the event of its crystallisation have the effect of a recorded heritable security without prior recording in a public register cuts across a basic principle of Scots law. The floating charge sits uneasily in a system with whose principles it does not accord. In these circumstances it is reasonable to prefer a narrow rather than a generous construction of its terms. Furthermore it seems to me correct to recognise that the introduction of the floating charge to Scotland must have been made in order that something of the same commercial benefits as were enjoyed in England should be available in Scotland and accordingly that it must have been the intention of Parliament to achieve as far as possible that the effect of the charge in Scotland should accord with the effect of the charge in England. There seems to be no doubt that in England such a charge as is here in question would not attach to lands which have been the subject of a transaction comparable with that which has taken place in the present case.

          The present case has some features in it which are, at least as one would hope, unusual. But even if that is recognised the decision reached in the lower courts appears unattractive and unfair. It would be unfortunate if the law had to be so applied as to compel such a result. The embarrassment of debtors may often involve a loss for those who have transacted with them. The necessity of obtaining a letter of non-crystallisation may not be an altogether satisfactory expedient for obtaining protection over the period until a purchaser can obtain a secure title. But if the creditors are to be treated fairly it seems curious that the assets of the debtor should be taken to include both the subjects which have been sold and the price which has been received for them. To use the words of Lord Field in Heritable Reversionary Co. v. Millar 19R. (H.L.) 43, 55 such a result "would involve the great injustice of applying one man's property in satisfaction of another man's debt". Moreover on the respondents' argument the receivers achieve by virtue of the floating charge a position superior to the debtor in that they have a power to make a lawful sale of the subjects although the debtor by virtue of his bare title only possessed an ability to sell which he could not lawfully exercise. Furthermore the receivers obtain this privilege without the necessity which may affect a liquidator or a trustee in bankruptcy of recording their title and perhaps engaging in a race to do that. All this supports a narrow rather than a generous construction of the terms of the charge.

          Counsel for the respondents submitted that if the appellants were correct the point and purpose of the register would disappear and that property would pass privately without the public act which has so long been a tradition in Scots law. He gave examples of cases where the failure to complete a formal title could be fatal in a competition. Thus in Strachan v. McDougle (1835) 13S 954 an unintimated assignation of a policy of life assurance did not prevail against an arrestment of the proceeds. In Morrison v. Harrison (1876) 3R 406 an assignation of shares intimated and recorded in the company's register after sequestration defeated a claim of the trustee who had failed to complete that statutory formality. In a similar way counsel sought to argue that the recording of the title to the flat was essential to save it from attachment by the floating charge. But the relevance of all of this rests on the critical question of the meaning to be given to the terms of the floating charge. The particular construction of the phrase "property and undertaking" in the floating charge does not in any way affect or erode the ordinary law on the transference of movables or immoveables. The appellants' argument is concerned not with the methods for transferring real rights but with the meaning of the words "property and undertaking" in the particular context of the floating charge. As Lord Macnaghten observed of the question discussed in Heritable Reversionary Co. v. Millar 19R. (H.L.) 43, 53:

"I venture to think that it turns wholly upon the language of the Act, and that a decision in favour of the company would not in the slightest degree trench upon the principles of the feudal law."

          Nor on the appellants' approach are we immediately concerned with the position of the disponees, the first defenders. That aspect of the situation was however developed by counsel for the respondents with a view to showing that the flat was still the property of Albyn. But the cases on which he particularly founded do not provide sufficient support. In Mitchell v. Ferguson (1781) M 10296 it was affirmed that an adjudication which had been followed by infeftment is preferable to a personal disposition. In the somewhat complex history of the case it is not altogether clear that the disposition had been delivered to Ferguson, but even if it had been delivered the case only illustrates one of the risks which may threaten the position of the holder of a personal right. It is not disputed that the interest of the first defenders in the present case could have been defeated by the recording of a title to the subjects by a bona fide purchaser for value without notice or indeed by an adjudication. Bank of Scotland v. Liquidators of Hutchinson Main 1914 S.C. (H.L.) 1 is of less assistance. The debenture in that case fell into the company's liquidation because the company had done nothing beyond obliging themselves to assign it to the bank. In that case the mere obligation to assign was not enough to prevent the debenture from being in bonis of the debtor. But that decision does not bear upon the present case where the contractual obligation on Albyn under the contract had been performed and a disposition had been delivered to the disponees.

          While in terms of a strict legal analysis the holder of an unrecorded disposition still only has a personal right to the lands disponed, he has personally acquired such rights as make it reasonable to use the language of ownership in relation to him even although there has been no alteration to the quality of his right. This has been recognised in a number of cases from Earl of Fife v. Duff (1862) 24D 936; (1863) 4 MacQueen 469 to Gibson v. Hunter Home Designs Ltd. 1976 S.C.23. As was recognised in the former case the legal effect of a disposition delivered but not followed by infeftment vests in the disponee most of the essential attributes of ownership, and the right which he enjoys is usually called a personal fee. I understand the Lord President in Gibson and indeed the judges who have followed his dicta in that case not to be intending to erode the distinction between a jus in re and jus ad rem or a jus crediti but, without analysing in any depth the position of a holder of an unregistered disposition, to be recognising that changes may occur in the substance of the right acquired by a disponee even although the essential quality of his right may remain constant. Counsel for the appellants recognised that by delivery of a disposition the disponer has in feudal terms enabled the disponee to obtain entry with the superior. Under the feudal law, before the various steps became submerged by the act of recording in the Register of Sasines, it would seem that the disponer should be taken to have granted a procuratory of resignation in favorem, or, as it later came to be, a clause of resignation, whereby the former vassal enabled the superior to pass the feu to the next vassal. The disponee was thus able to obtain entry with the superior and establish his feudal title. It may be noted that Craig (Jus Feudale 3.1.6., Vol II p. 891), while he recognises that there may be competing resignations describes the position in contrast with a resignation ad remanentiam, in these terms:

"The feu is, as it were, placed in the superior's hands in trust in much the same way as inheritances and bequests are made the subjects of trust-dispositions; except that the resigner retains no right to the feu, and the superior reserves no right in it to himself."

          But it is more particularly with the position of the disponer that the present case is concerned. It was accepted in this case that Albyn had a bare title to the flat, a real right, but a right which was open to defeat as soon as the disponees recorded their disposition. In feudal terms Albyn was still entered with the superior but it had passed to the appellants the means for obtaining entry for themselves. It was accepted that Albyn could not lawfully do anything with the flat. While it had the title it could convey it to a third party and if the third party acquired it in good faith for value and without notice that third party could obtain a good title if the deed was recorded before that of the original disponees. But such a transaction would be an unlawful or even fraudulent act by Albyn. An adjudger could similarly obtain a good title by recording his adjudication before the holder of the original disposition. But unless there was some valid ground for opposition Albyn would only be a passive party in such a process. That a bona fide purchaser for value without notice may acquire a good title over the head of an earlier disponee who has not recorded his disposition is in accordance with the principle that people are entitled to transact on the faith of the public record. As Lord Watson observed in Heritable Reversionary Co.Ltd. v. Millar 19R. (H.L.) 43, 47:

"It must, however, be kept in view that the validity of a right acquired in such circumstances by a bona fide disponee for value does not rest upon the recognition of any power in the trustee which he can lawfully exercise, because breach of trust duty and wilful fraud can never be in themselves lawful, but upon the well-known principle that a true owner who chooses to conceal his right from the public, and to clothe his trustee with all the indicia of ownership, is thereby barred from challenging rights acquired by innocent third parties for onerous considerations under contracts with his fraudulent trustee."

But, as he went on to point out, creditors are in a different position. He quoted Lord McLaren's observation in the lower court (18R. (H.L.) 1175):

"Creditors in general do not give credit to a bankrupt in reliance upon any supposed presumption that property standing in his name is his private property. Unless they are going to advance money on heritable security they know nothing of his title deeds and trust only to his personal credit."

In the context of the present case where it is a creditor who is involved there is the less reason to hold that everything to which the debtor has a recorded title is necessarily to be regarded as property within his property and undertaking.

          At one stage in his argument counsel for the respondents indicated that the consequences of construing the words "property and undertaking" in the way for which the appellants contended would have serious consequences both for the practical operation of floating charges and for the law of Scotland. But the practical consequences when explored did not appear to involve greater difficulty than is already encountered in the kinds of enquiry which the receiver would require in any event to undertake. Counsel accepted that there were no consequences so far as moveable property was concerned and although concern was expressed in the First Division about the uncertainties in the operation of a floating charge which would follow upon the appellants' success, in the formulation of the argument which was presented before this House it was eventually not strenuously maintained that any serious problems should ensue. It had been suggested that particularly in the context of commercial practice the substance of the "property" must be open to precise and ready definition. On the other hand it does not appear to have been suggested that any particular difficulty had followed from the decision which was reached in Heritable Reversionary Co. Ltd. v. Millar 19R. (H.L.) 43. So far as the ordinary law is concerned, as I have already sought to explain, the approach taken by the appellants in this case does not seek to innovate upon the established principles of Scottish land law or conveyancing.

          In the lower courts some argument was presented to the effect that Albyn might be regarded as holding the flat in some form of trust or constructive trust. Counsel for the appellants did not submit that in the circumstances of this case anything which could be described as a constructive trust had been constituted, although he submitted that circumstances could arise where, following on a conveyance where something came into the hands of the seller which he should be seen as holding for the purchaser, it might be proper to use the terminology of trust. It is sufficient to observe that whatever meaning is to be given to the expression "constructive trust" nothing can be said in the present case to have been delivered to the seller so as to enable the concept of trust to apply.

          In my view the receivers were not entitled to the declarators which they have sought in this action and the appeal should be allowed.