Scottish Court of Session Decisions

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URL: http://www.bailii.org/scot/cases/ScotCS/1866/01SLR0182.html
Cite as: [1866] ScotLR 1_182, [1866] SLR 1_182

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SCOTTISH_SLR_Court_of_Session

Page: 182↓

Court of Session Inner House First Division.

1 SLR 182

M'Ewan

v.

Middleton.

Subject_1Obligation
Subject_2Clause
Subject_3Option
Subject_4Waiver.
Facts:

Circumstances in which held (aff. Lord Jerviswoode) that a party who had under an obligation an option which he might exercise “upon the dissolution” of a company of which he was a partner, had failed timeously to exercise it.

Headnote:

This is an action for payment of a sum of £760 arising out of the following circumstances:—The defender, Lewis Stirling Middleton, a calenderer in Glasgow, purchased in 1859 certain heritable subjects in Miller Street, Glasgow, at the price of £18,000, with the view of occupying them for the purposes of his trade. He thereafter entered into a contract of copartnery with the pursuer, J. T. H. M'Ewan, and on the same day let a portion of the subjects to himself and the pursuer, as trustees for the company. At the date of the purchase of the subjects they were considerably burdened with debt, and one of the bonds having been called up, another loan was obtained, for which the firm and the pursuer personally became bound, and in consideration thereof the defender granted an obligation to the pursuer, dated 13th September 1859, in which he bound and obliged himself that, in the event of the pursuer exercising an option to that effect, and requiring him “ at any time within five years from the date hereof, or upon the dissolution of our said copartnership within the said period,” and for payment as therein expressed, to dispone and convey the subjects to and in favour of himself and the pursuer equally betwixt them pro indiviso. Under the contract of copartnery it was provided that in case of the death or insolvency of either of the parties during the currency thereof, the whole trade, stock, and estate should in his option fall to, and devolve upon, the surviving and solvent partner, and provision was also made, in case of difference or dispute arising, for a reference to arbiters. At Whitsunday 1862 the interest of the bonds over the property was unpaid, and the pursuer having had recourse to arbitration, the arbiter found that in the sense of the contract of copartnery the defender was insolvent, and also found that in respect the pursuer elected to take over the estate of the company, the whole trade, stock, and estate of the company had fallen and devolved upon him. The decree-arbitral was issued on 11th December 1862, and shortly thereafter the pursuer advertised the award in the newspapers, and also that the defender had ceased to have any interest in the firm, and that the whole business, assets, &c., now belonged to him. Some time after this the defender dealt with the heritable subjects as his own, and sold them for £1500 more than he had paid for them. This having come to the pursuer's knowledge, he, on the 2d March 1863, intimated to the defender that “I exercise the option under your deed of obligation to me dated 13th September 1859,” and he now claims to participate in the benefit of the advantageous sale of the subjects. This claim the defender resists on the ground that he was entitled to deal with the property as his own, the pursuer not having timeously exercised the option provided for in the obligation. The dissolution was advertised by the pursuer on 18th December 1862, and he did not declare his option till 2d March 1863. The Lord Ordinary (Jerviswoode) gave effect to this plea and assoilzied the defender. The pursuer having reclaimed the Court to-day adhered.

Judgment:

The Lord President said—The circumstances of this case are peculiar, and it has been argued to us with great clearness and perspicuity. The question is, Whether the pursuer duly and timeously exercised the option which he had? It appears to me that he did not. It is very clear that the option was to be exercised at the end of five years, or upon a dissolution taking place, if it took place before the expiry of that period. In that event the dissolution was the punctum temporis. I don't say that the option had to be declared on the very day of the dissolution, but there was not to be unreasonable delay. The pursuer himself advertised the dissolution on 18th December 1862, and he did not exercise his option till 2d March 1863. That is a very long time. It is maintained by the pursuer that the defender on 22d January 1863 called upon him too hurriedly to exercise his option. I cannot accept this as a sufficient excuse in the circumstances of this case. In the arbitration preceding the dissolution, the value of these heritable subjects was discussed. The matter was not submitted to the arbiter, but the parties did discuss it before him, although he had no power to deal with it. The pursuer in these arbitration proceedings bad said that the value of the heritable subjects was such that he never would exercise his option. I do not say this statement in another proceeding is conclusive against the pursuer in this case; but it shows that the pursuer had been, before he advertised the dissolution, considering the matter. When the dissolution took place, the matter was not new to the pursuer. In particular, when the arbiter, on 18th October 1862, issued notes of his opinion that a dissolution had taken place, the pursuer's attention was or ought to have been directed to the subject. Then, on 11th December 1862, the arbiter pronounced his final decision. It was therefore unreasonable to hold that the pursuer had down to 2d March to declare his option. On 22d January 1863, the defender's agents wrote to the pursuer—“Mr Middleton has assumed that, in accordance with his previously expressed resolution, Mr M'Ewan waived the exercise of any right he might have to demand a conveyance to the property in terms of the deed of obligation. We shall take it for granted if we do not hear from you in the course of to-morrow that in this Mr Middleton has not misunderstood Mr M'Ewan. On the footing that Mr M'Ewan has waived the right referred to; Mr Middleton has been endeavouring to make arrangements with the view of preventing loss upon the property.” I think that was quite a reasonable letter. All the defender wanted to know was whether or not he had misunderstood the pursuer. That question might have been easily answered; but the pursuer takes five days to answer the letter, and then all he says is that he has been so busy with one thing and another that he has been unable to look into the matter, and that he will take his own time. All this takes place when the subjects are supposed to be of such value as not to induce the pursuer to exercise his option. I think it was not incumbent on the defender to call on the pursuer a second time. The letter of 22d January told him that in the event of not hearing to the contrary next day, the defender would assume that the option was not to be exercised; and on 28th January the defender's agents again write the pursuer that he is not now entitled to exercise the option, and that “it was with the view of preventing misunderstanding that the previous letter was written.” When the pursuer received this letter stating that the defender held him excluded, he was bound at once to do something. But it is not until 2d March, when a large price is obtained for the subjects, and it becomes desirable for him to do so, that the pursuer declares his option. The obtaining of this large price was quite fortuitous, for the pursuer himself states on record that he exercised his option “in consequence of a party having a special object in view unexpectedly offering a high price for the subjects.” What he now demands is a share of the surplus price, and not a conveyance of one-half of the subjects, in terms of the obligation. I think therefore that, in the whole

Page: 183↓

circumstances the pursuer has not timeously exercised his option.

Lord Curriehill concurred. He was of opinion that the defender had acted throughout with great fairness and liberality. He thought that after 23d January the option was at an end, but was very clear that after 28th January it was. His Lordship also expressed doubt as to whether even on 2d March the option had been validly exercised. Under the obligation he was, on declaring his option, to pay money, whereas when he did so he asked some.

Lord Deas, in concurring, had no doubt that their Lordships had taken the equitable view of the case, but he had a little difficulty as to the law. The letter of 22d January was written on the footing that the pursuer was entitled to some notice from the defender before he lost his option. If so, he was entitled to a reasonable time. Then on 28th January, instead of giving the pursuer a week or some such period, the defender's agents write that they hold the option at an end. If they had given him a reasonable time, their position would have been unassailable. These difficulties, however, did not justify his Lordship in arriving at an opposite conclusion.

Lord Ardmillan concurred with the Lord President.

Counsel:

Counsel for Pursuer— Mr Fraser and Mr MacLean. Agent— Mr John Ross, S.S.C.

Counsel for Defender— Mr Clark and Mr Asher. Agents— Messrs Maconochie & Hare, W.S.
1866