Scottish Court of Session Decisions

In April 1866 a minute of agreement was entered into between George Cowie, coal master in Airdrie, the original pursuer in the action, on the one part, and the Airdrie Mineral Oil Company on the other, “whereby the said first party” agreed “to sell to the said second party the whole produce and output of the seams of fine gas coal and shale contained in the seam known as the Mussellband seam, and which is in connection with the Mussellband ironstone at Rochsolloch, declaring that the said seams of fine gas coal and shale consist of the gas coal lying immediately above the ironstone, and the seam of shale which lies immediately above said gas coal, and is presently being used in the district for the purpose of oil manufacture, but does not include blaize, at the price of 8s. 3d. per ton, and that as the same is output from the said first party's mineral workings, without reference to the respective proportions of each,” and that for the whole period of eleven years from and after Whitsunday 1866. Then followed a provision for an increased price being paid for the said coal in the event of the average price of crude oil rising above eleven pence per gallon. The said seams of gas coal and shale were to be worked out in a certain manner by the said first party, and supplied in certain quantities to the said second parties in their own waggons at the pit mouth, and the said second parties were taken bound to accept delivery and pay monthly for the same, the agreement declaring that in the event “of the price or value of each monthly delivery not being paid to the said first party as hereinafter stipulated, the said first party shall not be bound to continue his delivery of coal or shale until the price or value of such monthly delivery shall have been adjusted and paid, or such consignation or other security for the same, as the arbiter ad interim may appoint.” Then followed a provision against liability of the said first party in the event of strikes among the miners, and for a rise in price consequent upon a rise in miners' wages above 5s. per day. “And further, in the event of the price of the crude oil falling in the Glasgow market to so low a price as, in the opinion of the arbiter hereinafter named, to render the manufacture of the same incapable of being carried on with reasonable profit to the said second parties, it shall be in the power and option of the said second parties to put an end to this agreement, and the whole obligations under the same, from the date when the same shall be declared to be so incapable of being manufactured.” The agreement concluded with a reference of any questions, disputes, or differences arising between the parties in relation to the meaning or intention of these presents, or in the carrying out of the agreement, or of the obligations of the parties under the same, to John Geddes, mining engineer, Edinburgh, &c.

This Mussellband seam, part of the produce of which was thus agreed to be taken by the company from Mr Cowie, is thus described by Archibald Cowie, his son, and one of his trustees. The Mussellband seam lies between the Kiltongue and Virtuewell seams. “It contains 2 inches of maggie (inferior ironstone), 7 inches of mussellband ironstone, 3 inches of gas coal, 10 inches of shale, 5 inches of bonnets (blaize), 3 feet of common blaize, with ironstone ribs.” He farther says in his evidence — “Shortly after commencing to take delivery the defenders found fault with certain portions of the seam of shale. They contended they were only bound to take the portion of the shale next the gas coal. We maintained they were bound to take the whole shale in the Mussellband seam, excepting any impurities in the shale— that is to say, extraneous matter in the shale which is not shale at all. They proposed to reject 6 or 7 inches out of the 10 inches of shale. The dispute was laid before the arbiter at the end of 1866, and there it remained for nearly two years. There was no objection made by the defenders to the stuff we were sending them except that which went to the arbiter. In September 1866 we stopped delivery, as for some months we had not been paid for what we delivered. In fact, we had only received £300 to account in the month of May. After September 1866 I offered no further deliveries, but if they had paid our accounts I would have gone on with delivery. In 1867 the market for crude oil fell very much, and after the decision of the arbiter in 1868 the contract was rescinded by agreement as it could not then be worked to profit, the price of oil being so low.”

The object of the present action, raised by George Cowie, and insisted in by his sons and trustees, the present pursuers, was to obtain damages for non-fulfillment of the contract on the part of the defenders up to the date at which it was rescinded.

The issue which went to the jury was:—

“It being admitted that the said George Cowie, the original pursuer, and the defenders, entered into the agreement No. 6 of process, dated 17th), 18th, and 26th April 1866:

Whether, in or about the month of September 1866, and between that time and the 31st of October 1868, or during any part of that period, the defenders, in breach of the said agreement, failed and refused to accept delivery of, and to pay in terms thereof, for the quantities of coal and shale specified in said agreement, or any part thereof, to the loss, injury, and damage of the pursuers?

Damages laid at £4000.”

And the jury's verdict was as follows:— “Find for the pursuers under the issue, and assess the damages at £550.”

The defenders moved for a new trial, on the ground that the verdict was contrary to evidence, and that the damages were excessive.

Watson, with him R. V. Campbell, for the pursuers, to show cause why the rule granted should not be made absolute, argued— The defenders refused to take and pay for a material portion of the shale which they were bound to take. They never were ready to take the whole shale in the Mussellband seam. Our contention is that the real breach of the contract was by them on that point. They were never ready to take the whole; they constantly rejected much that was offered them, and they never made payment, except to the extent of a small sum to account. The defenders attempt to make out that there was a breach of contract on the pursuer's part, in that he was delivering them bonnets and blaize proper as well as shale, and that he was making an advance on the price of shale beyond what he was entitled to make. The correspondence and evidence both show that this was not the case, and that the contract was not broken off on this ground at all. There may have been a little bonnets, as it is impossible entirely to separate them, but the pursuer was ready to allow for them, and he was quite

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willing that the price should be adjusted in terms of the agreement. The jury came to a right conclusion when they found that the defenders alone were guilty of the breach of the contract.

Shand and Campbell Smith, for the defenders, argued—That the fact was not that the company were refusing to take delivery, but, on the other hand, that they were demanding it, and Mr Cowie refusing to give it. That his excuse about non-payment was clearly not a good one. He had rendered no account for months previously, then, while the parties were before the arbiter upon a point intimately concerning the working of the contract, he suddenly renders his account, and eight days after sends his notice that he was going to stop delivery. It was at that time of the utmost advantage to Mr Cowie not to continue delivery, but rather, if possible, to get the company to refuse to accept than himself to refuse to give delivery. There was pending a question before the arbiter; he was in doubt which way it might be decided, and he knew that if it went against him, and he continued delivery, he might be found liable in very serious damages. But farther, independently of the question which was before the arbiter, Mr Cowie was, as proved by the evidence, actually delivering to them to a large extent material which they were not bound to take even if the arbiter's decision went against them. They were therefore justified in the step they took, and the breach of the contract was on the part of the pursuer.

The correspondence which passed between the parties during the months June to September 1866, was of much importance in determining the question as to whether a new trial should be allowed. The following are the terms:—“23 d June 1866.—George Cowie, Esq.—Dear Sir,— As our yield of oil has been so very much less than what the company were led to expect, and than what is obtained by other parties working the same seam in the district, I made, at the request of the directors, an inspection of the workings in No. 2 pit, and found that, instead of the gas coal and shale, your men are sending up everything for seven inches or thereby above what is being worked throughout the district, and in many instances everything up to the white brushing. I reported this to the directors, and am instructed by them to call your attention to it, as they cannot believe you can be cognisant of such a departure from the terms of the contract, and to request that you will take the proper steps to have it at once rectified. — I am, dear sir, yours respectfully, for the Airdrie Mineral Oil Co. (Limited), James C. Adamson, Manager.” To this Mr Cowie replied on 23d June— “I regret to learn from yours of to-day that the yield you are obtaining is less than you expected from the coal and shale. However, you are aware that nothing ever passed between us about the yield. You satisfied yourselves about the quality before, I think, I had the pleasure of meeting you at all. With regard to the thickness of the shale put out, you are aware I never would consent to allow any number of inches to be specified as the quantity to be put out, and it was on that account stated in our agreement irrespective of thickness, and I assert that I am supplying you with the same gas-coal shale as wrought in the district. I admit that pieces of brushing may be found in the shale, but this is impossible, even with any amount of care, to avoid, but should be of trifling importance on the result of the yield. But what your manager considers blaize or brushing and complains of to me is a portion of the seam of shale which it is your bargain to take.” On 2d July the company's manager wrote—“In answer to yours of the 23d ult., I am directed to say that the statements made by you are by no means corroborated by Messrs Russell & Stewart, and the other parties who met you when negotiating the contract. They are quite clear it was only the fine gas coal and seam of shale lying immediately above it that was to be supplied at 8s. 3d. per ton, and as nothing else is wrought in the district for the manufacture of oil, the directors moreover consider the contract by which both they and you are bound to be sufficiently distinct on this point. Should you continue to dispute this, the question must immediately be settled by a reference to the arbiter. I have accordingly received instructions, if you still adhere to the views stated in your letter, to take the requisite steps to have this done, and, at the same time to intimate that the company hold you liable for all loss and damage they may sustain through your delivering to them material clearly excluded by the terms of the contract.” Mr Cowie replied on 5th July—“I have been making inquiry into the complaints you have made, and find that in the neighbourhood some parties put out the full thickness of the seam of shale, while a number of others put out more or less of it. Your bargain with me is to take the full thickness of the seam, and which you have been getting only to a limit extent since Saturday last. I am quite willing to have the arbiter's opinion taken, or will meet with Messrs Russell & Stewart, and see if some understanding can be come to, and allow matters to run more smoothly.” Again, on 12th July, the company's manager wrote—“I duly received your letter of 5th instant, which I have communicated to the directors; and I am instructed in reply to remind you that your contract is simply for the fine gas coal and shale as generally wrought in the district, and that with the blaize or upper portion of the shale-bed you have been sending out they have nothing whatever to do. They therefore consider that no time should be lost in taking the opinion of the arbiter, and that, in the meantime, any meeting with you can lead to no satisfactory result.” And Mr Cowie replied —“I have your letter of this date, and have only to say what I mentioned in my letter of the 5th instant—viz., that I am only delivering to you what is your bargain to take, and since you consider differently, you can call in the arbiter to determine who is right. Indeed this should have been done long ago, as I have always told you what I considered was our agreement.” The parties accordingly at once went before the arbiter on the point of dispute between them. When his award was obtained, which was not till 1868, it was to the following effect:— “I find that there is no limitation in the contract between the parties to any specific thickness or portion of shale, and no reference whatever to the blueball referred to in the proof, and that the contract includes the entire seam of shale from the gas coal up to but exclusive of the blaes or blaize, or, as it is locally termed, the bonnets, which I find is the natural parting of the shale and blaize: And I find that the words presently used in the district for the purpose of ‘oil manufacture’ are merely a farther specification of the seam of shale bargained for, lying between the gas coal and the blaize, and to distinguish it from all other

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seams of shale which may be found or known to be in connection with any other coal and ironstone, and more clearly to restrict the shale with which the parties were dealing to the seam of shale lying immediately between the mussellband ironstone and the blaize in the said first party's mineral field and workings.” On 31st August 1866 Mr Cowie wrote requiring payment of the account which he rendered. The company refused or delayed payment, alleging some objections to the prices charged, and Mr Cowie, a little later, about the 15th September, refused any farther deliveries. From that date no more shale was delivered. It was not till after he raised an action against the company that Mr Cowie got payment for what had been delivered, and after the arbiter's award he raised this action to obtain damages for his loss in consequence of the defenders' breach of the contract. There was evidence of workmen led, but on the whole it was conflicting as to the nature of the output, and of the material actually delivered to the defenders.

At advising—