Scottish Court of Session Decisions

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Cite as: [1871] ScotLR 8_446, [1871] SLR 8_446

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SCOTTISH_SLR_Court_of_Session

Page: 446↓

Court of Session Inner House Second Division.

Friday, March 18. 1871.

8 SLR 446

Special Case—Fleeming

v.

Baird

Subject_1Lease
Subject_2Minerals
Subject_3Sterility
Subject_4Break.
Facts:

The minerals in certain lands were let under a lease which entitled the lessees to work the minerals for two years on trial, and thereafter, if they decided upon proceeding with the workings, the rent for the minerals was specified, and the lease was to endure for thirty years, with breaks in favour of the tenant every five years. The trial period was extended till four years, and thereafter the tenants possessed the lands and continued working the minerals until a period after the date of the first break in their favour, when they renunciated the lease on the ground that the minerals were not workable to profit.— Held that, notwithstanding the failure
Page: 447↓
of the minerals, the lease endured until the specified break in favour of the tenant.

Headnote:

This Special Case was presented by the Hon. Cornwallis Fleeming, of Biggar and Cumbernauld, on the one part, and Messrs Baird & Co., of Gartsherrie ironworks, on the other. The following were the circumstances out of which the case arose:—

“On 26th January 1859 conditions of lease were entered into between George Dunlop, as commissioner for John Fleeming, Esq., of Biggar and Cumbernauld, afterwards fourteenth Lord Elphinstone, and William Baird, James Baird, and George Baird, in trust for William Baird & Co., of the ironstone and iron ore of every description in certain portions of the Cumbernauld estate, known by the general name of Duntiblae. The lease, if ironstone was found, was to endure for thirty years from Whitsunday 1859, with breaks in favour of the tenants at the expiry of every five years, reckoning from the first term of Whitsunday after a proper winning of the ironstone should have been made, and they had fairly tried to work the ironstone. By the conditions of lease the tenants were, inter alia, bound, at their sole expense, to search, by boring or otherwise, for workable ironstone, in which they should expend not less than £300; and the result, whether workable ironstone was thereby proved, should be decided by the tenants at the end of two years from Whitsunday 1859, and royalties were to be paid on any ironstone that might have been found and worked during said trial period, but no fixed rent. If the trials turned out satisfactory, the tenants were bound immediately to proceed to win the ironstone in manner pointed out in the conditions of lease; and for the three years ending respectively Whitsunday 1862, Whitsunday 1863, and Whitsunday 1864, to pay a yearly fixed rent of £250, and thereafter a yearly fixed rent of £500, beginning the first payment at Martinmas 1861 for the half-year preceding; or, in the proprietor's option, the lordships therein mentioned. John fourteenth Lord Elphinstone died on 13th January 1861. Upon 26th March 1861 the rents, issues, and profits of the lands and estates of Wigtoun, Biggar, and Cumbernauld, situated in the counties of Lanark, Dumbarton, &c., falling due from and after the 13th day of January 1861, being the date of the death of John fourteenth Lord Elphinstone, were sequestrated by this Court, and William Moncreiff, Esq., accountant in Edinburgh, was appointed judicial factor thereon; and he immediately thereafter entered upon the duties of his office. On 8th May 1861 the tenants wrote to Mr Moncreiff, C.A., who had been appointed judicial factor on the estates of the late Lord Elphinstone, that they had bored the field very extensively, but without any satisfactory result; that they had found no workable ironstone, and that the bores had proved the position of the ironstone to be much deeper than expected and overlaid by whinstone of great thickness, so that it was greatly more expensive to prove and win; and that one very deep bore, then in progress, would not be got finished before Whitsunday 1861, the expiry of the trial period. And they stated that they were willing, provided the terms of the lease were a little altered, to complete this bore, and to explore the field still further; and with that view they proposed—(1) That the trial period should be extended for two years, the fixed rents remaining the same in respective amounts—that is, that there should be three years at £250 from entering upon the lease, but postponed as above proposed; and (2) That the lordship on calcined blackband ironstone should be reduced from two shillings to one shilling and sixpence. A report on the trials made by the tenants was, at the request of Mr Moncreiff, made by Mr John Geddes, mining engineer, Edinburgh, who recommended the terms proposed by the tenants to be accepted. Thereafter Mr Moncreiff applied to the Court for, and obtained special powers to enter into a lease, containing modifications on said conditions, in the terms of a draft lease, which had been prepared by him and approved of by Mr Geddes, and had also been revised and approved of on the part of the said trustees of William Baird & Co., and was produced with his application.

A formal tack, in the terms of the draft so adjusted, was afterwards executed between Mr Moncrieff, as judicial factor, on the one part, and the Messrs Baird on the other, of all and whole the ironstone of every kind, and all ores of ironstone of every description, under and within all and whole the lands, portions of Cumbernauld estate, of which the property or dominium utile belonged to the said deceased Lord Elphinstone. The sequestration and judicial factory were recalled over certain portions of the Cumbernauld estate in March 1869, and Mr Cornwallis Fleeming has completed his title thereto, and is now in right and possession thereof, with right to the minerals in question, and to enforce the conditions and stipulations of the said lease. In the course of their possession during the four years allowed for trial, and under the lease, the tenants made eight bores into the mineral field. They afterwards sunk two deep pits, and from the former of these pits, in terms of a clause in the lease allowing this to be done, they extended their workings into the mineral field forming the subject of the lease, and wrought a portion of the iron ores in the lands of Duntiblae comprehended in the lease. These workings continued until the middle of April 1869. On the 16th of that month the tenants intimated to the landlord that he was at liberty to enter on possession of the whole subjects, and that they were prepared to execute a renunciation in any form he might wish. On the 14th May 1869 the tenants intimated that they had removed from possession of the mineral field. The tenants have expended large sums in the sinking of the bores, and in working the pits above mentioned. The ironstone which they have obtained in the lands comprehended in the lease has been of comparatively trifling amount. The ironstone has not yielded, and it does not appear that, if further wrought, it would yield sufficient to pay the expenses of working. Mr Fleeming and his administrator-at-law are satisfied that the borings and workings have sufficiently ascertained the character of the ironstone, and they do not desire any further borings or workings to be made.

The tenants, without waiting to take advantage of the break in their favour at Whitsunday 1837, having refused to pay the fixed rent due by the lease at Martinmas 1869, or any subsequent rent, the following questions were laid before the Court:—

Whether the tenants are bound to make payment of the fixed rents falling due under said tack, as at Martinmas 1869 and subsequent terms?

or,

Whether the tenants were or are entitled to refuse payment of rent from and after the term of Whitsunday 1869?”

Page: 448↓

Pattison and Asher quoted Gowans v. Christie, 8th Feb. 1871, Scot. Law Rep. viii, 371.

Solicitor-General ( Clark) and Watson, for the second parties, relied on Ersk. 2, 6, 41; Wilson, M. 10,125; Shaw, 7 Shaw, 404.

At advising—

Judgment:

Lord Justice-Clerk—The claim which is made by the Messrs Baird, the tenants under the lease founded on in this case, is that they shall be liberated from all future rents, and that in respect of the sterility of the subject let. It is maintained for the landlord that that doctrine of sterility does not apply to a mineral lease, but that, at all events, under the authority of the case of Gowans v. Christie, decided very recently in the First Division, the stipulations of this particular lease exclude any claim of that kind. We had the case very ably argued to us, and I must fairly own that I was greatly impressed with the argument on the part of the tenant. But I have come to a very clear opinion that the case of Gowans v. Christie must rule the present case, and consequently, that judgment must go for the landlord. On the general question as was expressed by the Judges in the case of Gowans v. Christie, I think there is great difficulty in principle in applying strictly the rules of an ordinary agricultural lease to a contract of this kind, because, excepting in an imperfect and inaccurate sense, a mineral lease is not a contract of location. In so far as relates to the minerals taken, it is truly more of the nature of a contract of sale, for the property passes, and as regards the minerals not taken, even the use of them is not transferred or enjoyed. The subject of the contract has no fruits, and any benefit which the tenant takes, if tenant he is to be called, is a benefit derived from the property, and not from the use of the minerals which he takes. In that view the doctrine of sterility is inapplicable, for sterility imports a failure to yield or produce expected fruits, that failure being caused by unanticipated causes. But a contract which does not relate to fruits, but to stock or to substance, can plainly not be affected, at least except by analogy, by a principle of that kind; and the true nature of a mineral lease seems to me rather to be a grant of a temporary privilege,—a privilege, during a period, of removing and appropriating so much of the substance of the minerals within a certain area as the grantee may be able or may choose to excavate, and that for a consideration or price calculated according either to the duration of the privilege or the amount appropriated. That seems to be a definition of the right transferred by what is called a mineral lease, and in this view the subject of the lease is not the minerals which are taken which are truly sold, nor the unworked mineral field, but the incorporeal privilege; and in that view, no doubt, it may be said that the fruit or profits of the privilege fails when the minerals are exhausted; but it is manifest that it is only the application of similar or analogous principles of equity to such a contract which can take place in the view that has been suggested. But then, even in that view, it is not sterility in the proper sense which is pleaded here; for the substance which was to be the source of the profit of the tenant remains exactly the same as it was when the lease was entered into. The case of Duff v. Fleming was quoted as being a case where the tenant got relief because the subject had perished. But the subject here is exactly what it was. It has not perished. Doubtless if the mine had been flooded or had been swallowed up by an earthquake— res perit domino, and the subject of the contract is gone. But in this case it is not that the subject of the contract is gone, for nothing has been changed in that respect. It is that the expected profit has not been yielded. I think these views are material when we come to consider the nature of the contract which we have before us, in which the parties most carefully provide for every contingency that they thought it necessary to provide for. And this is even a stronger case than the case of Gowans in that respect. In the first place, it is a most elaborate and well considered document between persons very well able to look after their own interests, and very well understanding what it was. They first take four years of trial before the lease is entered into, under conditions, and then at the end of four years of trial they entered into the regular lease in 1863, and they provide that for the first five years there shall be only half rent paid, viz., £250, and then after that that the rent shall be raised to £500; but with this provision, that at every period of five years from 1863 the tenant shall be at liberty to stop the currency of this lease. Now, certainly it is very difficult to say, as the Solicitor-General argued with great ability, that with all these provisions, and with a lease which has lasted from 1859 till now, there never was anything to be the subject of a contract at all. I think it is impossible to hold this. The cases that were quoted were truly cases of that nature where there was no coal to work, and where the whole field had failed. But in this case, although there may never have been profitable working, there has at least been enough of substance in the contract itself to induce the tenants to go on for ten years. Now, the conclusion that J, have arrived at is the same as that which the Lord Justice-General arrived at in the case of Gowans. I think that these breaks at the distance of five years which were given to the tenant, without assigning any reason, were intended to cover all the risk which he undertook. I cannot read the contract in any other sense, and I think there is a general principle that when parties reduce their obligations to writing in the careful manner which has been followed here, you are not to import common law principles, except in very clear and very specific cases. In this case the common law principle may be doubtful enough, but I am satisfied that whatever it was, it was excluded and provided against by the provision in regard to breaks. And therefore, on the whole matter, I think judgment must be for the landlord.

Lord Cowan—This is a very interesting case in one aspect of it, but I take “the same view of the principle on which the question must be decided that your Lordship has explained. I think it is pre-eminently a case of contract, and that it must be ruled by what we shall hold to have been the intention of the parties in reference to this matter. Now the remarkable thing in this case, which seems to me to make it a stronger case than that of Gowans, is this, that by the conditions of the lease, which it is impossible to leave out of view, looking at the case as one of contract, we have it expressly stipulated that trials shall be made by the tenants; and then it is said, “and the result whether workable ironstone be thereby proved shall be decided by the tenants at the end of two years.” And that was extended to four

Page: 449↓

years, “from Whitsunday 1859.” And after having made up their minds, on a trial of four years, as to whether there was workable ironstone or not, the lease was to be entered into; and, accordingly, at the close of that time this lease was expressly entered into; and we must hold that the tenants had found from their experience of working that there was workable ironstone which made it safe for them to enter into the contract. Then, when we come to the lease, there is no clause whatever providing against the possible non-workability of the ironstone, and I am not surprised at that, considering the careful way in which the parties had arranged this pre-eminently risky contract before they entered into it. There is no such clause, but there is a clause providing for the safety of the tenants in the event of their finding it an unprofitable speculation or bargain into which they had entered, viz., the clause by which at the end of every five years they were to be entitled to abandon the lease. I think the parties, therefore, ex contractu, have fixed their own relative legal position, and that we must come to the determination which your Lordship has announced. We have nothing to do here with a question of sterility. But viewing the question simply as a question whether there was workable ironstone, that is the only case presented to us for judgment, and to that case it seems to me that the parties applied their minds when they entered into this contract. I do not say that absolute sterility from the very outset, even in a mineral lease, may not be a good defence, but we are not called to determine that in this case. At the same time, I may make this observation, with great deference to the Solicitor-General, acute and interesting as his argument was, that I cannot agree with him. His argument was that there was never any subject of contract, and consequently that there was never any contract; and we had Pothier quoted to tell us what we know in our own authorities as well, that there must be a subject in order that there may be a lease, and that one of the indispensable conditions of a contract is a subject. That is quite true, but how can we say that there was here no subject, when the parties covenanted in the way I have mentioned, the simple question being whether the ironstone was workable. There is ironstone there, and there may be future inventions and modes of working this mine which may make it a productive mine, or there may be such an enormous rise in the price of ironstone as to make it even in its present state not an unprofitable thing for the tenants to work. But I cannot entertain the view that there is here no subject.

Lord Benholme—My opinion is the same as that which has been expressed by your Lordship and by Lord Cowan. I cannot adopt the Solicitor-General's argument that there never was a subject here at all. If that had been the case we would have been in a totally different category. But it is in vain to say that there was no subject. There is ironstone to be found here, and that was ascertained. It is one thing to say that there is no subject, and it is a totally different thing to say that by the common law a certain amount of sterility or non-workability will enable a party to get rid of the contract. As to the amount of sterility which will entitle the party to relief at common law, I don't think we are bound to consider that. Even supposing that the common law did give relief whenever the subject would not pay expenses, still the question occurs here which was settled in the case of Gowans—where the parties have dealt with and apparently provided for the risks that are always involved in such a lease as this, can they invoke the common law in addition to those remedies which they have contracted for? Upon that question I think the case of Gowans is a binding authority; and even if the point was not settled by that precedent, I should be inclined to concur in the very able judgment of the head of the Court in that case.

Lord Neaves—There is no doubt that the questions argued here have been of very considerable interest, and of some delicacy, but I have arrived at the same opinion as your Lordships. I rather understood the Solicitor-General's argument, as to sterility, to be—that there was no contract from whatever point the sterility or non-workability developed itself; but the whole of this matter about sterility is one which is attended with very considerable difficulty. The true category is, that the contract either cannot exist because there is no subject, or that the lease which is well entered into when there is a subject, is brought to an end rei interitu. The question of sterility even in agricultural leases is by no means free from difficulty. When a subject becomes flooded or sanded over, and is thereby made quite different from what it formerly was, a great deal might be said, but I have some doubts in my own mind whether in agricultural leases the repeal of the corn laws would have entitled a tenant to abandon his lease on that ground. I have also considerable doubt whether every year is to be taken by itself in a continuing lease. Supposing an Egyptian in the time of Joseph had had a fourteen years' lease of land, and had got his first seven years of plenty with his barns crowded, and the years of scarcity had followed, I think it would be very hard on the landlord that the tenant should get his full measure of the harvest during the first seven years, and then pay no rent at all for the next seven. But we are quite out of that consideration here, because this is not a case of fruits. It is a case of the gradual appropriation of the subject to which the contract relates. If it were proved that there was now no subject, and that there never had been any; if it were ascertained that not a particle of ironstone is left in the subject, or that it had become inundated by the sea, so as to be inaccessible,—I do not say what would happen then, because that would be rei interitus. But when it just comes to this, that the profit sinks a little below zero, and that for that reason the contract is to be thrown up, I think that is quite inappropriate to a subject of this kind. A fall in the price of ironstone might produce that derangement, which must be one of the risks that the parties run. Upon these grounds, I think we must come to this result, that the case of Gowans is undistinguishable from the present. The law there laid down seems to be this,—that after full opportunity to consider and calculate all the chances, unless some absolute destruction of the thing occurs, it is in vain to ask any remedy except that which has been provided for here by a five years' break. It is in vain for the party to attempt to get rid of the lease on the ground that the prices have fallen or that wages have risen, and that he must get rid of what he formerly worked with profit to himself because the expense of working is now a little greater than the profit.

Solicitors: Agents for Pursuer— T. & R. B. Ranken, W.S.

Agent for Defender— James Webster, S.S.C.

1871