Scottish Court of Session Decisions

The pursuer of this action in March 1872 became tenant of a shop in Leith, which was at that time the property of John Cameron. The agreement, which was by missive of lease ex facie regular, was that the lease was to be for one year, and that at the end of that time the pursuer was to have the option of purchasing the subject at a valuation to be fixed by arbiters mutually chosen. In May 1872 the defender Lawson bought the subject from Cameron, and at the end of the year the pursuer raised an action against Cameron and Lawson for implement of the agreement. Cameron did not appear to defend the action, and decree in absence was given against him. Lawson, though denying his liability, expressed his willingness to concur with the pursuer in appointing valuators—and this was done—but the valuators failed to agree. Lawson alleged that the missive of lease founded on was neither holograph nor properly tested, and had been vitiated, and in the course of the action this was admitted by the pursuer, who insisted in the action on the ground that the informal missive had been validated by rei interventus.

The Lord Ordinary ( Gifford) pronounced the following interlocutor:—

“ Edinburgh, 30 th December 1873.— The Lord Ordinary having heard parties' procurators, and having considered the closed record, writs produced, and whole process, Finds that the agreement of sale entered into between the pursuer and the defender Cameron, dated 15th March 1872, is binding both on the defender Cameron and on the defender Lawson, and in respect that the parties have failed to ascertain the price by valuators mutually chosen, remits to Adam Beattie, Esquire, builder in Edinburgh, to examine the shop in question, No. 2 George Street, Leith, giving the parties or their agents an opportunity of meeting with him, and thereafter to report the fair price or valuation of the said shop as upon a sale by the defenders to the pursuer under the agreement above mentioned: Finds the defender Lawson liable in the expenses hitherto incurred, and remits the account thereof, when lodged, to the Auditor of Court to tax the same, and to report.

Note.—The present action is brought in very peculiar circumstances, and gives rise to questions of considerable nicety. The pursuer's averment is that he took from the defender Cameron a lease of the shop 2 George Street, Leith, for one year to Whitsunday 1873, and that it was part of the bargain that the pursuer should be entitled to purchase the shop at any time before 15th March 1873, at a valuation to be made by valuators mutually chosen by the parties.

The written agreement of lease, containing this bargain of sale, is No. 11 of process, and although it is subject to several objections, the Lord Ordinary assumes in the meantime that it is binding. It seems to have been followed by possession, which possibly might be held rei interventus both as to the lease and as to the agreement of sale. The pursuer avers that he made improvements on the faith of his purchase.

On 17th October 1872 the pursuer raised an action against Cameron to enforce the agreement of sale, having previously intimated his election to purchase. By that time, however, it seems Cameron had sold the shop to the other defender Lawson, who took infeftment on 18th May 1872, and a dispute arose whether Lawson was bound by the agreement to sell which his author Cameron had made. This dispute was compromised by Lawson concurring in appointing valuators, the pursuer naming Mr Brown, and Cameron and Lawson naming Mr Goalen, to fix the price. There was some correspondence about entering into a new agreement and minute of reference, but the defender Lawson, the purchaser, refused to do this, granting, however, on 1st November 1872, a letter (No. 18 of process), in which he says,—‘I have already informed you, as also your clients, on their call here, that I would implement the decision of the parties mutually chosen, and you have it now in writing that I will so implement it.’

It appears that the valuators mutually chosen, Messrs Goalen and Brown, have been unable to agree on the valuation of the shop, and the result is the present action, to have the defender Cameron ordained to concur in appointing a new valuator, or otherwise to have a valuator named by the Court, and thereupon to enforce a conveyance by both defenders to the pursuer on payment of the price.

The defender Cameron has not appeared, and although decree in absence has been pronounced against him in terms of the conclusions of the summons, he has failed to concur in appointing a valuator. The other defender, Lawson, has lodged defences, and keenly contested the case, and it is with him alone that the litigation has taken place. He refuses to concur in naming a valuator, and maintains that he is no way bound either to do so or to convey the shop. He maintains a variety of pleas, chiefly, however, of a technical character.

The Lord Ordinary is of opinion that the pursuer is entitled to have a valuator named by the Court to ascertain and fix the price of the subjects.

When parties enter into an agreement of sale at a price to be fixed by valuators mutually chosen, it will not annul or void the contract although the arbiters should differ in opinion, or although one of the parties should either refuse to appoint an original valuator, or should refuse to appoint a new valuator in the event of the first valuators differing in opinion or failing to make any report by reason of death or otherwise. In such a contract of sale the reference to, and the decision by, valuators is not the main contract, but merely incidental thereto, and the contract of sale will be binding though the valuators originally named should fail to fix the price. If the parties cannot agree in naming new valuators the Court must intervene, otherwise the contract of sale itself would be inextricable. The reference to valuators in such a case is not a reference of a dispute which has arisen, or even of a dispute which is expected to arise. It is the mode chosen by the parties for liquidating the price, and it will be enforced like any other agreement which is a necessary part of a contract. The question does not seem to have arisen frequently, at least there are not many reported cases, but the principle has

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been often recognised. Thus, in Smith v. Duff, 28th February 1843, 5 D. 749, where a landlord was entitled to resume land on compensation to be ‘fixed by men to be mutually chosen for that purpose,’ it was held that the parties were bound to refer, and that the contract was not voided by an abortive award which was reduced. In this case will be found a pretty full reference to authorities, and the decision is the more valuable as some of the earlier cases appear adverse thereto. Lord Cockburn in his note says he enforces the obligation ‘because he thinks that the enforcement of such obligations, even where the arbiters are not named, aud the dispute has not yet arisen, rests upon far sounder principles of common sense than defeating them does.’ Lord Mackenzie, with whom the other Judges concur, distinguishes the case of a reference of disputes from the case ‘where no difference has arisen, or is contemplated as likely to arise, but where neither the one party nor the other knows the value of a particular subject, and where it is necessary that they shall have a valuation.’ He observes A reference in such cases made beforehand, in order to make a bargain, differs from either of the other two classes of cases. It takes place in sales. A sale may be made by a reference of the price to one of the parties. The Roman Law held that to be a good sale, and I don't think it illegal; but suppose it is agreed that two persons shall be named to fix the value of the article agreed to be sold, I don't see why it should not be good in order that the bargain may be carried through.’

‘It is quite common in the Sheriff-Court to enforce agreements to take over stock, or cropping, or machinery, or improvements, at a valuation, and if the parties won't concur in naming valuators, or if the valuators differ, the Sheriff appoints a valuator.’ See an instance of this in the Supreme Court, Monro, 18 Dec. 1823, 2 Shaw, 508. See the old case of Wallace, 20 July 1715, 5 Brown's Supplement, 7.

The cases of mineral leases, in which there frequently occurs a provision that if two referees mutually named shall find that the minerals are not workable to profit, the lease shall came to an end—may be referred to. One of the latest of these is Merry Cunningham v. Brown, 7th June 1860, 22 D. 1148. Here it was held by the whole Court that although the parties were bound to name referees under such a clause, they were not bound to execute a submission containing a devolution to an oversman. This case did not determine what the remedy of the tenant would be if the referees differed in opinion; but all the Judges indicated an opinion that there would be a remedy by inquiry in some form. Such reference clauses, however, in mineral leases differ from the present case; the object of these clauses is to enable a tenant to terminate a current contract, and it might well be that the tenant should be held bound strictly and in terminis to terminate the contract in the exact way provided by the lease, otherwise the contract must just subsist. In the present case, and in all cases of sale, the fixing of the price is really for behoof of both parties, and if the Court were to refuse assistance, this might annul the contract and create the greatest injustice.

In the next place, the Lord Ordinary is of opinion that the obligation come under by Lawson to implement the agreement made by the pursuer with Cameron is still binding, notwith-standing the failure of the valuators originally named to fix the price. He thinks that Lawson will be bound to implement the agreement when the price is fixed by the valuator now appointed. No doubt the words of Mr Lawson's letter have reference to the valuators who had been named, and it was very ingeniously contended by his counsel that it was because of his confidence in these valuators that he had agreed at all to implement the obligation, which it was said he was not bound to do. Whether he was bound or not depends upon the previous question—whether he was a bona fide purchaser, purchasing and paying the price in ignorance of the prior agreement of sale? and this is a matter of fact yet unascertained. But the Lord Ordinary thinks it unnecessary to inquire into this, because reading Mr Lawson's letters, and particularly the letter of 1st November 1872, which has been duly stamped, the Lord Ordinary thinks that their fair meaning is to place him in the same position with his author Cameron. He became a party to the original contract of sale. The pursuer did not make one bargain with Cameron and another separate and different with Lawson. As to both, the price was to be ascertained in the same way. Lawson himself says in his letter of 1st November, ‘As you allege there is an agreement between the parties, I do not understand why there should be another,’ and accordingly he declines to enter into any new reference, but contented himself with agreeing to implement the original contract. The Lord Ordinary thinks he is bound thereby. No other result would be consistent with justice and fair dealing between the parties.

Both as regards Cameron, therefore, and as regards Lawson, the Lord Ordinary thinks that the agreement must be enforced. As both of the defenders resist the carrying out of the agreement, and refuse to concur in the ascertainment of the price, the Lord Ordinary has himself named an experienced and practical valuator, whose report will enable the contract of sale to be carried through. The Lord Ordinary has found the defender Lawson liable in expenses hitherto incurred, Cameron having been already found liable in expenses in absence. The expenses of the valuation, necessary and reasonable, will be paid by the parties mutually.”

The defender reclaimed, and pleaded, inter alia:—“(2) This defender being a singular successor in said subjects is not bound by any missives, formal or informal, or any other obligations undertaken by his authors, and not contained in his title or appearing ex facie of record. (3) The missives of sale founded on by the pursuer being neither holograph nor tested, and therefore defective in the solemnities required by law, are not binding on this defender. (4) Said missives having been vitiated and tampered with after their execution, the same have been rendered null and of no effect, at least as against this defender. (5) The said arbiters having differed as to the competency of nominating an oversman, and not having proceeded with their reference, the same stood unexhausted, and it is therefore incompetent to supersede them by the present action.”

The pursuer pleaded;—“(1) The defender John Cameron is bound to concur with the pursuer in a reference de novo to two valuators mutually chosen, for the purpose of ascertaining and fixing the price or value of the subjects in question, and failing

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such a reference, the pursuer is entitled to have the price or value judicially ascertained and fixed. (2) The price or value being so fixed, the pursuer is, upon payment of it to the party having right thereto, entitled to a valid disposition of the said subjects in his favour by the defenders, or one or other of them.”

At advising—