Scottish Court of Session Decisions

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Cite as: [1885] ScotLR 22_568, [1885] SLR 22_568

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SCOTTISH_SLR_Court_of_Session

Page: 568↓

Court of Session Inner House Second Division.

Friday, March 20. 1885. ^*

22 SLR 568

Gerry

v.

Caithness Flagstone Company.

Subject_1Arbiter
Subject_2Contract of Copartnery
Subject_3Question between Partner and Company whose Partner has Opposing Interest
Subject_4Reference Clause not Excluding Action.
Facts:

A partnership contract provided that any disputes or differences arising among the partners as to the true extent and meaning of the contract, or the partners' rights under it, or the execution or implement thereof, or the management or winding-up of the business should be referred to an arbiter named therein. One of the partners, G, was owner of a quarry which the company leased from him, and to lease and work which, and other quarries belonging to the individual partners, was one of the objects of the copartnership. G agreed by separate letter, in respect of difficulties which arose in working his quarry, to grant the company certain contingent abatements on the rents and lordships due to him under the contract. A dispute having arisen as to whether the company were entitled to certain sums claimed by them as deductions under this letter— held that the question was one between G as a landlord, and the company, including G as a partner, and therefore that the action was not excluded by the clause of reference.

Headnote:

This was an action for, inter alia, £172, 9s. 2d., as rent and arrears of rent, raised by James Gerry, proprietor of Upper Langlands flagstone quarry in Caithness against the Caithness Flagstone Quarrying Company. The partners of the Caithness Flagstone Company were six pavement merchants in Thurso. They entered into that copartnery in order to work on joint account certain quarries, of which some belonged to the individual members of the firm, and some to Sir J. G. T. Sinclair. James Gerry, the pursuer, one of the partners, was owner of one of the quarries (Upper Langlands). With regard to it and two other quarries, of which the individual partners were part owners, the respective owners bound themselves to grant to the company leases thereof, and exclusive right to
_________________ Footnote _________________

* Decided January 20.

Page: 569↓
quarry for flagstones, slates, &c., therein, on the same terms and conditions as were contained in a memorandum of lease of other quarries between Sir J. G. T. Sinclair and D. J. Craig.

The contract contained this reference clause—“In the event of any disputes or differences arising among the partners, or between the surviving or solvent partners and the heirs, representatives, or creditors of the deceasing or insolvent partners as to the true intent and meaning of the foregoing contract, and of these presents, or their rights under the same, or in regard to the execution or implement thereof, or the management or winding-up of the said business, or with reference to questions and duties specially submitted to him under the said contract, or as to any other matter or thing relating to the copartnery affairs, all such questions, disputes, and differences are hereby referred to the amicable decision and decree-arbitral of Alexander Henderson, Esq. of Stemster, whom failing,” &c.

In 1881 Gerry's quarry (Upper Langlands) began to be worked. That quarry proved difficult to work in consequence, inter alia, of the company having to open up a new face of rock. Gerry agreed by separate holograph letter as follows:—“That in the event of your being unable, either by contract or day's wages, to quarry the sawing and H edged flags from this stretch, at a rate not exceeding 1s. per square yard off any excess above the said figure, I shall pay you the same.” And further, “that in the event of your being unable to raise during the year ending at Whitsunday 1882 the minimum quantity of flags for lordship, I will not ask for that year lordship on a greater quantity than you have been able to raise.”

The quarry continued to be worked by the company till 1884, when in consequence of disputes as to the deductions allowable under the letter just quoted, and as to surface damage to other lands, this action was brought. The defenders had after the disputes arose, and before the action was raised, offered to refer the disputed points to the arbiter, but the pursuer declined to do so, on the ground that the points did not fall within the arbitration clause.

The defenders did not dispute that rent was due, and the question was what deductions were claimable by them. They claimed £147, 18s. 5d. as a deduction to which they were entitled under the letter quoted above, on the ground that the cost of working the slates in the quarry had been to that extent in excess of 1s. a yard. Further, they alleged that the lordships on slabs raised in the first year's working was only £39, 7s. 5d. instead of £139, 17s. 11d., the minimum lordship exigible under the contract of copartnery.

To this claim for deductions the pursuer replied that the defenders' own inefficient working had caused both the extra expense and the deficiency of output.

The defenders pleaded—“(1/1) The action is incompetent in respect that the questions raised fall to be determined under the arbitration clause in the contract of copartnery, and this action ought therefore to be dismissed, with expenses; or otherwise, the questions in dispute should be referred to the arbiter, and decree given in terms of his decision. ”

The Sheriff-Substitute ( Harper) allowed a proof before answer.

The defenders appealed.

At advising—

Judgment:

Lord Young—This is an action for rent by the proprietor of a quarry, and the rent is admittedly due, but there are certain deductions claimed which give rise to the dispute presented by the parties on this record. The defenders found upon a holograph letter of guarantee and obligation by the landlord to them, dated 18th April 1881, and say that they are entitled to deduct from the rent the excess of cost of working over 1s. per square yard, which amounts to £147, 18s. 5d., and they further say that whereas lordship is claimed upon the minimum output specified in the lease, by that same letter the landlord undertakes not to ask for lordship for the first year's working on a greater quantity than the tenants have been able to raise—the lordship on the quantity which they did in fact raise in the first year being admittedly not £139, 17s. 11d. but £39, 7s. 5d.

Now, with regard to the first ground of deduction—I mean the sum of £147, 18s. 5d.—the landlord's answer is this: In point of fact your working expenses did come to £147, 18s. 5d. in excess of what they would have been at Is. per square yard, but that is owing to your not having worked properly, or as economically as you might. And with respect to the second he says —True, £39 is the lordship due on the quantity actually raised, but by due and proper working you might have raised more.

These questions were brought under the notice of the arbiter mentioned in the contract of copartnery, when the balance-sheet for the year and the vouchers relative thereto were laid before him; and he invited the landlord to address himself to them to show that the £147, 18s. 5d. is due to the cause he mentions, and that the £39, although the lordship on the quantity actually raised, was an insufficient lordship by reason of the way the company conducted the working. The landlord declined that invitation, saying that the questions were not within the reference clause, and the arbiter thereupon approved of the balance-sheet which contained these items. The landlord disregarded that decision, and raised this action for his full rent, without deduction of those items I have referred to, being £147, 18s. 5d., and the difference between £139, 17s. 11d. and £39, 7s. 5d.

What is put forward in defence is this: The company say that the matters upon which the pursuer's right to these sums depends are within the reference clause of the contract of copartnery, and have been decided by the arbiter in the exercise of his jurisdiction. It is urged upon us, on the other hand, that they are not within the reference clause, and that therefore the arbiter had no right to determine them.

I do not go into the details of the question. They have been pointed out in the course of the argument at the bar, and in the views indicated from the bench, and I now merely express it as my opinion that these questions are not within the reference clause. I think they are not questions among partners, but between the whole body of the partners on the one side, including the pursuer, and the pursuer himself, not as a partner but as landlord, and having an adverse interest, on the other, and therefore that they are not

Page: 570↓

referred to the arbiter, and have not been decided by him.

There are other matters, namely, claims for ground occupied in the course of quarrying, and for surface damages to other subjects, about which we have had no debate, it being conceded on both sides that they would most conveniently be referred to a man of skill. I put it to Mr Robertson if we were against his contention—which I individually am, and which I understand your Lordships also to be—about the reference clause, and the decision by the arbiter, then would it not be more expedient to refer the whole questions now to a man of skill than to go on with a proof here? I understood him to say that he should then think the matter not suitable for a proof, but rather for a man of skill. I understand that to be the view of the other party also. Therefore if your Lordships should be of the same opinion as to the reference clause, and consequently as to the jurisdiction of the arbiter, the result would be that we should now remit these matters to a person or persons to be agreed upon by the parties. I should like to say at the same time that I am not at all of opinion that it is not within the competency of the Court—although it is better to go to a referee with the consent of the parties —to appoint such matters to be determined by the report of persons of skill, or by such persons upon the examination of witnesses.

Lord Craighill—I am entirely of the same opinion. There is no doubt that there is a reference clause in the contract, but when we look at the contract it seems manifest that only disputes among the partners themselves are referred under it. Gerry, as well as some of the other partners, occupy a different position from that of mere partners. Gerry stands in the place of landlord, and he is bound to fulfil the obligations undertaken by the landlord, and is entitled to exact performance of the obligations undertaken to him. That is quite a different matter from the relation in which Gerry as a partner stands to his copartners. As, however, it is plain upon the terms of the lease that only disputes amongst the partners are to be remitted to the arbiters, I concur in the judgment which your Lordship has proposed.

Lord Rutherfurd Clark—I am of the same opinion.

The Lord Justice-Clerk was absent.

The Court sustained the appeal, recalled the interlocutors of the Sheriff-Substitute appealed against, repelled the plea-in-law No. 1/1 for the defenders, and interponed authority to a joint minute for the parties referring the whole matters in dispute to a referee.

Counsel:

Counsel for Pursuer (Respondent) — Low — Guthrie. Agents— Hamilton, Kinnear, & Beatson, W.S.

Counsel for Defenders (Appellants)— J. P. B. Robertson— Dickson. Agents— Smith & Mason, S.S.C.
1885