Scottish Court of Session Decisions

By lease dated 28th and 29th March 1877, James Arthur Crichton, advocate, and George M'Intosb, S.S.C., surviving trustees under a disposition and conveyance in trust executed by the deceased William Waddell, of Easter Moffat, let to the Monkland Iron and Coal Company (Limited) the whole ironstone in the lands of Easter Moffat, in the county of Lanark, for a period of nineteen years from Whitsunday 1877. The rent was £500 per annum. There were to be breaks in the lease in favour of the lessees at the end of every fifth year on giving six months' notice. The lessees bound themselves to make all practicable exertions for working and putting out the ironstone.

The lease further provided:—“And it is hereby agreed that if at any time before the natural expiry of this lease the said lessees or their foresaids shall work out and exhaust the ironstone hereby let, or in case it be proved by a mining engineer to be fixed by the parties, or by two mining engineers to be mutually chosen, or by an oversman to be named by them at the time they accept their appointment, or in case of their disagreeing, by a person to be appointed by the judge ordinary in the event of the parties not naming an arbiter or arbiters, or of their differing in opinion and not appointing an oversman, that the ironstone hereby let cannot be wrought to profit, and that this result has arisen from no fault on the part of the tenants, then the lessees or their foresaids shall be entitled to put an end to this lease, just as if it had terminated by the lapse of time.”

The Monkland Iron and Coal Company (Limited) worked the ironstone from 1877 to 1881. The company then assigned the tack to the Monkland Iron Company (Limited), the defenders in the present action, who worked the ironstone and paid the rents under the lease until Martinmas 1884.

On 7th August 1884 the lessees wrote to the Easter Moffat trustees in these terms—“Dear Sirs—We beg to give you notice, in terms of our lease of Easter Moffat, that owing to the unprofitable nature of our workings we intend to cease mining operations at Martinmas first, and as this matter comes within the scope of an arbiter, we shall be glad to have this matter arranged as soon as may be convenient. Kindly own receipt of this intimation.” On 12th August 1884 the trustees' agent replied—“Gentlemen,—We received your Mr Ferguson's letter of the 7th. You some time ago applied for a modification of the terms of your lease of the ironstone in this property, when our clients instructed us to request Mr Geddes, M.E., to inspect the workings and report for their information. We at once did this, but, as you will see from the annexed copy of Mr Geddes' letter to us of the 31st July, he has been unable, owing to an accident to your manager Mr M'Culloch, to examine the workings and report. In these circumstances we cannot admit your right to discontinue the workings as you propose to do, nor is there at present any occasion for entering into a reference such as you propose. So soon as Mr Geddes makes his report the matter will be considered by the Easter Moffat trustees, and we will then write you further.”

The lessees abandoned the workings at Martinmas, and in December they began to dismantle the works. They took up the position that they were entitled in consequence of the unprofitable nature of the undertaking to take advantage of the clause of the lease quoted above, and that their letter of 7th August was a notice to abandon at Martinmas 1884, while the trustees maintained that the workings had not been satisfactorily conducted nor the ground properly explored for minerals, and that they were entitled to rent till the next break at Whitsunday 1887, or till the lease should be found by competent authority to be at an end.

This action was raised by the trustees for £250. the rent for the half-year from Martinmas 1884 to Whitsunday 1885.

The pursuers pleaded, inter alia—“(3) The alleged notice of abandonment by the defenders not being sufficient in itself, or in accordance with the provisions of the lease, the defenders are liable for the rents from Martinmas 1884 to Whitsunday 1885. (4) It not having been proved by a mining engineer or otherwise, as provided by the lease, that the ironstone let has become unworkable to profit, and the defenders not having fairly and fully worked out and explored the minerals so as to ascertain that it is unworkable to profit, the pursuers are entitled to decree in terms of the conclusions of the summons.”

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The defenders pleaded—“(1) The defenders having abandoned the lease at Martinmas 1884 in consequence of the unworkability to profit of the mineral, and the pursuers having refused to concede the existence of the ground of abandonment, the question falls to be determined by arbitration in terms of the lease. (2) The ironstone let having become unworkable to profit, the defenders were entitled to abandon the lease. (3) The defenders having given due notice to the pursuers of their intention to abandon the lease, and having offered to submit to arbitration, in terms of the lease, the question as to the existence of the cause of abandonment, are entitled to absolvitor, with expenses.”

The Lord Ordinary ( Lee) on 30th October 1885 pronounced this interlocutor:—“Sists procedure in hoc statu to enable the parties to have the facts relative to the questions whether the ironstone let could not be wrought to profit, and whether this result had arisen from no fault on the part of the tenants, ascertained in the manner contemplated by the lease; and reserves in the meantime all questions of expenses.

“ Opinion.—This is an action for rent alleged to be due for the period from Martinmas 1884 to Whitsunday 1885 under a mineral lease.

The defence is founded on the following not unusual clause—‘In case it should be proved by a mining engineer, to be fixed on by the parties, or by two mining engineers to be mutually chosen, or by an oversman to be named by them at the time they should accept the appointment, or, in case of their disagreeing, by a person to be appointed by the judge ordinary in the event of the parties not naming an arbiter or arbiters, or of their differing in opinion and not naming an oversman, that the ironstone let could not be wrought to profit, and that that result had arisen from no fault on the part of the tenants, then the lessees or their foresaids should be entitled to put an end to the lease, just as if it had terminated by the lapse of time.’

It is pleaded, in the first place, that the ironstone had ceased to be workable to profit, and that therefore the defenders were entitled to abandon the mine, as they say they did. This plea, by itself, I am of opinion is bad. Where the lessees under such a lease as the present have allowed a new term to run, or to be entered upon, without taking previously any steps to raise the question with the lessor, and to put it upon him to allow them an opportunity of having the fact ascertained, it is no defence to an action for rent to allege, and offer to prove, that the minerals have become unworkable to profit. For it was incumbent on the lessees, if desirous of taking advantage of such a clause, to initiate in some form the proceedings necessary to have their right determined before the rent was incurred. This was settled in the case of Thomson v. Gordon, 18th March 1869, 7 Macph. 687.

But it is also pleaded that in the present case proceedings were taken before the period for which rent is claimed commenced to run, sufficient to entitle the defenders to require the landlord to concur with them in having the fact ascertained, as at Martinmas 1884, in the manner contemplated by the lease. It appears from the record and relative productions that on 7th August 1884 the defenders wrote to the agents of the landlord intimating that, owing to the unprofitable nature of their workings, they intended to cease mining operations at Martinmas, and adding, ‘As this matter comes within the scope of an arbiter, we shall be glad to have this matter arranged as soon as may be convenient.’

It is not alleged by the pursuers that the defenders continued to work or occupy the mine after Martinmas. What they say is, that they disputed at once the right of the lessees to discontinue working, or to put an end to the lease as proposed, and that the defenders were not entitled at Martinmas to proceed as they did to dismantle the mine.

This raises a question which was not decided in Thomson v. Gordon, and is of some importance.

In my opinion the letter of 7th August was a sufficiently distinct intimation of the defenders' claim to take advantage of the clause referred to, and which I have already read. I think that the terms of the reply which was made to it on 12th August indicate that it was so understood by the pursuers' agents. That reply was as follows:—‘Easter Moffat—We received your Mr Ferguson's letter of the 7th. You some time ago applied for a modification of the terms of your lease of the ironstone in this property, when our clients instructed us to request Mr Geddes, M.E., to inspect the workings and report for their information. We at once did this, but as you will see from the annexed copy of Mr Geddes' letter to us of the 31st July, he has been unable, owing to an accident to your manager, Mr M'Culloch, to examine the workings and report. In these circumstances we cannot admit your right to discontinue the workings as you propose to do, nor is there at present any occasion for entering into a reference such as you propose. So soon as Mr Geddes makes his report, the matter will be considered by the Easter Moffat trustees, and we will then write you further.’

But whether the notice was understood or not as referring to the clause in question, I think that it was sufficient; and the point which arises for consideration is, whether it was met by the landlord in such a way as to put upon the lessees the duty of taking some further steps before Martinmas in order to entitle them to treat the question of their right to put an end to the lease as one which was then already pending?

It appears to me that the reply to the tenants' agents was not a refusal to entertain the defenders' notice as a claim to put an end to the lease, and to have the question of right determined in the manner contemplated by the lease. It was a temporising letter, which only refused to admit the right of the lessees in the circumstances mentioned—that is to say, pending an intended examination by Mr Geddes—and merely denied that there was ‘at present’ any occasion for a reference. It led the defenders to expect a further communication on the subject when Mr Geddes should have made his report, and I think that the defenders were entitled to await such further communication, and to assume that they could not be prejudiced by awaiting it. They waited accordingly, and I think that the correspondence which ensued when the defenders proceeded to act upon their notice shows that it was not their fault that the state of the facts as

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to the condition of the mine was not ascertained before Martinmas.

My opinion is, that the defenders are now entitled to have the facts ascertained, as at 11th November 1884, in the manner contemplated by the lease, and that the pursuers are not, in the circumstances, entitled to maintain that because the fact was not ascertained before 11th November the defenders are liable for the rent down to Whitsunday, and until the arbiters have found it proved.

The principle of the decision in Thomson v. Gordon appears to me to have no application to the circumstances here disclosed.

I shall therefore sist the process in hoc statu to enable the parties to have the facts ascertained in the manner contemplated by the lease. Expenses will be reserved.”

The pursuers reclaimed, and argued—The rent must be paid until there was a finding that the minerals could not be profitably worked; nothing had been done by the defenders to ascertain the true state of the minerals; the lease had provided a mode of abandoning if the minerals ceased to be worked at a profit; the course laid down by the lease must be followed. Dixon v. Campbell, June 25, 1830, 8 S. 970; Merry & Cuninghame v. Brown, July 15, 1859, 21 D. 1337, and 22 D. 1148.

The respondents adopted the argument contained in the note of the Lord Ordinary.