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The liquidators of a company who were tenants under a lease of minerals, in connection with which works had been erected, having failed to dispose of the subjects as a going concern, presented a petition for power to dismantle the works and sell the buildings and machinery. The landlord objected, on the ground that what the liquidators proposed to sell were fixtures belonging to him. Held ( rev. Lord Fraser) that the rights of the liquidators as in a question with the landlord were no higher than those of the tenants, and petition refused.
In 1884 John Pender of Seafield and Blackburn, let to the Bathgate Oil Company, Limited, for thirty-one years, the whole shale, coal, ironstone, and other minerals in and under the estates of Seafield and Blackburn, in the county of Linlithgow.
The eighth clause of the lease provided that at the natural or earlier termination of the lease the landlord should have right, at his option, to take the whole engines, machinery, plant, &c., belonging to the tenants, and connected with the working of the minerals, at a fair valuation to be made by arbiters. The tenants were taken bound to offer the engines, machinery, plant, &c., to the landlord six months before the termination of the lease, and if the landlord did not accept the offer, then the tenants were to be entitled to remove the engines, machinery, plant, &c. If the landlord accepted the offer, then when he paid the value of the machinery he was to be entitled to set-off against the price all rents and admitted or liquid claims for surface damages that might be due to him at the time. Further, at the end of the lease, the landlord was to have the option of taking over the moveable plant on payment of its value, and in the event of his not taking it over the tenants were to be entitled to remove it.
The thirteenth clause provided as follows—“In the event of the said company, or the tenants for the time, including any liquidator or trustee or adjudger, wishing to sell or assign the tenant's interest under this lease to any third party, and of their receiving a bona fide offer to purchase the same, they shall be bound first to make offer in writing to the landlord to assign the same to him for the same consideration and on the same terms as they propose to assign the same to such third party; and on the landlord's acceptance of such offer within thirty days after receipt thereof, they shall be bound to assign such lease to him in terms of such offer, without prejudice to his then outstanding claims against the tenants … and in the event of the said company being wound up, or the tenants becoming insolvent, or their rights attached by adjudgers or creditors, then in the event of a sale of the tenants' interest (after previous offer to the landlord as herein provided) not being effected within one year from the date of the commencement of such winding-up or declared insolvency or attachment, it shall be lawful to the landlord, should he not himself have accepted an offer to assign to him as aforesaid, to declare this lease at an end, and to remove or otherwise deal with the tenants and enter into possession, all as if this lease had come to its natural termination.”
The lease was recorded under the Registration of Leases Act in the Register of Sasines. The following securities were granted over it—(1) Bond and assignation in security by the company in favour of the Union Bank of Scotland, Limited, for £3500; (2) Bond and assignation by the company in favour of Anderson A Co., ironfounders, Musselburgh, for £3500.
The company went into liquidation, Mr David Nicolson Cotton and Mr William Veitch Turn-bull being appointed liquidators. On 2d June 1886
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the Court, on the petition of the liquidators, authorised them to expose for sale by public roup the oilworks of the company on the estate of Seafield, including workshops, offices, engine-house, retorts, scaffolds, engines, and other machinery and mines, and that at such upset price as should hereafter be fixed by the Court. On 6th July the Court fixed the upset price at £10,500. The subjects were on 14th July exposed for sale under articles of roup. There was no offer, and the sale was adjourned. On 30th September the liquidators lodged a note in which they stated that from their knowledge of the state of the oil trade the subjects as already exposed could not be disposed of as a going concern, and they craved authority, under reservation of the rights and preferences of the landlord and holders of securities, to sell the subjects for the purpose of being dismantled, broken up, and removed by the purchaser, or, in the event of no sale being effected, to dismantle, break up, and remove the said oilworks, including workshops and offices, engine-house, retorts, scaffolds, engines, and other machinery, together with the building known as the Patent Fuel Works, and formerly occupied by the Patent Seafield Fuel Company. Answers were lodged for John Pender, the landlord, in which he stated that besides paying no rent, the company and the liquidators had never made any payment for surface damages, and that the claims of the respondent and the agricultural tenant amounted to £1093, 14s. 1d. The answers contained this further statement—“The said buildings and machinery are fixed to the soil, and belong to the respondent at common law; the said company and liquidators thereof have no right thereto except under the special stipulations of the lease, which have not been implemented by them, and must be held to have been departed from. In any view, the respondent is entitled to the option of purchase given him by the lease if the liquidators do not intend to continue the lease, as now appears for the first time to be the case. The proposal for sale is made by the liquidator entirely in the interests of the bondholders, whose only right to the preference which they claim is as assignees of the recorded lease, and before taking any benefit as such assignees they are bound to implement the whole prestations of the lease to the respondent, and on their doing so he would agree to the said machinery and buildings being sold.” The respondent accordingly submitted that the prayer of the note should be refused, at all events hoc statu.
On 4th May 1887 the Lord Ordinary on the Bills ( Fraser) pronounced this interlocutor:—“Under reservation of the rights and preferences of the landlord and holders of securities over the said lease, as such rights and preferences now exist, (1) Grants authority to the liquidators to sell by public roup on 14th June next, and after such advertisement as they may consider proper, the oilworks of the company on the estate of Seafield, including workshops and offices, engine-house, retorts, scaffolds, engines, and other machinery, together with the building known as the Patent Fuel Works, and formerly occupied by the Patent Seafield Fuel Company, with a view to dismantle, break up, and remove the same from the ground, and that at the upset price of £3500, or such larger price as may be obtained, and under such articles and conditions as the liquidators may deem necessary; (2) in the event of no such sale being effected, grants authority to the liquidators to dismantle, break up, and sell by public roup or private bargain the said oilworks, including workshops and offices, engine-house, retorts, scaffolds, engines, and other machinery, and the said buildings known as the Patent Fuel Works, in detail, and in such lots as the liquidators shall think right, and grants authority to them to expend such sum or sums as they may consider necessary or expedient in doing this.”
Pender reclaimed, and argued—The Lord Ordinary's interlocutor was not only unjust but unsound in law. The company were the reclaimer's debtors to a large amount, irrespective of sums in name of damages for non-fulfilment of the prestations of the lease and injuries to the surface. He had never pressed for payment, as he did not want to embarrass the company in its difficulties. All he wanted now was some security for payment of a fair ranking with other creditors. What the liquidators proposed now to do would deprive him of this. They proposed not only to remove tenant's fixtures, but erections which were partes soli, and belonged to the landlord. They were not entitled to do this, as they had no higher right than the company, who were his tenants. In any view, if the company pleaded the conditions of the lease, they must fulfil the whole conditions of the lease, and until this was done by payment of rent and damages for injury to surface they were not entitled to succeed.
The respondents maintained that under the order of the Lord Ordinary the rights of the landlord were reserved.
At advising—
The Court recalled the interlocutor reclaimed against and remitted the cause to the Lord Ordinary.
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Counsel for Respondents— Young. Agent— J. Knox Crawford, S.S.C.