Scottish Court of Session Decisions

Mr Thomas Main, market gardener, Milton, Dumbartonshire, was tenant from Mr Buchanan of Auchentorlie of a piece of ground extending to 10 1 4 acres, on a 19 years' lease from Whitsunday 1888, at a rent of £4 per acre. He occupied the ground for the purpose of market gardening, and had the liberty of erecting on it certain forcing houses. In 1892 the Lanarkshire and Dumbartonshire Railway Company, whose line, as authorised by their Act, intersected the

Page: 686↓

plot of ground leased by Mr Main, gave notice of their intention to take, and did take, for the purposes of the railway, two acres of the ground. The result of the intersection was to separate five acres on the south side of the railway from the remainder on the north side. The parties having failed to agree on the amount of compensation to be paid, a submission was entered into, and arbiters were appointed, and the arbiters not being able to agree as to an oversman, the Court appointed Sheriff Cheyne. He accepted the office and the submission was ultimately devolved upon him.

The claim lodged by the tenant in respect of his interest in the ground amounted to £19,500, being made in respect of (1) loss of profits which he would have made on the two acres of ground taken by the company during the fourteen remaining years of his lease; (2) the value of the stock in the ground taken; (3) the injurious affection of the rest of his garden; and (4) an allowance for severance damage. He stated that he had a scheme for developing his garden by erecting in it reversible glass horticultural houses, which he had invented and patented for the growing thereunder of fruit, flowers, and vegetables.

After a proof had been led for the parties, the oversman, on 9th November 1893, issued proposed findings. In a note appended to these findings the oversman thus stated the principles on which he proposed to deal with the question of compensation— “I have no doubt that the claimant must be dealt with on precisely the same principles as would be applied to the tenant of an agricultural farm, a strip in the centre of which was taken by a railway company, and he is therefore entitled to receive as compensation (1) the profits which, according to reasonable expectation, and after all contingencies are allowed for, he might have made out of the ground taken during the portion of his lease that was unexpired at the date of the notice to treat; (2) the value of the stock in the ground taken; (3) such allowance as the arbiter thinks reasonable in respect of injurious affection of the remainder of his garden; and (4) an allowance for severance damage.”

In consequence of representations by the parties the oversman issued further proposed findings on 29th December 1893, and on 13th March 1894 third notes of proposed findings, and on 11th April 1894 he issued his final decree-arbitral, wherein he found and determined that the Company were liable to Main in the following amounts of compensation:— “( First) The sum of £2280 as the value at the date of the said notice to treat, 29th September 1892, of his (the claimant's) interest in the said two acres taken as aforesaid (including the value of the stock therein at the date of the said notice), and which sum of £2280 I find to be payable as on the 13th day of March 1893, being the date on which the said railway company took possession of the ground.” He also awarded Main compensation, ( Second) for injurious affection of the remainder of the subjects held in lease by him, and ( Third) in respect of severance damage.

With regard to the award under the first head, it appeared from the notes appended to the various proposed findings issued by the oversman, that he was satisfied on the evidence that Main intended to utilise the ground for cultivating fruit and flowers in the manner alleged in his claim, and would soon have covered the ground with houses of the kind which he had patented but for the service of the notice to treat; that he considered the principle of reinstatement applicable to the case, provided ground contiguous to the claimant's holding could be obtained; that he was convinced by the proof that the claimant could obtain two acres contiguous to his holding and suitable for his business on lease at £6 per acre, and that this ground could be brought into the same state of preparedness for the claimant's business as the ground taken was at the date of the notice to treat in three years; and that he estimated the loss of profit which the claimant would have earned during these three years at the rate of £250 per acre a-year. He accordingly explained that his award of £2280 under the first head was made up of “( a) £1390 as the present value of three years' profits of two acres, at £250 per acre; ( b) £450 to meet the increased rent which he will have to pay for the substituted ground, the probable diminution of profits from that ground in the last eleven years of the lease due partly to the proximity of the railway and road, and partly to the increased cost of erecting the houses owing to the fall of the ground and the general inconvenience attending the re-instatement; and ( c) £440 as the value of the stock in the ground at the date of notice.”

On 15th May 1894 the Lanarkshire and Dumbartonshire Railway Company raised an action against Mr Main, concluding for reduction of the above proposed findings and decree-arbitral.

The pursuers averred that the land at the date of their proposal to treat was only to a small extent used as a market garden; that the defender had only erected on it one small vinery and the forcing-houses which he had liberty to erect under his lease; that at this date none of his patent houses had been erected, nor had their practicability been in any way tested, though more than two years had elapsed since the patent; that to build these patent houses would cost a sum of £3000 per acre, and that the defender had no capital to carry out his scheme.

They pleaded, inter alia—“(1) The said proposed findings, further findings, third notes of proposed findings, and decree-arbitral, are ultra vires, irregular, and incompetent, and ought to be reduced, with expenses to the pursuers, in respect that (1) compensation has been awarded for loss of profits to be derived, not from the ground as it was leased to the defender, or as it existed at the date of the pursuers' notice to treat, but from buildings and houses which were not erected by the defender on the ground

Page: 687↓

leased by him at the date of the notice to treat by the pursuers, but were alleged by the defender as intended to be erected by him at some future time.

The defender averred that under his patent system he would have made very large profits from the ground, and that the compensation awarded was very moderate, and pleaded—“(2) The arbiter's proceedings challenged being regular and within his powers, this action is unfounded. (3) The oversman having considered and given all due effect to the contentions of the pursuers, his award is not subject to review, and the defender is entitled to absolvitor.”

The Lord Ordinary on 30th November 1894 allowed the pursuers a proof of their averments that the oversman in fixing the amount of compensation had allowed the defender compensation for the prospective profits to be derived, not from the ground included in the notice to treat, but from houses and buildings which the defender alleged that he proposed to erect on the ground.

The oversman was examined as to the principles by which he had arrived at his determination, and explained the manner in which he had arrived at his award under the first head, his explanation agreeing with that already set forth above as given in the notes to his proposed findings.

The Lord Ordinary ( Low) on 9th January 1895 sustained the defender's pleas-in-law, repelled the reasons of reduction, and assoilzied the defender from the conclusions of the summons.

“ Opinion.—The defender is the tenant of a market garden at Milton, Dumbartonshire, which he holds under a lease for nineteen years from Whitsunday 1888. The pursuers, in the exercise of their statutory powers, took some two acres of the garden for the purpose of constructing their line of railway. The parties having failed to agree as to the amount of the compensation to be paid by the pursuers to the defender, appointed arbiters, and the arbiters not being able to agree as to an oversman, the Court appointed Sheriff Cheyne to be oversman. He accepted the office, and ultimately the submission was devolved upon him.

The present action is brought for reduction of (1st) proposed findings issued by the oversman on 8th November 1893; (2nd)further findings, dated 29th December 1893; (3rd) third notes of findings, dated 18th March 1894; and (4th) decree-arbitral, dated 11th April 1894.

The main ground upon which reduction is sought, as stated in the pursuers' pleas-in-law, is as follows:—‘Compensation has been awarded for loss of profits to be derived, not from the ground as it was leased to the defender, or as it existed at the date of the pursuers' notice to treat, but from buildings and houses which were not erected by the defender on the ground leased by him at the date of the notice to treat by the pursuers, but were alleged by the defender as intended to be erected by him at some future time.’

Ex facie of the decree-arbitral and the proposed findings of which reduction is sought, the arbiter has not gone beyond that which was submitted to him, because the first sum in the decree-arbitral is awarded ‘as the value at the date of the said notice to treat of his (the defender's) interest in the said two acres taken as aforesaid.’

Further, in the note appended to the proposed findings of the 8th November 1893, of which reduction is sought in the first place, the oversman states the principle which he has applied in fixing the amount of the compensation. He says that the defender ‘is entitled to receive as compensation (1) the profits which, according to reasonable expectation, and after all contingencies are allowed for, he might have made out of the ground taken, during the portion of his lease that was unexpired at the date of the notice to treat.’ No objection was taken, or, in my opinion, could be taken, to the principle there laid down.

It is therefore clear that the oversman was under no error in regard to the question which was submitted to him, and that the sum which he has awarded is the value, in his opinion, of the defender's interest in the land taken, and of that only.

Now, there is no doubt that the general rule is that it is not competent to inquire into the method by which the oversman has arrived at the amount awarded. The rule was stated thus by Lord Chancellor Chelmsford in the ease of The Duke of Buccleuch v. Metropolitan Board of Works, 5 E. & I., App., p. 418—‘The defendants were not at liberty to ask the umpire what were the elements which entered into his consideration in determining the quantum of compensation.’

But then the case may occur in which, although ex facie of the award, the oversman has given compensation only in respect of the matter submitted to him, and has admittedly not intended to give compensation for anything else, he may yet, through error, have, as matter of fact, included in the amount awarded, compensation for some loss or injury which did not fall within the submission. Such a case was figured by Lord Chelmsford in the judgment to which I have referred in these words—‘The defendants had an undoubted right to know from the oversman whether in his estimate of the compensation he took into consideration any matter not included in the reference, and therefore beyond his jurisdiction.’

The case of The Glasgow City and District Railway Company v. M'George, Cowan, & Galloway, 13 R. 609, is an example of that rule. There an Act of Parliament allowed in certain cases compensation for structural damages only. The oversman gave an award which, ex facie, was only for structural damage. The railway company brought a reduction of the award on the ground that, as matter of fact, the oversman had included in the amount awarded loss sustained by deterioration in the marketable value of the property, as well as loss sustained by structural injury, and the First Division held that the averments were relevant, and allowed a proof.

Page: 688↓

It therefore appeared to me that inquiry was not excluded by the terms of the decree-arbitral and notes, as to whether, as matter of fact, the oversman had allowed to the defender compensation for prospective profits to be derived, not from the ground taken, but from a business which the defender proposed to carry on in greenhouses which he alleged that he had intended to erect. I accordingly allowed the pursuers a proof of their averments to that effect, and they have examined the oversman.

The facts appear to be as follows:—When the pursuers gave notice to treat for the ground in question, there were fourteen years of the lease still to run. The claim of the defender was based upon the allegation that he intended to use the ground, and had been in the course of preparing it for growing fruit according to a particular method of culture. That method was to put glass houses of a certain construction over the plants until the fruit had attained a certain stage of developement, when the glass would be removed and the fruit allowed to ripen in the open air. The oversman, in his examination, was not asked, and does not say, anything about the removal of the glass houses at a certain stage, but the pursuers in their condescendence state that that was the case.

The oversman has admittedly taken into consideration, in fixing the amount of compensation, the profits which might have been derived from the land if it had been cultivated according to that method, and the pursuers contend that in doing so he exceeded his powers, because he necessarily took into account not only the profits which might have been derived from the ground, but also, and indeed chiefly, profits to be derived from the glass houses. That must have been the case, they argue, because the oversman admits that the profits which could be derived from the ground without the houses would be comparatively small, while the profits which he estimates that the defender might have made if the houses had been erected, are enormous.

Now, the Court has nothing to do with the amount awarded, although it does appear to a very large, considering the extent and character of the ground taken. Further, the Court cannot consider whether the evidence justified the conclusions at which the oversman arrived, whether as regards facts or amounts. To do so would be to review the decision of the oversman.

There are certain matters of fact upon which the oversman has been satisfied by the evidence. In the first place, he was satisfied that the purpose to which the defender intended to devote the ground leased by him, and for which he had been preparing the ground, was to grow fruit according to the method of culture which I have indicated. In the second place, he was satisfied that if the Railway Company had not stepped in, the ground taken by them would shortly have been cultivated according to that method. In the third place, he was satisfied that the profits which would have been derived from the ground would have been very largely increased.

The question is, must the oversman be held to have awarded compensation not only for the loss of profits which the defender would have made out of the ground taken, but for loss of profits which he would have made out of the glass houses which he proposed to erect upon the ground? Now, of course, in one sense, that question must be answered in the affirmative, because the oversman has taken into consideration profits which could only have been earned by the aid of the glass houses. But, on the other hand, the view which the oversman took was this:—The profits which he took into consideration were profits to be derived from growing fruit trees upon the lands, and the glass houses were only to be used as covers to shelter the plants and force on the growth of the fruit, and were therefore nothing more than a means of increasing the crop which the ground would yield. The oversman says that he regarded the glass covers just as he would have regarded the application of manure—as a means of increasing the productiveness of the soil.

I have pointed out that the condition of the argument is, that the oversman, who is final upon the matter, is satisfied that the defender took the ground for the purpose of cultivating it according to the method indicated, that he was preparing the ground to be so cultivated, that if the company had not taken the ground it would have immediately been so cultivated, and that the results would have been very profitable to the defender.

In such circumstances I find myself unable to affirm that it was incompetent and ultra vires of the oversman to take the profits in question into consideration, unless it can be said that it is necessarily incompetent for an arbiter in any case to take into consideration a proposed use of lands to be held under lease, but to which they have not actually been put when they are taken by the company.

That may be the general rule, but I do not think that it is a rule of universal application. On the contrary, I think that many cases may be imagined in which the application of any such hard and fast rule would lead to injustice.

Suppose, for example, the case of waste lands being taken upon an improving lease, and a railway company taking them while the process of reclamation was in progress. The lands, when the company took them, might be of little value, but it might also be proved beyond doubt that if the tenant had been allowed to complete the reclamation, and to cultivate the lands during the remainder of the lease, he would have obtained very large returns from them. In such a case I do not see how the tenant could be fully and fairly compensated for his ‘interest’ in the lands, unless consideration was had of the use which would have been made of, and the profits which would have been derived

Page: 689↓

from, the lands during the remainder of the lease.

I am therefore of opinion, although the question appears to me to be one of great difficulty, that the pursuers are not entitled to have the award set aside. I do not think that it can be set aside unless it can be affirmed that it was clearly and necessarily incompetent for the oversman to take into consideration to any extent the profits in question, because the Court cannot inquire as to the method by which the oversman has arrived at the amount awarded, nor consider whether he has adopted the best method, nor even whether he has adopted a reasonable method.”

The pursuers reclaimed, and argued—The oversman had decided more than was submitted to him in the reference, and therefore his decision should be set aside. There was no peculiarity in this land entitling the defender to be awarded such an unreasonable amount, but the subjects out of which the profit was to be made—if there were to be such a profit—were the buildings to be erected by the defender, which as yet he had not erected. The oversman had acted ultra vires in taking them into his consideration, and the prospective damage which might accrue from loss of profit made on them was too remote to take into consideration— Hamilton v. Northern Lighthouse Commissioners, March 5, 1886, 13 R. 710. The principle that prospective damage, which might never exist, was not to be reckoned in estimating compensation was further exemplified in the cases of Queen v. Poulter, 1887, L.R., 20 Q.B.D. 132; and in re Marylebone Improvement Act, 1871, L.R., 12 Eq. 389. If the oversman were to take into account future profits at all, he should have estimated them at ordinary market garden rates, and not on this purely hypothetical scale depending on the erection of houses which might never be built.

Argued for the defender — The Court had no power to review the methods by which the oversman had arrived at his conclusion, or the amount of his award— Adams v. Great North of Scotland Railway Company, November 27, 1890, 18 R. (H. of L.) 1. He had not acted ultra vires by proceeding on the principle that compensation was to be given for future profits. In Ripley v. Great Northern Railway Company, 1875, L.R., 10 Ch. 435, compensation had been allowed in respect of profits to be derived from supplying water to mills, which were not built at the time, but were only in contemplation. The same principles were followed in Queen v. Brown, 1867, L.R., 2 Q.B. 630; and Brown v. Mayor of Liverpool, 33 L.J., Q.B. 15. It was the oversman's duty to go into the facts of the case, and to give weight to all the circumstances of it in awarding compensation— Stebbing v. Metropolitan Board of Works, L.R., 6 Q.B. 37. There was nothing ex facie illegal in the award here, and the pursuers were really only attacking the amount of it. The tenant had been prepared to make a legitimate use of his land, and the oversman had a perfect right to estimate any profit which he might legitimately make.

At advising—