Scottish Court of Session Decisions

On 6th November 1894 John Fleming and James Murray, tenants of the farm of Low Plewland belonging to the Duke of Hamilton, in the parish of Avondale and county of Lanark, raised an action against the District Committee of the Middle Ward of Lanarkshire for declarator that upon a just construction of their lease they were entitled to receive full compensation from the defenders for all loss, injury, and damage sustained and to be sustained by them to the term of Whitsunday 1911, being the natural termination of the said lease, in consequence of the defenders taking land and way-leave on the said farm under their private Water Act 1892, and for payment (1) of the sum of £6307, 14s. 1d., and (2) of the sum of £50.

The pursuers possess the said farm under a lease dated 15th and 20th February 1892, granted in their favour by the commissioner of the Duke of Hamilton. The duration of the lease is for nineteen years, but with power “to either of the parties hereto to put an end to this lease at the termination of six, eleven or sixteen years from the respective terms of the tenants' entry under the same, upon the party resolving to exercise such power giving to the other party notice in writing at least six months previous of his intention to do so.”

In 1892 the defenders obtained a private Act of Parliament (55 and 56 Vict. cap. 169), whereby they were authorised and empowered to construct certain water-works to supply water within the district. The main reservoir for storing the water is situated in part upon the pursuer's farm. In 1893 the defenders served on the pursuers a notice stating their intention of taking certain portions of their farm, extending to 66 acres, for the purposes of the said works, and a further notice was served with regard to a way-leave over an additional portion of the farm. The pursuers lodged a claim for compensation in respect of the taking of the said lands and way-leave.

By deed of nomination and submission dated 10th October 1893, the defenders, in terms of the Lands Clauses Consolidation (Scotland) Act 1845, nominated an arbiter on their part to determine the purchase money to be paid for the said lands and the said way-leave, and for all injury or damage occasioned to the pursuers by the defenders' actings, the said arbiter to fix and determine alternatively the amount of purchase money and compensation to be paid to the pursuers as aforesaid, in the first place, on

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the footing that their right and interest in the said lands and others expired at Martinmas 1897, and, in the second place, on the footing that their right and interest did not expire till Martinmas 1910. The said nomination was stated by the defenders to be made under protest and without prejudice.

On 7th November 1893 the pursuers, under protest that the condition contained in the defenders' deed of nomination and appointment that the arbiter should give two, or alternative, findings of the amount or amounts to be found due to the pursuers, was illegal and invalid, nominated and appointed an arbiter on their part along with the defenders' arbiter. The said arbiters appointed an oversman, and on 19th October 1894 pronounced their final sentence and decree-arbitral.

By the said decree-arbitral the arbiters found that the District Committee were liable to pay as compensation to the pursuers—“I. ( a) On the footing that the said claimants are entitled to compensation for loss, injury, and damages as aforesaid, sustained and to be sustained by them to the term of Whitsunday 1898 only,” the sum of £2573, 3s. 0 1 4d; “( b) on the footing that the said claimants are entitled to compensation for loss, injury, and damages as aforesaid, sustained and to be sustained by them to the term of Whitsunday 1911, being the natural termination of said lease,” the sum of £6307, 14s. 1d. II. In respect of the lands taken for way-leave the sum of £50.

The pursuers maintained that they were entitled to compensation under the second of the above alternative findings, and accord-ingly claimed the sum of £6307, 14s. 1d.

The pursuers pleaded—“(2) The condition in the said lease with regard to a break being personal to the parties thereto, and not having come into operation, the defenders are not entitled to found upon the same, and the pursuers are entitled to compensation” in terms of the second branch of the first head of the said decree-arbitral.

The defenders pleaded, inter alia—“(3) On a sound construction of the pursuers' lease, they are entitled to compensation only on the footing of their tenancy expiring at the first break therein. (4) The pursuers having no vested right or jus quœ-situm to a continuance of their tenancy beyond the date of the first break in their lease, they are not entitled to decree as concluded for.”

On 3rd July 1895 the Lord Ordinary ( Stormonth Darling) pronounced an interlocutor in which he found, decerned, and declared in terms of the conclusions of the summons.

The Lord Ordinary's note was as follows:—“The question here is whether the tenant of a farm holding under a lease for a term of years with breaks in it available to either party, is entitled to receive compensation under the Lands Clauses Act on the footing of his tenancy enduring for the full period of the lease, or only till the first break after the land is taken.

It is a new question, on which there is no direct authority. I have found it a difficult one, and I do not profess to have arrived at a very confident conclusion. But, on the whole, it seems to me that the tenant is entitled to compensation for the full term.

I admit the force of the defenders' argument that a lease containing mutual breaks binds the parties only till the first break arrives, and that they are then perfectly free to make a new bargain. They may do so or they may not; nobody can tell till the time comes for giving notice. But in the meantime a portion of the farm is compulsorily taken on the footing of full compensation, which can only be assessed once for all, and must be determined according to the vested rights and interests in the land as they exist at the time.

Now, what was the nature of the pursuers' right to this farm when the defenders took 66 acres of it to form a reservoir? It was a right to possess it for nineteen years from Martinmas 1891, subject to the double contingency of the tenants being turned out of it by the landlord at the end of six, eleven, or sixteen years, or of their electing to go of their own accord at one or other of these period. For the loss of the part taken the statute provides, in the first place, a proportional abatement of rent, and so far there is no difficulty. But when further compensation is claimed, it is on the footing that the loss of the part taken deprives the tenant of the profits which he would have made out of that part during the remainder of his lease, and also that it will diminish the profit which he is likely to make out of the part which is left to him.

Now, profit being the postulate of the claim, it is not to be supposed that the tenant would himself make use of a break in the lease so as to terminate a beneficial contract. Indeed, this power on the tenant's part may be regarded as making the lease more valuable to him, and certainly it can never make it less so. Then, if the break be considered on its other side, as an option on the part of the landlord, it is difficult to see why a third party, like the promoters of an undertaking, coming in under compulsory powers, should take any benefit from the possibility or even the probability of the option being exercised so as to turn the tenant out. In short, the existence of the contingency does not destroy the tenant's vested right to possess for the full period, though it makes his right defeasible in a certain event. I do not see my way to hold that a break in favour of the tenant alone would diminish the value of a right, which in truth it enhances, nor that a break in favour of the landlord alone ought to be treated as a certainty, when in truth it is only a chance. But if neither of these powers standing alone would have the effect for which the defenders contend, it is very difficult to see why the mere combination of the two should make all the difference.…

I do not know whether the arbiters, in arriving at the larger of the two sums, made any allowance for the possibility of the lease being terminated at one of the breaks. Certainly that was quite a proper matter for them to consider, but their award is not before me on its merits, and

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the decision of the present question cannot be affected by anything which they did or left undone.”

The defenders reclaimed, and argued—The question here was, What is the tenancy? It was not a lease for nineteen years; it was a lease only for six years, and if the tenant sat longer, it was only in virtue of a new consent given six months before the termination of the first period. The case was thus distinguished from the Solway Junction Railway Company v. Jack-son, March 12, 1874, 1 R. 831. The contingency, in short, was precisely on a footing with the chance of tacit relocation at the end of a nineteen years' lease. If the tenant got compensation on the larger scale, he would, of course, throw Up his lease at the end of the first six years.

Argued for the respondents—The Lord Ordinary was right. The lease is for nineteen years with the chance of a break; not for six years with the chance of a renewal. The pursuers were therefore entitled to declarator and decree— The Queen v. Kennedy, February 8, 1893, L.R. (1893), 1 Q.B. 533; Bexley Heath Railway Company v. North, June 9, 1894, L.R. (1894), 2 Q.B. 579.

At advising—