Scottish Court of Session Decisions

The following narrative of the facts in this case, as they appeared from a proof, is taken from the opinion of the Lord Ordinary (Low)—“This action is brought by the trustee on the sequestrated estate of Alexander Mitchell, builder in Edinburgh,

Page: 437↓

who acquired a piece of ground at Jessfield Terrace, Leith, from the defenders the trustees of the late James Galloway, conform to feu-charter dated 17th and recorded 19th August 1899. The summons concludes, in the first place, for declarator that the defenders Galloway's trustees are bound to allocate on a part of the ground feued upon which a tenement of buildings has been erected the sum of £20, as the proportional part of the cumulo feu-duty of £50. There is also a conclusion for damages in respect of loss which the pursuer alleges that he has sustained by reason of the refusal of the defenders to make the allocation. Although the feu-charter was not executed until August 1899, the term of entry thereunder was Whitsunday of that year, and a considerable time prior to the date of the charter Mitchell had entered into possession of the ground, and had commenced to erect a tenement of dwelling-houses upon the portion of it referred to in the summons. Mitchell was taken bound to erect upon the ground within three years of the date of entry buildings of the value of not less than £5000, conform to plans to be approved by Galloway's trustees. Mitchell had some months before the date of the charter submitted plans of buildings, which were approved of by the trustees and by the Dean of Guild. These buildings consisted of a tenement of dwelling-houses upon the eastmost portion of the feu (which is that now in question), and a hall and dwelling-houses upon the remainder of the ground. Mitchell proposed in the first place to erect the tenement upon the eastern portion of the ground, and to enable him to do so he required a building loan. He accordingly in July 1899 applied to the Standard Property Investment Company, who agreed to advance to him a sum of £2500 upon the footing that the feu-duty of the ground upon which the tenement was being erected was £20. The total feu-duty for the ground feued was £50, but it was provided in the charter (the terms of which had been adjusted although the formal deed had not been executed) that Mitchell should have power, as soon as buildings were erected upon the ground to the stipulated value, to sell any part thereof, and to allocate the feu-duty among the purchasers in such proportions as might be approved of by the superiors. It was apparently in view of that provision that Mitchell stated in his application to the Standard Property Investment Company that the feu-duty of the ground upon which he was building was £20. The company having agreed to advance £2500, their law-agent Mr M'Laren was instructed to prepare the necessary bond, and he then ascertained that the cumulo feu-duty was £50, and that the superiors had not consented to £20 being allocated upon the portion of the ground in question. Mr M'Laren therefore informed Messrs Emslie & Guthrie, Mitchell's law-agents, that they must obtain a letter from the superiors ‘fixing £20 as the feu-duty upon the area of ground disponed in the bond.’ Messrs Emslie & Guthrie accordingly entered into communication with Messrs Galloway & Davidson, who were the law-agents for the superiors, and on 17th August they wrote to Mr George Galloway, a partner of the firm of Galloway & Davidson, saying—‘As arranged by telephone to-day, we now send draft letter which the bondholders require at settlement to-morrow morning. The feu-charter states that the superiors require to approve of the feu-duty and also the plans, and it will be a favour if you can send us this letter to-night.’ Mr George Galloway on the 18th August, after consultation with his brother James Galloway, who was one of Galloway's trustees (the superiors), wrote to Emslie & Guthrie a letter in terms of the draft which they had enclosed in their letter of 17th August. The letter of 18th August, which is signed ‘Galloway & Davidson,’ was in the following terms—‘With reference to our telephone conversation to-day, we beg to state that the superiors are satisfied with the plans of the tenement in course of erection on the north side of Jessfield Terrace, and that when the same is completed they are prepared to allocate thereon £20 of the cumulo feu-duty payable under the charter.’ Upon the faith of that letter the transaction between Mitchell and the Standard Property Investment Company was completed, and the Company made advances from time to time to Mitchell as the building proceeded. If it had not been for the letter the advances to Mitchell would not have been made. Mr George Galloway admitted that he was informed early in August that Mitchell required a building loan, and that he knew that the object of the letter of 18th August was to enable the loan to be arranged. Mitchell's estates were sequestrated under the Bankruptcy Acts in February 1900. The building was not then finished, but it was completed by Mitchell's trustee, who then advertised it for sale, and he received an offer of £3250 from Messrs Mackay & Young upon the footing that the proportion of the feu-duty allocated upon the ground was £20. Messrs Galloway & Davidson, however, refused to grant a formal allocation of the feu-duty, or to recognise that their letter of 18th August 1899 amounted to an obligation to do so, and accordingly the proposed sale fell through.”

In addition to the facts stated by the Lord Ordinary in the foregoing narrative it appeared that the trustee had taken no steps to erect any other buildings upon the ground feued. He declined to give any undertaking to do so. It was not disputed that the buildings already erected were not worth £5000.

The pursuer pleaded, inter alia—“(1) The defenders having agreed to allocate a feu-duty of £20 on the eastmost portion of the said feu, and rei interventus having followed upon the said agreement, the pursuer is entitled to decree of declarator and implement, as concluded for.”

The defender pleaded, inter alia—“(4) Esto, that the said letter imports a binding obligation upon the defenders, such obligation must be construed along with the feu-charter to which it refers; and, upon a

Page: 438↓

sound construction of the charter and relative letter no obligation is imposed on the defenders to allocate the feu-duty in question unless and until the whole of the stipulated buildings are erected in terms of the charter, and such not having been erected the defenders are entitled to absolvitor. (5) The pursuer, in respect that he is seeking to enforce against the defenders the provisions of the said charter in favour of the vassal, without offering implement of the reciprocal provisions therein incumbent on the vassal, is not entitled to maintain this action, and the defenders are therefore entitled to absolvitor.”

On 18th April 1902 the Lord Ordinary pronounced an interlocutor by which he decerned in terms of the declaratory conclusions of the summons; found the defenders liable to the pursuer in damages; assessed the same at £300; and quoad ultra continued the cause.

Opinion.—[After stating the facts, ut supra]—“These are the circumstances under which the present action is raised, and the first question is, what is the meaning and effect of the letter of 18th August?

“The defenders contended that the letter only amounted to an agreement on their part that £20 should be allocated upon the tenement in question when the time for allocation arrived, namely, when buildings had been erected upon the ground feued to the stipulated value, and that as that had not been done they were under no obligation to make the allocation.

I am unable so to construe the letter. It refers to ‘the tenement in course of erection,’ and provides that the allocation is to take place ‘when the same is completed.’ These words seem to me to be unambiguous, and not to be capable of being read (as the defenders seek to read them) as meaning that the allocation was to be made not when the tenement in course of erection was completed, but when certain other buildings had also been erected.

The defenders further argued that, even assuming that they hound themselves to allocate the feu-duty when the tenement was completed, the circumstances had so changed when that event occurred that they were absolved from their obligation.

As I have said, Mitchell was bound within three years to erect buildings upon the ground to the value of not less than £5009, and when he became bankrupt he was unable to fulfil that obligation. Further, his trustee, although he completed the tenement at considerable cost to himself, does not appear to have contemplated proceeding with buildings upon the remainder of the ground. In these circumstances the defenders maintain that as Mitchell was unable to implement his obligation in regard to building they were not bound to allocate the feu-duty.

Now I do not doubt that when Mr Galloway wrote the letter he assumed that when the tenement was completed Mitchell would proceed with the erection of the other buildings proposed, and would thereby secure the remainder of the feu-duty; but I think he took the chance of Mitchell not being able to do so. The right of the defenders under the charter was to refuse to consent to any allocation until the whole of the feu-duty was secured by the erection of buildings to the stipulated amount, but by the letter they consented to an allocation upon the completion of the tenement then in course of erection, in order that Mitchell might obtain the building loan which he required to enable him to complete that tenement. The loan was in fact obtained upon the faith of the letter, and the proceeds were expended in erecting the tenement. In these circumstances I am of opinion that the defenders were not entitled to refuse to allocate the feu-duty when the tenement was completed, and I shall accordingly grant decree in terms of the declaratory conclusions of the summons.

In regard to the claim for damages, it is proved that if the defenders had not refused to allocate the feu-duty the tenement would have been sold at Whitsunday 1901 at the price of £3250. It is also proved that since that date property of the kind in question has very considerably depreciated in value. I am therefore of opinion that damages are due, and upon consideration of the whole evidence I think that a fair sum to assess is £300.”

The defenders reclaimed. Besides an argument to the effect that the letter of 18th August (quoted supra) only bound the superior to allocate when the whole buildings were erected, they maintained that, even if that letter was to be construed as an obligation to allocate when the particular building in question was erected, it had to be read with the feu-charter as forming one contract, and that the pursuer could not insist upon their fulfilling the obligation to allocate unless he was prepared to fulfil the obligation to erect buildings of the value of £5000— Anderson v. Hamilton & Company, January 22, 1875, 2 R. 355, opinion of Lord Neaves at p. 363, 12 S.L.R. 267.

Counsel for the respondent supported the reasoning of the Lord Ordinary.

At advising—