Scottish Court of Session Decisions

On February 13th, 1902, at an extraordinary general meeting of the shareholders of the Linlithgow Oil Company, Limited, it was resolved that the company should be voluntarily wound up, and Messrs John Scott Tait, C.A., Edinburgh, and John Young, Glasgow, were appointed liquidators. On February 22nd, 1902, the liquidation was placed under the supervision of the Court.

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The company held a lease of their oilfield from the Earl of Rosebery, under which the landlord was entitled to a certain fixed rent, “or otherwise in lieu of the said fixed rent and in his option” to lordships at certain rates.

Lord Rosebery, who had on 11th February 1902 executed a sequestration of the company's effects under his hypothec as landlord, lodged a claim in the liquidation claiming a preferable ranking for the sum of £1596, 18s. 2d. in respect of lordships. The liquidators rejected this claim, but allowed a preferential ranking for £535, 2s. 4d., being the amount of the fixed rent payable under the lease. In a note the liquidators expressed their reasons as follows:—“The claimant claims a preferable ranking for the sum of £1596, 18s. 2d. in respect of lordships. Under the lease between the claimant and Thomas Spowart and others, dated 2nd and 23rd April, and recorded in the Division of the General Register of Sasines applicable to the county of Linlithgow, 27th May, all in the year 1884, the landlord is entitled to a fixed rent, ‘or otherwise in lieu of the said fixed rent and in his option’ to lordships at certain rates. The claimant has elected to claim lordships in lieu of rent, and as there is no hypothec or preference given to a landlord in respect of lordship, the claim for a preferable ranking must accordingly be rejected.”

The liquidators presented a note to the Court inter alia for approval of this deliverance. Lord Rosebery lodged answers in which he submitted that he was entitled to a preferable ranking in terms of his claim.

On 22nd July 1903 the Lord Ordinary ( Low) pronounced the following interlocutor:—“Recals the deliverances of the liquidators in so far as they have refused to the respondent a preferable ranking in respect of royalties or lordships, and remits to the said liquidators to give to the said respondent a preferable ranking in respect of the royalties or lordships to the extent to which they may be entitled thereto, upon the footing that the landlord's right of hypothec applies to royalties and lordships as well as to fixed rents: Quoad ultra sustains and approves of the said deliverances: Appoints the said liquidators to lodge in process amended deliverances giving effect to this interlocutor, and reserves in the meantime consideration of the question whether the respondent is entitled to immediate payment of the whole sums for which he is entitled to a preferable ranking or only to a substantial payment to account thereof.”

Opinion.—“The first question which was argued was whether in a lease of minerals the landlord's hypothec secures royalties beyond the amount of the fixed rent.

I take it to be settled that the hypothec can be used to secure payment of any sum due by the tenant to the landlord which is truly rent. The question therefore appears to me simply to be whether royalties can be regarded as rent? I am of opinion that they are rent and nothing else, because they are the stipulated return due by the tenant for the possession and use of the subject of the lease. In my judgment therefore the liquidators were wrong in holding that ‘there is no hypothec or preference given to a landlord in respect of lordship.’”

[ His Lordship proceeded to deal with other questions in the case turning on the terms of the particular lease.]

The liquidators reclaimed, and argued—The question whether a landlord had a right of hypothec for lordships on royalties had never been decided. It ought now to be decided in the negative, because the hypothec of a landlord was an anomalous right which should not be extended to cases which were not covered by authority—Hunter, Landlord and Tenant (4th ed.), ii. 359; Rankine, Leases (2nd ed.), p. 339; Robertson v. Clark, June 1, 1842, 4 D. 1317; Withan v. Young's Trustee, July 20, 1866, 38 Sc. Jur. 586. No case could be found in the history of hypothec in which it had even been claimed for royalties. It did not extend to a contract for cutting down trees— Muirhead v. Drummond, May 16, 1792, reported in 2 Bell Com. (M'L. ed.), 27. Admitting that royalties had been held to be covered by the term rent under the Aberdeen Act and in questions of estimating a composition, it was not every form of rent that was covered by hypothec. The distinguishing point with regard to royalties was that their amount could not be ascertained by other creditors from the terms of the lease.

Argued for the respondent—Although there was no direct decision that royalties were covered by hypothec, yet it appeared that such a claim had been sustained in Lindsay v. Earl of Wemyss, May 18, 1872, 10 Macph. 708. But even if the question were looked upon as new the Lord Ordinary was right. Once it was settled that the return from mines was to be regarded as rent, which was now settled— Weir's Executors v. Durham, March 17, 1870, 8 Macph. 725; Allan's Trustees v. Duke of Hamilton, January 12, 1878, 5 R. 510, 15 S.L.R. 279; Earl of Home v. Lord Belhaven, July 19, 1900, 2 F. 1218, 37 S.L.R. 990, rev. May 25, 1903, 40 S.L.R. 607—there was no distinction between lordships and fixed rent. The lordship was simply rent calculated in a particular way.

At advising—