Scottish Court of Session Decisions

On February 18, 1907, Miss Jane Wilson Forrest, Woodhouse, Blantyre, and others, the testamentary trustees of the late John Clark Forrest of Auchinraith, Blantyre, who died on 28th August 1893, raised an action against Merry & Cuninghame, Limited, iron and coal masters, Glasgow, in which they sought declarator (with corresponding interdict) “that the defenders are not entitled while they continue tenants of the pursuers under the lease entered into between the said John Clark Forrest, on

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the one part, and Merry & Cuninghame, carrying on business as iron and coal-masters in Glasgow, … and … the individual partners of that company, on the other part, dated 4th January 1889, and under relative minute of agreement between the same parties, also of the said date, to work the coal in the following lands in the parish of Blantyre and county of Lanark, namely, the lands of Birdsfield, sometime belonging to the trustees of the late Archibald Craig, Esq.; the lands of Springwell, sometime belonging to Mrs Janet Herbertson or Jackson, widow of Andrew Jackson, Esq., of Spittal, and part of the lands called Auchinraith, and a small field of about 4 acres called Aikenfin or Aitinfin, both sometime belonging to John Craig, Esq., of Bellsfield, to any greater extent than 21,215 tons annually in all, or such other extent as is required to enable them, the defenders, to pay to the several proprietors of the said lands such sums of lordship as will amount to but not exceed fixed rents, amounting in cumulo to £550 sterling per annum.”

The lease referred to had conferred power on Merry & Cuninghame, whose successors the defenders were, to sink pits for the working not only of the lessor's minerals, but also of those on adjoining properties, and about the same date the lessees had made new, or adjusted old, leases of the minerals in the adjoining properties mentioned in the summons.

The minute of agreement referred to contained the clause quoted supra in rubric upon which the decision of the case turned, and also this clause—“Although by the foresaid lease it is expressly provided and declared that should the lordship in any year fall below the amount of fixed rent, the second parties shall be entitled to make up the deficiency from the excess of lordship, if any, above the fixed rent which may be payable in any three subsequent years, it is hereby expressly provided and declared that the second parties shall only be allowed one year to make up any such deficiency which may have taken place from the excess of lordship above fixed rent, if any, and that in the year immediately following: Declaring, however, that this restriction shall not apply while and so long as the tenants restrict their output from the said adjoining proprietors' land, so that the lordships payable to them do not exceed the fixed rents of £550 above mentioned.”

The defenders, inter alia, pleaded—“(6) The defenders being entitled to work the minerals in the adjoining lands without restriction on payment of the wayleave provided in said minute of agreement of 1889, should be assoilzied.”

The circumstances are given in the opinion, infra, of the Lord Ordinary ( Salvesen), who, on November 14, 1907, pronounced an interlocutor finding that the defenders were not entitled to work out the coal in the lands specified “to any greater extent than is required to enable them to pay to the several proprietors of said lands such sums of lordship as will amount to, but not exceed, fixed rents amounting in cumulo to £550 sterling per annum.”

Opinion.—“The late John Clark Forrest was proprietor of the estate of Auchinraith, a property which contains valuable seams of coal. It adjoins certain small properties called Birdfield, Springwell, part of Auchinraith, and Aitkenfin, and since 1872 the coal in these adjoining lands along with the coal in Auchinraith has been let to the same tenants and wrought by pits in the lands of Auchinraith. The pursuers are the trustees of Mr Forrest and now own the estate of Auchinraith, and the defenders are a limited company who are the successors of the original tenants of the mineral field.

“On 4th January 1889 Mr Forrest granted a lease of the coal in his lands of Auchinraith to the defenders' authors for thirty-one years from the term of Whitsunday 1888 for payment of a fixed rent of £2000 per annum or lordships in the lessors' option. By this lease Mr Forrest conferred power on the tenants to sink pits for the purpose of working not merely the coal in the lands let by him but also any coal in the adjoining lands. The consideration for this privilege was the payment to Mr Forrest of a wayleave of a penny per 22 1 2 cwts. provided for under a previous agreement which was referred to and adopted in the lease. About the same time that this lease was entered into leases were granted or existing leases modified and confirmed by the proprietors of the adjoining lands, and it is a fair inference that the whole of these deeds were the outcome of a general agreement between the various proprietors and the mineral tenants.

Under the lease of 4th January 1889 it was provided that lordships which Mr Forrest was entitled in his option to exact instead of the fixed rent were to be paid to him according to a sliding scale, and that the wayleave of one penny per ton should be paid directly by the mineral tenants. The other proprietors also stipulated for a fixed rent, or in their option a lordship or a fixed sum of 7d. per ton of 22 1 2 cwts. The sliding scale appears to have been very favourable to Mr Forrest, for it provided that he should be entitled to payment of two-fifteenths of the average yearly selling price of the coal in the event of that exceeding the lordship of 6 2–9d. per ton of 20 cwts. Whenever accordingly the selling price of coal at the pithead exceeded 4s. 6d. or 5s. a ton, it was the tenants' interest after they had taken sufficient coal from the lands of Auchinraith to pay the fixed rent, rather to work out the coal beneath the adjoining lands than to increase their output from the minerals of Auchinraith.

Of even date with the lease the parties entered into a minute of agreement; and it is upon the construction of a clause in that deed that the main controversy turns. The clause is quoted at length in condescendence 4, and by it the defenders' authors ‘undertook and bound themselves that from and after the term of Whitsunday 1893 they will work the coal in the adjoining properties only to such an extent as to enable them to pay to the several

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proprietors thereof such sums of lordship as will amount to but not exceed the fixed rent agreed to by their existing leases to be paid to such proprietors respectively.’ Had the clause stopped there, there would have been no room for doubt, as the language is not open to two interpretations. There follows, however, a declaration in these terms—‘If in any year during the currency of this lease the sums payable to such proprietors shall exceed the said fixed rent, then and in that event the second parties shall be bound, as they hereby agree and bind themselves and their foresaids, to pay to the first party and his foresaid (that is, the pursuers) the sum of one penny per ton on every ton of coal worked from the lands of such adjoining proprietors in excess of the quantities necessary to make up or equal the said fixed rents payable to them as above mentioned.’

The defenders contend that this clause read as a whole gives them the right to work out the coals in the adjoining lands as fast as they choose on payment of one penny per ton on all coal from such lands in excess of the quantities required to make up the fixed rents, and they referred to various cases in which prohibitions with somewhat similar qualifications had been so construed— Woodward v. Giles, 2 Vernon 119; Aylet, 2 Atkin, 238; Leigh v. Lilley, 30 L.J.Ex. 25; while the pursuers referred to Gold, 8 Macph. 1006; Mackenzie, June 18, 1811, F.C. affirmed 6 Pat. 117, and Mackenzie, December 13, 1811, F.C. In further support of their construction of the clause the defenders maintained that so small a sum as one penny per ton could not be treated as a penalty for violating a prohibition, and they also founded upon the clause in the same agreement under which a restriction as to making up a deficiency between the fixed rent and the lordships payable in respect of the coal actually worked in any given year is not to apply ‘while and so long as the tenants restrict their output from the said adjoining proprietors' lands, so that the lordships payable to them do not exceed the fixed rents.’ They further point to the admitted fact that ever since 1893 there has been an average excess of output from the adjoining lands over the amount required to meet the fixed rents and lordships of about 55,000 tons per annum; and that notwithstanding the pursuers and their author have accepted the sum of one penny per ton on this excess, although it would have been far more to their interests to have insisted on the output from their own lands being increased. Finally they contend that the pursuers' construction of the clause if given effect to would be contrary to the good faith of the agreement made with the adjoining proprietors.

I am not much impressed with this last argument, because under the leases of the coal in the adjoining lands the defenders are not under any obligation to work the minerals so long as they pay the fixed rent. It may well be that the adjoining proprietors might have objected to being deprived of the chance of having their coals worked out more speedily, but that was a good reason why the minute of agreement should be entered into between the owners of Auchinraith and the mineral tenants alone; and if the mineral tenants are not violating any obligation which they undertook to the other proprietors, it does not seem improbable that they should have put themselves under this prohibition in a question with the pursuers. As regards the inference which is to be drawn from the actings, it must be noted that Mr Forrest, who was a party to the agreement, died on 28th August 1893, and that during his lifetime no question as to its construction could possibly have arisen. The argument would have been stronger if Mr Forrest, who no doubt had a clear view of what he was stipulating for, had consistently acted contrary to his own interests on the view of the agreement for which the defenders contend. But the fact that his trustees may either have misinterpreted the clause or not had their attention directed to it for fourteen years after his death does not seem to me to have much bearing upon the true construction. The other points which I noted first do at first sight seem to favour the interpretation on which the defenders found, for if the prohibition of working was to be enforced, one would have expected a higher penalty than a penny per ton to be exacted, even if to that be added the restriction to which I have already referred, and which in actual circumstances could have had no deterrent effect. I also recognise fully that a clause which is expressed as prohibitory may nevertheless be so qualified as to confer an option of contravening on payment of a stipulated sum; and the decisions quoted by the defenders contain illustrations of such clauses. In the end, however, the question comes to be one of construction of the particular clause; and I am of opinion that I cannot construe it as giving the mineral tenants a licence to work as much coal as they please from beneath the adjoining lands so long as they pay the stipulated one penny per ton. If that was the intention of parties I cannot understand why there was any prohibition at all. It would have been much simpler to have said that if the tenants worked coal in the adjoining properties, &c., then they should pay one penny per ton on the excess quantities so worked. On the other hand, it is possible to find a good reason for the clause being expressed as it is, for it would not always be easy to ascertain during the currency of any particular year whether the prohibition was being contravened; and in any event it practically gave the owners of Auchinraith the option either of enforcing the prohibition or of accepting the stipulated one penny per ton, whichever they might think most to their interest.

Parties were agreed that all that I should decide at present was this question of construction, so that they might have an opportunity of getting my judgment submitted to review without any further expense being incurred. I have accordingly

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limited my interlocutor to a finding in terms of the above opinion.”

The defenders reclaimed, and argued—The clause in dispute was not an absolute prohibition, but an option to work the coal on the adjoining lands to an extent in excess of that required to bring the lordships up to the cumulo fixed rents if a penny per ton were paid on that excess. Taken broadly, the effect of the whole deeds, which together constituted a general agreement, was a discharge of the wayleave of one penny per ton exigible from the adjoining proprietors and its reimposition on the defenders. If the clause were an absolute prohibition, then the stipulation for a payment of one penny per ton must be aimed at a set of circumstances which never could arise. Examples of such clauses construed as permissive occurred in Rolfe v. Peterson, 1772, 2 Br. P.C. 436; Woodward v. Gyles, 1690, 2 Ver. 119, and in the opinions of the Judges in Leigh v. Lilley, 1860, 30 L.J., Ex. 25. The case of Gold v. Houldsworth, July 16, 1870, 8 Macph. 1006, 7 S.L.R. 646, was distinguished by its circumstances and also by the terms of the clause in question, “found guilty” of contravention, as also were Mackenzie v. Craigies, June 18, 1811, F.C. 304, where the prohibition was in the event of the tenants' “neglect,” and Mackenzie v. Gilchrist, December 13, 1811, F.C. 419—see Lord President Hope at pp. 427–8. The interlocutor of the Lord Ordinary should be recalled.

Argued for the pursuers (respondents)—The real question was, what did the agreement mean. That was not affected by the prior history of the coalfield or the other documents. Assuming that the pursuers were bound to grant a wayleave for the adjoining proprietors' coals, there was no inconsistency in their having a right to limit the quantity of these coals which might be worked. The wayleave was granted not to the adjoining proprietors, but only to the defenders, the tenants. If their tenancy for any reason ceased, so would the right of wayleave. Turning to the agreement itself, it was signed contemporaneously with the lease by the pursuers' author to the defenders and meant to form part of it. Its most important provision (article 2) was giving the pursuers right to a lordship calculated on a sliding scale, if that was at any time larger than the rate of 7d. a ton—payable alike to the pursuers and the adjoining proprietors under their leases. It naturally resulted that if coal were dear it would be the tenants' interest rather to work the adjoining proprietors' coal than the pursuers. To provide against this was the object of the clause in question. Accordingly it began by prohibiting working the adjoining proprietors' coal in excess of an amount corresponding to their fixed rents. That was not unfair, as under the leases the defenders were expressly not bound to work at all. This prohibition was to take effect only as at Whitsunday 1893, when the original leases would have expired. The declaration which followed was not an option to the defenders to work more, but a provision for the event which well might happen without its being intended of a greater quantity being worked at any time. The language was significant:—“If in any year the sums payable to such adjoining proprietors should exceed the said fixed rents.” That pointed to an inadvertent, not to an intentional, excess. Further, the declaration was applicable to the whole period of the lease before as well as after the prohibition took effect. That sufficiently accounted for its existence. Again the clause bore that the consideration given by the pursuers was the renunciation from the beginning of the lease of the right to a wayleave on the whole coal wrought. That was plainly more than a consideration for all that would be left to them if the defenders' construction was sound, viz., the right to a wayleave on the excess over what corresponded to the fixed rent. The declaration at the end of the fourth article was similarly accounted for by the fact that it applied to the whole lease, not merely to the period after 1893. On the whole, the pursuers' construction was the natural construction. The defenders' construction was most unnatural—to commence with a prohibition when what was intended was the grant of an option. No doubt the wayleave payable if more coal was worked was pactional, not penal, but that made no difference as to the landlord's right to an interdict. Nor was it material that it might appear small (Fry on Specific Performance, 3rd ed., secs. 142, 146, 116, 156). The English cases cited by the defenders were inapplicable. They turned on the question of whether a payment stipulated for was or was not capable of modification as being a penalty. But that had no bearing on the question of whether the lease contained a prohibition entitling the landlord to interdict or an option to the tenant to do some act on payment of an increased rent. The Scots authorities strongly supported the pursuers' contention ( M'Kenzie v. Craigies, 18th June 1811, F.C., aff. 6 Paton 117; M'Kenzie v. Gilchrist, cit. sup.; Cross v. Muirhead, Hume's Decisions, p. 860; Campbell v. M'Laurin, Hume's Decisions, p. 864; Gold v. Houldsworth, cit. sup. In several of these cases the clause much more resembled an alternative, and in none was the act provided against of an irreparable character; yet in each case interdict was granted. The Lord Ordinary's judgment was sound.