Scottish Court of Session Decisions

The Danish Dairy Company, Limited, Edinburgh, pursuers, brought an action against James Gillespie, Motherwell, defender, for payment of £250 as damages in respect of the breach of an alleged contract of lease of a shop entered into between the pursuers and the defender. The lease in question was constituted by informal writings passing between the agents of the parties. The pursuers averred that these writings had been rendered valid by the fact that the landlord's agent had, in accordance with one of the stipulated conditions of the lease, accepted a cheque from the pursuers' agent in payment of his account of expenses; and also by the fact that in reliance on the informal agreement the pursuers had, in the defender's knowledge, abstained from taking steps to procure another shop. By amendment made at another stage they added an averment that the defender, on or before 1st December 1919, when the informal negotiations terminated, had authorised his law agent to complete the contract on his behalf in whatever shape, formal or other, he thought expedient, and that the law agent had acted in pursuance of that authority when he cashed the cheque.

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The pursuers pleaded, inter alia—“2. The defender having refused to implement his part of a contract of lease between him and the pursuers' authors, constituted said contract by improbative writings and rei interventus, as condescended on, is liable in damages to the pursuers. 3. The defender is barred from resiling from the contract of lease condescended on ( a) by mora and acquiescence, and ( b) by homologating the said contract.”

The defender pleaded, inter alia—“4. The alleged lease founded on by the pursuers not having been granted by the defender, the defender is entitled to be assoilzied. 5. The defender not having validly bound himself to grant the lease in question, he is entitled to be assoilzied. 6. Separatim. The contract in question being one for a lease of heritage, and not being holograph or tested, the defender was entitled to resile therefrom, and having timeously resiled, he is entitled to be assoilzied. 7. The defender not having any contract with the pursuers, et separatim, not having committed any breach of contract, he is entitled to be assoilzied.”

On 17th June 1921, the Lord Ordinary ( Hunter), after a proof, decerned against the defender for payment of £140 as damages in full of the conclusions of the summons. The nature of the correspondence and of the evidence sufficiently appears from the opinion of the Lord Ordinary.

Opinion.—“In this action the Danish Dairy Company, Limited, sue a Mr Gillespie, residing at Oakdene, Motherwell, for damages in respect of his refusal to implement his part of an alleged contract of lease entered into between him and their authors.

The late Mr George Jamieson, who carried on business under the designation of the Danish Dairy Company, of which he was sole partner, was tenant of the premises No. 27 Craigneuk Street, Wishaw, for ten years prior to Whitsunday 1920, under leases between him and the defender, the last of which was for the five years ending at Whitsunday 1920, and carried on business there as a dairy produce and provision merchant during said period. On 10th March 1919 Mr Jamieson died, and thereafter the business was carried on by his trustees, by whom it was transferred to the pursuers.

On 13th November 1919 Mr Pole, the agent for Mr Jamieson's trustees, wrote to the defender regarding a renewal of the lease, and while suggesting that he might agree to some reduction of rent intimated that his clients would be prepared to take a lease for say three years on the same conditions as at present. The defender handed this letter over to Mr Marshall, his agent and factor, with authority to deal therewith, giving him specific instructions as to charging an increased rent and providing that all expenses of the lease were to be borne by the tenants. Acting upon these instructions Mr Marshall wrote to Mr Pole,—‘My client cannot agree to any reduction of the rent, and indeed is not disposed to continue the lease after Whitsunday next. He would, however, continue it for one year from Whitsunday at a rent of £23. The only terms upon which my client would agree to a lease being entered into are:—For two years at a rental of £23; for the following two years at a rental of £25; and for the year following at a rental of £27—all expenses of the lease to be borne by the tenant.’ After consulting his clients Mr Pole on 22nd November wrote asking if the defender would be prepared to grant a lease on the terms proposed except with regard to expenses with a break in their favour at the end of two years. Mr Marshall refused to assent to either of these two proposals. On 25th November 1919 Mr Pole wrote to Mr Marshall that his clients still hoped that the defender would agree to a break at the end of two years in their favour only, but if not ‘they have instructed me to agree to your client's terms for a five years’ lease as to rent and expenses, the terms of the lease otherwise to be the same as under the existing lease. I shall accordingly be glad to receive at your convenience a draft lease for revisal.’ On 1st December Mr Marshall replied—‘I note that you have been instructed to agree to my client's terms and I am accordingly preparing the draft lease.’

At this date I am of opinion that there was complete agreement between the parties as to the subjects of the lease, the rent, the duration, and other conditions of the lease. It is now suggested by the defender that he made an express stipulation in his instructions to Mr Marshall that he should be protected against any claim for internal repairs, and that no lease should be binding until the draft thereof had been submitted to himself for personal approval. I regret that I feel bound to look upon this statement as a mere afterthought. The defender's evidence both in substance and in the manner in which it was given appeared to me unsatisfactory and unconvincing. A letter has been recovered from Mr Marshall to the defender dated 1st December 1919 in these terms—‘I have now got Mr T. M. Pole's acceptance on behalf of the lessees of your terms for the renewal of the lease of above premises. The lease is to be for five years at a rental of £23 for the first two years, £25 for the next two years, and £27 for the last year, with a break in favour of either party at the end of two years. The expenses of the lease are to be borne by the lessees.’ The defender's reply to this letter, if he made a written one, has not been recovered. He certainly never suggested that he in any way disapproved of what his agent had done.

On 21st January 1920 Mr Marshall sent to Mr Pole for revisal draft lease between the defender and Mr Jamieson's trustees. The lease was revised and returned on 22nd January with a request for the engrossment for signature within the next week or ten days. Mr Marshall there after forwarded the lease to Mr Pole on 29th January asking that he should have it back duly signed at bis convenience. Some delay seems to have occurred in getting the signatures of the trustees, but on 25th February the lease was returned by Mr Pole to Mr Marshall duly signed by the trustees, together with a

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cheque for £5, 5s. 11d. in payment of Mr Marshall's note of expenses which he had been expressly instructed by the defender to recover from the tenant. On 27th February Mr Marshall returned the note of his expenses duly discharged and said he would send the tenant's copy of the lease in course. On the same date he informed the defender that he had now had the lease of the shop returned, signed on behalf of the Danish Dairy Company, and ‘shall be glad if you will arrange to call here at your convenience to sign it also.’ He duly cashed the cheque in his favour for expenses.

Meantime a disturbing factor had entered into the situation. A proposal had been made to Mr Marshall by a firm of law agents on behalf of clients to purchase the property, of which the shop tenanted by Mr Jamieson forms part, but a condition of the sale was that the lease to Mr Jamieson's trustees should not be proceeded with. This proposal was communicated to the defender by a letter from Mr Marshall, also dated 27th February, in which he says he would be glad to have a call from his client to discuss this. A meeting thereafter took place about 1st March, but as I do not trust the defender's evidence I find it difficult to say what exactly occurred at this meeting. The lease was not in fact signed, but if the reason for this had been what is now suggested by the defender, I should have expected some communication to have been made at once to the agents for the tenants, but this was not done. I do not hold it proved that the defender was not made aware of the circumstances that Mr Marshall had received payment of his expenses. I think, however, that Mr Marshall did inform his client that he might resile from the informal lease that had been concluded at any time prior to actually appending his signature thereto.

Negotiations were now continued as to the purchase of the property, and nothing further was done about the lease. The intending purchasers were induced to better the offer which they had made, and on 8th March Mr Marshall writes his client to call and see him on the 9th. Apparently the defender's son called on the 10th, for on that date Mr Marshall writes to his client referring to this call, and saying that he had according to the defender's instructions accepted the offer. On the same date Mr Marshall wrote Mr Pole that his client had sold the property and was not in a position to grant a lease to his clients, and enclosing his cheque for £5, 5s. 11d. in repayment of the amount forwarded to him on the 25th February. Mr Pole refused to accept the cheque, expressed his astonishment at the contents of the letter, and intimated that his clients would hold the defender to the lease. Correspondence followed. The pursuers arranged to take premises similar in character to those occupied under the defender at an increased rent, and as the defender refused to recognise that he had acted in excess of his legal right the present action was raised.

On the evidence I am prepared to hold that everything done by Mr Marshall was done within the authority conferred upon him by the defender, that he was authorised to receive the £5, 5s. 11d. which he obtained from Mr Pole, and that that payment falls to be treated as a payment to the defender.

The question of law involved in the case remains to be considered. It was contemplated by parties that a formal lease would be drawn up, though this was necessarily a mere formality, as it was agreed in December 1920 that the new lease was to be similar in terms to the existing one. Until actual signature by him of the lease the defender was entitled to resile, unless this right was excluded by his having homologated the imperfect contract or by rei interventus, i.e., a change of circumstances prejudicial to the tenant of which the defender had, or may be presumed to have had, knowledge. The pursuers maintain that they have succeeded in establishing both these grounds of bar. It has been decided that receipt by a seller of part payment of the purchase price of lands prevents a seller from founding upon the informality of a bargain concerning heritage. The defender made payment to him by the tenant of the whole expenses of his law agent a condition of his granting the lease. I think, therefore, that payment to his law agent of his expenses was in law an acceptance by him of part of the consideration which he had stipulated for, and amounts to such an approval of the lease as prevents his resiling.

As regards rei interventus it is proved that the pursuers had given one of their employees instructions to look out for suitable premises about six months before the termination of their lease with the defender. After their negotiations with Mr Marshall had resulted as they thought in the conclusion of a bargain for a new lease, they stopped their inquiries, and for about three or four months made no effort to secure other premises, in the belief as they thought that a concluded bargain had been effected. During this time rents were rising, and premises that were on the market were secured by others. No doubt the pursuers finally succeeded in getting suitable premises, but the rent they had to pay was substantially higher than they would have had to give at an earlier period. The defender says that he did not know that the pursuers were in any way prejudiced by not securing the lease, but I do not think that it can be taken that one interested as the defender was in property was ignorant of the prejudice being suffered by the pursuers in being out of the market at the critical period when rents were rising and accommodation was becoming scarcer. In my opinion the defender was not justified either in equity or in law in selling his property without regard to the rights acquired by the pursuers and is therefore liable to them in damages.”

[ His Lordship then proceeded to deal with the question of damages.]

The defender reclaimed—The argument turned largely on the nature of the evidence and sufficiently appears from the opinions of the Judges. The following authorities were cited:—For the defender

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and reclaimer— Dallas v. Fraser, 1849, 11 D. 1058; Mitchell v. Scott's Trustees, 1874, 2 R. 162, per Lord Ormidale at p. 167, 12 S.L.R. 108; Caithness Flagstone Quarrying Company v. Sinclair, 1880, 7 R. 1117, 1881, 8 R. (H.L.) 78, per Lord Watson at p. 90, 18 S.L.R. 466; Ballantine v. Stevenson, 1881, 8 R. 959, per Lord Justice-Clerk Moncreiff at p. 971, and Lord Craighill at pp. 975, 976, 18 S.L.R. 696; Bell's Prins., secs. 25, 26 and 27.

For the pursuers and respondents— Earl of Kinghorn v. Hay, 1674, M. 8414: Lawrie v. Maxwell, 1697, M. 8425; Campbell v. M'Pherson, 1793, Hume 786; Sutherland v. Hay, 1845, 8 D. 283, per Lords Medwyn and Moncreiff at p. 286 and 287; Church of England Life and Fire Assurance Company v. Wink, 1857, 19 D. 1079; Forbes v. Wilson, 1873, 11 Macph. 454, per Lord Neaves at p. 467; Bathie v. Lord Wharncliffe, 1873, 11 Macph. 490, 10 S.L.R. 398; Ballantine v. Stevenson, 1881, 8 R. 959, per Lord Justice-Clerk Moncreiff at p. 974, 18 S.L.R. 696; Sutherland's Trustee v. Miller's Trustee, 1888, 16 R. 10, per Lord Young at p. 13, 26 S.L.R. 6; Buchanan v. Harris & Sheldon, 1900, 2 F. 935, per Lord President Kinross at p. 938, and Lord M'Laren pp. 939 and 940, 37 S.L.R. 729; Station Hotel, Nairn, Limited v. Macpherson, 1905, 13 S.L.R. 456; Bell's Prins., secs. 26 and 27.

At advising—