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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> HJ Banks & Company Ltd v. Shell Chemicals Uk Ltd [2005] ScotCS CSOH_123 (08 September 2005)
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Cite as: [2005] CSOH 123, [2005] ScotCS CSOH_123
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HJ Banks & Company Ltd v. Shell Chemicals Uk Ltd [2005] ScotCS CSOH_123 (08 September 2005)
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OUTER HOUSE, COURT OF SESSION [2005] CSOH 123 |
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CA11/05
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OPINION OF LORD CLARKE in the cause H J BANKS AND COMPANY LIMITED Pursuers; against SHELL CHEMICALS UK LIMITED Defenders:
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Pursuers: Dean of Faculty; Bowen, Dundas & Wilson C. S.
Defenders: Reid, QC; Biggart Baillie
8 September 2005
[1] In this commercial action the pursuers seek a Declarator in the following terms:"For declarator that the defenders are contractually bound by the Deed of Servitude dated 2 April and 14 April both 1992 to refer the claim made by the pursuers by letter of 7 December 2004 for compensation to a single arbiter to be agreed between the pursuers and the defenders and failing agreement such arbiter to be appointed by the Chairman for the time being of the Scottish Branch of the Royal Institution of Chartered Surveyors".
As the terms of the conclusion indicate the pursuers' case is based on a contractual right, which they assert they are entitled to enforce against the defenders.
[2] The action came before me for debate on the defenders' first plea-in-law which is a plea to the relevancy of the pursuers' averments. [3] The pursuers' case, as averred, relies on the provisions of a deed to which they were not parties at the date of its execution. The Dean of Faculty, who appeared at the debate, on behalf of the pursuers, disclaimed any case based on ius quaesitum tertio. [4] The pursuers are tenants under a Mining Lease granted to them by Robert Brown and dated 8 and 28 March 2002 and 2 April 2002 (6/1 of process) relating to land at Bogo Farm, Avonbridge, Falkirk. Robert Brown is the heritable proprietor of the land in question. Robert Brown's predecessor, in title, to the land, George Wilson, granted a Deed of Servitude in favour of the defenders, the said deed being executed on 2 April and 14 April 1992 and recorded GRS Stirling, 31 August 1992 (6/2 of process). That Deed of Servitude granted to the defenders servitude rights relating to a pipeline of theirs which runs over the area of land leased by the Mining Lease in favour of the pursuers. The servitude rights in favour of the defenders include a right of continued support for the pipeline in question. In Clause 1(2)(d) of the Deed of Servitude, "the Owner", where that expression appears in the deed, is said to mean "The person whose name and address are set out in Part II of the schedule as heritable proprietor of the Property and unless the context so precludes includes his successors in title as such heritable proprietor". Part II of the schedule of the Deed of Servitude is headed "The Owner" and provides:"George Wilson, residing at Bogo Farm, Avonbridge, Stirlingshire, as an individual and as sole surviving infeft trustee of the firm of Wilson Brothers, Farmers, Bogo Farm, aforesaid".
By Clause 1(2)(c) of the Deed of Servitude the expression, "The Company" where it appears in the deed is defined as being the defenders "and its successors and assignees in whom the benefit of the servitude and other rights hereby granted shall for the time being be vested". The Deed of Servitude, by Clause 3, imposes obligations on the defenders. In particular, in Clause 3(1), it is provided that they undertake to the owner that they will:
"At all times take all reasonable and proper precautions to ensure that in the exercise of the Specified Rights as little damage as is reasonably practicable is caused to the Property and any crops or structures thereon or drains thereunder and pay compensation to the owner or other occupier of the property for any loss, damage or injury suffered by him by reason of the exercise of the Specified Rights or any of them except to the extent that such loss, damage or injury results from the negligence of the Owner or its tenants or licensees or other occupier or occupiers of the property or their respective servants or workmen or others authorised by them".
Clause 3(4) also provides that the defender will indemnify and keep indemnified:
"The Owner and his tenants or licensees or other occupier or occupiers for the time being of the Servitude Strip from and against all loss, damage, claims, demands, costs and expenses and liabilities whatsoever in respect of the exercise of the Specified Rights ..........".
In return the Owner undertakes certain obligations to the defender. Clause 5(1) of the Deed of Servitude is to the following effect:
"Subject as hereinafter provided the provisions (in this clause called 'the Mining Code') substituted by Part II of and the First, Second and Third Schedules to the Mines (Working Facilities and Support) Act 1923 for Sections 71 to 78 inclusive of the Railway Clauses Consolidation (Scotland) Act 1845 shall be deemed to be incorporated herein".
Clause 5(2) then provides, inter alia, as follows:
"In the construction of the Mining Code for the purposes of this Deed the following expressions used therein shall have the following meanings, that is to say:-
.........
'The mine owner' shall mean the 'Owner'".
Clause 5(3) states as follows:
"Save as provided by sub-clause (2) of this Clause the interpretations provided by Section 78C(1) and (2) of the Mining Code shall apply for the purposes hereof".
Clause 7 of the Deed of Servitude is an arbitration clause. It provides:
"Any difference which may arise between the Owner and the Company and for the determination of which this Deed does not expressly otherwise provide shall be determined by a single arbiter to be agreed between the parties or failing such agreement to be appointed by the Chairman for the time being of the Scottish Branch of the Royal Institution of Chartered Surveyors; Provided nevertheless that the Owner and the Company shall be entitled to institute proceedings to restrain the other from doing anything which is contrary to the terms and conditions of this deed."
It is in respect of that last quoted provision that the pursuers, in the present action, seek to have pronounced in their favour the Declarator as contained in their first conclusion.
[5] The circumstances in which the dispute between the parties arises are set out in Article 4 of condescendence where the pursuers aver, inter alia, as follows:"By letter and two Notices of Approach all dated 20 September 2002 the pursuers' surveyors notified the defenders' agents of the pursuers' intention to undertake open cast coal operations at Bogo Farm. By counter-notice dated 14 October 2002 the defenders' surveyors notified the pursuers' surveyors that sections of the pipeline should be regarded as protected works and that all minerals lying within the area of protection required to remain unworked ............ The said counter-notice served by the defenders on the pursuers amounted to an acknowledgement by the defenders that the pursuers were within the scope of the 'Owner' for the purposes of the Mining Lease. As a result of said counter notice, the pursuers accordingly provided the defenders with specification of their claim for compensation by letter dated 22 October 2004 in the sum of £704,115 which was not agreed by the defenders. By letter dated 7 December 2004 the pursuers called on the defenders to submit their claim for compensation to arbitration. By letter dated 30 December 2004 the defenders rejected the pursuers' call to submit their claim to arbitration. The letter and two Notices of Approach all dated 20 September 2002, the counter-notice dated 14 October 2002 and letters dated 22 October, 7 December and 30 December all 2004 are produced and referred to for their terms which are incorporated herein brevitatis causa". (my emphasis).
"In the foregoing provisions of this Act with respect to mines lying under or near a railway, unless the context otherwise requires 'Mine Owner' includes the owner, lessee, or other person entitled to work and get minerals; ..........."
While the provisions of the Mining Code did not apply, as a matter of statute, to regulate the rights and obligations of the parties to the Deed of Servitude, they had chosen to incorporate them subject to modifications, one of which was the definition of "Mine Owner". The question raised in the present proceedings from beginning to end was one of contract. To contend, as the pursuers, apparently did, that the Deed of Servitude had to be read as extending, by implication, the definition of "Owner" to include lessees was an attempt to imply what had been expressly excluded. In any event any implication would have had to arisen at the time when the Deed of Servitude was executed in 1992. At that time there was no mineral lease in favour of the pursuers who did not become mineral tenants until 2002 when the Mining Lease was executed. There were numerous references in the Deed of Servitude to third parties and how their position should be regulated which clearly distinguished them from persons to be subsumed under the definition of Owner. For example Clause 3(4) provides that the defenders would indemnify and keep indemnified "the Owner and his tenants or licensees or other occupier or occupiers" for certain losses arising during the exercise of the Servitude. The deed itself constitutes a grant by the heritable proprietor of the Servitude Rights in question. It was inappropriate to extend rights of the owner under the deed to parties other than him such as the pursuers.
[8] Senior counsel for the defenders then drew my attention to the notice served by the pursuers on the defenders which forms part of 6/3 of process. On the second page thereof it is stated:"NOW THEREFOR pursuant to the said Deed and the provisions of the Mines (Working Facilities and Support) Act 1923 NOTICE IS HEREBY GIVEN on behalf of the Mine Owner that".
That statement was given in the context of Clause 2 of the Notice in the preamble which is to the following effect: "Sub-clause 5(2) of the said Deed provides that the Mining Code shall be construed as if references therein to 'the Mine Owner' are reference to the Owner". The counter-notice served by the defenders (6/4 of process) was addressed to Messrs Wardell Armstrong who had sent the notice and the covering letter (6/3 of process) on behalf of the pursuers. In that counter-notice it was stated, on behalf of the defenders, inter alia, as follows:
"Your notices state that in each case the Owner has authorised H J Banks to do all things necessary to exercise the provisions of the Mining Code and whilst we are happy to deal with yourselves or H J Banks as agents, we would point out that Shell's contract is with the Owner".
The contents of the notice and counter-notice were consistent with the pursuers simply acting, in terms of the Mining Lease, as agents for the Owner. Senior counsel, in this connection, referred me to Clause 7 of the Mining Lease which is to the following effect:
"Shell Servitude:-
Notwithstanding anything to the contrary expressed or implied in the foregoing, these presents are granted entirely subject to the terms of the Deed of Servitude granted by George Wilson in favour of Shell Chemicals UK Limited dated 2 April and 14 April and recorded GRS Stirling on 31 August all 1992.
Banks undertake:-
(a) To comply with the terms thereof and to indemnify the Owner fully against any consequence of Banks' failure so to do;
(b) To comply with the provisions of the Mining Code as defined therein, as if Banks were the mine owner for the purposes of the Mining Code, and whereas in terms of the said Deed of Servitude, the mine owner is defined as meaning the Owner, the Owner appoints Banks as the Owner's agent to do all things incumbent upon the mine owner in terms of the Mining Code for the purposes of the said Deed of Servitude, notwithstanding the definition in the said Deed of Servitude, and Banks undertakes to the Owner so to do, and to do all things reasonably necessary to preserve the rights of the mine owner and the minerals proprietor for compensation in respect of the sterilisation of minerals, and to do nothing prejudicial to the availability of such claims to Banks and the Owner for their respective interests; and
(c) The Owner and Banks hereby undertake each to the other to keep the other generally informed with the progress of any claim for compensation which may be competent to them in respect of the sterilisation of any minerals with reference to the said Deed of Servitude and the Mining Code incorporated therein."
Senior counsel for the defenders submitted that the effect of those provisions was to appoint the pursuers, as agents, on behalf of the owner Mr Brown, to do all that was necessary under the Mining Code because, as a matter of fact, it was the pursuers who were working the minerals. In their capacity as such agents the pursuers could serve the appropriate notices and indeed conduct an arbitration on behalf of the owner. Reference was then made to a letter from Messrs Dundas & Wilson (6/10 of process), agents for the pursuers, dated 7 December 2004 which is in the following terms:
"We refer to previous correspondence and note that we act on behalf of H J Banks and Company Limited.
We note that they have now submitted a formal claim to you, by letter dated 22 October 2004 addressed to Mr G Ellis, which you have rejected. We now formally call upon you to submit to arbitration with H J Banks and Company Limited as agent for Mr Robert Brown and as principal qua tenant of property burdened by the Servitude in respect of the disputed claim.
If you fail to confirm within seven days that you will submit to an Arbiter's jurisdiction a court action shall be raised without further warning, seeking declarator that your clients are obliged so to submit".
The content of the letter, it was submitted by senior counsel for the defenders, indicated that the pursuers were seeking to wear two hats at any such arbitration, that is both as principal and as agent. That betrayed the misconception that bedevilled their whole approach. As a matter of contract law they were only acting as agents for the owner in terms of the Deed of Servitude and had no right qua principals, in their own capacity, to demand arbitration. The action should be dismissed.
[9] In reply, the learned Dean of Faculty, submitted that the pursuers were entitled to demand arbitration regarding the potential compensation due to them. After having gone through the relevant provisions in the Mining Code, the Dean of Faculty submitted that the provisions of the Code made it clear that the scheme for compensation and arbitration under that Code envisaged that a number of persons, with interests in the land in question, would be entitled to seek compensation and arbitration. The Dean of Faculty contended that in the contractual scheme, with which the present action is concerned, the word "Owner" should be read as meaning the persons who had the bundle of rights that might be affected by the serving of a counter-notice by the defender which would sterilise those rights. It was accepted, however, by the Dean of Faculty that standing the terms of the counter-notice (6/4 of process) it could not be said that, as yet, any notice had been served on the pursuers requiring them to desist from winning the minerals. [10] Although the pursuers have certain averments apparently seeking to support a case of personal bar against the defenders, which might turn on the language of the correspondence between the parties, in the event, the learned Dean of Faculty did not seek to support these averments by any substantial submissions in relation thereto. [11] Senior counsel for the defenders, in reply, accepted that the defenders had no contractual rights against the pursuer upon which they could rely. The defenders' concern was to restrict their liability to those persons to whom they were liable under the Deed of Servitude and to ensure that any arbitration proceedings, in terms thereof, ran in the name of the heritable proprietor of the lands in question, as was provided for in the Deed or, alternatively, in the name of the pursuers as agents for the heritable proprietor and with his consent. The point was that the defenders had never been asked to go to arbitration by the pursuers simply acting as agents for the heritable proprietor. [12] I am satisfied that the submissions made on behalf of the defenders are correct. The pursuers do not have a contractual right against the defenders to demand arbitration. They were not parties to the Deed of Servitude. As noted no argument based on ius quaesitum tertio in their favour was advanced. No other case but a contractual case was advanced by them. They cannot, in my judgement, seek to clothe themselves with that right, by the process of definition or construction, for which they argued. The express provisions of the Deed of Servitude regulate who is to be the "Owner" for the purposes of that deed and therefore the person who has the right to seek arbitration in terms of the deed and, in so doing, excludes the possibility of the pursuers or, anyone in their capacity, having that right. The provisions of the Mining Lease recognise the true position being that as long as they are lessees under that lease they are to act as agents for the heritable proprietor in relation to the operation of the Mining Code provisions. Clause 7(b) of the Mining Lease expressly recognises that for purposes of the Deed of Servitude the rights therein lie with the heritable proprietor. Clause 8 of the Mining Lease, it should be noted, provides for the allocation of compensation between the pursuers and the heritable proprietor once it had been recovered. As already indicated, while the pursuers have a plea relating to personal bar the learned Dean of Faculty did not advance any substantial submissions in relation thereto and I am satisfied that their plea is not supported by any relevant averments. [13] For all the foregoing reasons the pursuers have not, in my opinion, averred a relevant basis for the remedy they seek. I shall, accordingly, sustain the defenders' first plea-in-law and dismiss the action.