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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Messrs. Merry and Cuninghame v. James Brown, Trustee on the Sequestrated Estate of the late W. F. Campbell, Esq. of Islay [1863] UKHL 2_Paterson_1163 (26 March 1863) URL: https://www.bailii.org/uk/cases/UKHL/1863/2_Paterson_1163.html Cite as: [1863] UKHL 2_Paterson_1163 |
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Page: 1163↓
(1863) 2 Paterson 1163
REPORTS OF SCOTCH APPEALS IN THE HOUSE OF LORDS.
No. 10
Subject_Arbitration — Submission — Obligation to Refer Oversman —
A missive of lease of minerals, on
which
possession
followed,
![]()
contained
a stipulation, that, “ should
the minerals become exhausted, or
workable
only at an evident loss, the tenants shall be entitled to give up the lease, on the same being ascertained by arbiters mutually
chosen.”
![]()
Held (affirming judgment), That, although arbiters
were
not named, a valid obligation
was
![]()
constituted
to refer to arbitration the question,
whether
the minerals
were
![]()
workable
only at an evident loss.
Held
further,
That
such a missive
did
not impliedly bind the parties to appoint an oversman or umpire, should the arbiter's
differ.
![]()
In 1844 Mr. Campbell
of Islay entered into “heads of agreement,” by
which
he agreed to let the
coal
and ironstone in his estate of
Woodhall
to Messrs. Alison, Merry, and
Cuninghame,
for
thirty one years, at a
fixed
yearly rent of £4000, or of
certain
lordships. The tenth head of agreement
was—“Should
the minerals become exhausted, or
workable
only at an evident loss, the tenants shall be entitled to give up the lease, on the same being ascertained by arbiters mutually
chosen.”
The thirteenth head provided that the lease contemplated
to be executed, in
conformity
with
the heads of agreement,
was
“to
contain
the usual
clauses
of a mineral lease.”
The tenants proceeded to work
the minerals, and in 1855 they intimated their abandonment of them, as being
workable
only at an evident loss. A
correspondence
ensued, in
which
the tenants
called
on the
defender
(trustee on the sequestrated estate of Mr.
Campbell)
to enter into a submission in terms of the tenth head, and the pursuers intimated that “the arbiter on our part is Mr.
David
Landale, mining engineer, Edinburgh.”
The defender
at
first
maintained, that the obligation to refer
was
not binding, but afterwards he stated that he agreed to refer, and “Mr. Nicholas
Wood
of Newcastle is to act on our part.”
The pursuers’ agent then prepared a draft
of a submission
containing
a
clause
empowering the arbiters to name an oversman; but the
defender
declined
to agree to any
clause
providing
for
devolution
on an oversman; and so no
formal
deed
of submission
was
executed.
The pursuers then raised the present action
1 See previous reports
21 concluding
for
declarator—
first,
that the
defender
was
bound to enter into a submission referring the question
whether,
at the
date
of abandonment, the minerals had become
workable
only at an evident loss, to two arbiters to be mutually
chosen
by the parties, and, in
case
of
difference
of opinion, to an oversman to be jointly
chosen
D.
1337:
22
D.
1148:
31 Sc. Jur. 733:
32 Sc. Jur. 528.
S.
C.
1 Macph. H. L. 14;
35 Sc. Jur. 417.
Page: 1164↓
The Court
of Session held, that the parties must
first
enter into an arbitration, and that it
was
premature to
compel
the parties to enter into the question as to an oversman.
Against the judgment of the Court
of Session the pursuers appealed to the House of Lords, maintaining in their
printed
case,
in reference to the judgment of 15th July 1859, that it ought to be reversed,
for
the
following
reasons:—1. Because in the tenth article of the heads of agreement between the late Mr.
Campbell
and the appellants, the arbiters
were
not named; and by the law of Scotland such a reference
was
ineffectual. 2. By the tenth article, there
was
not
constituted
an effectual obligation, binding the appellants to refer to arbiters either of the two questions embraced in that head of the agreement, viz.
whether
the minerals let had become exhausted, or
whether
they had become
workable
only at an evident loss under the lease; and because the alleged
clause
of arbitration
was
wholly
ineffectual. 3. On a sound
construction
of the agreement, and, in particular, of the tenth head, the right of the appellants to give up the lease
was
dependent
only upon the occurrence of one or other of these events, viz. that the minerals had become exhausted, or that they had become
workable
only at an evident loss under the lease, and
did
not
depend
upon two arbiters having previously
determined
the existence of such
facts,
or either of them. 4. According to the true
construction
of the agreement, the
finding
by arbiters, that the minerals had become exhausted, or had become
workable
only at an evident loss,
was
not only not a
condition
precedent to the exercise of the right to give up the lease, but
was
not an integral part of the
contract
of parties, and therefore the agreement to refer
did
not
form
an exception to, but
fell
under the rule of law, that, in order to
constitute
an effectual obligation to refer, the arbiters must be named. 5. There
were
no grounds
for
maintaining, that there
was
a valid nomination of arbiters by the parties in the
correspondence
and
communings
which
took place prior to the
date
of action. 6. The appellants
were
entitled to a proof of their averments, and to have the question,
forming
the subject of
dispute
between them and the respondent,
determined
by the
Court
below,
without
recourse to arbiters; and, upon these averments being proved, to have
decree
pronounced in terms of the
conclusions
of their summons.
The
respondents in their
printed
case,
supported the judgment on the
following
grounds:— 1. The lease of the minerals to the appellants, in the
form
of the heads of agreement between them and the proprietor, the late Mr.
Campbell,
followed
by
rei interventus or possession since 1844,
was
a valid and effectual
deed
in all its heads and
clauses.
2. According to the proper
construction
of the tenth head, the
clear
meaning of parties
was,
that the ascertaiment of the
fact
of
working
at evident loss, if at any time alleged, should be by arbitration, and not by the ordinary
courts
of law. 3. The tenth head made it a
condition
precedent, that
working
at an evident loss should be ascertained by the
concurring
opinion of two arbiters before the tenants
could
claim
to give up their lease. 4. The arbitration section in the tenth head,
whether
technically expressed or not as a
condition
precedent to the tenants’ relief,
was
an essential part of the article,
which
could
not be separated
from
the privilege
conferred
on the tenants. The tenth head of agreement must therefore stand entire, or if any part of it, particularly the obligation
for
a reference to arbiters,
were
ineffectual, the
whole
agreement
was
at an end. The landlord
could
not be made to accept a renunciation of the lease unless the
fact
on
which
he
was
bound to
do
so
was
ascertained in the manner stipulated
for
by him, and not by an expensive process at law
with
a jury trial,
which,
if proposed to him,
would
have
certainly
made him refuse to enter into any lease on such terms; and
which,
consequently,
could
not be now imposed upon him. 5. If the arbitration under the tenth head
were
either a
condition
precedent to the tenants being entitled to give up their lease, or a vital part of the agreement, essentially united
with
it, the obligation to refer
was
not affected by the general
doctrine,
that in submissions of an actual
dispute
a submission to unnamed or uncertain arbiters
was
invalid; but
fell
under the exception of
cases
where
an award by arbiters
was
requisite to liquidate a
contract,
or
was
so incorporated
with
it, that the privilege and its ascertainment
could
not be separated. 6. The exception, and not the general rule, applied
with
peculiar
force
to the present
case,
where
there
was
in
fact
no arbitration in the proper sense of the
word,
but only provision made
for
the ascertainment by two men of skill of the
fact
of
working
at evident loss, in regard to
which
the respondent
was
entitled,
without
even giving a
denial
of the appellants’ assertion, to require the stipulated attestation by
Page: 1165↓
In reference to the judgment of 7th June 1860, the
pursuers maintained in their
printed
case,
that it should be reversed—1. Because, upon a sound
construction
of the agreement, and in particular of the tenth article, it
was
agreed, that the lessees should be entitled to give up the lease upon the occurrence of either of the two events therein mentioned, namely, that the minerals had become exhausted, or that they had become
workable
only at an evident loss under the lease, and that, altogether irrespective of the mode of ascertaining
whether
these events had
come
to exist or not. 2. Because the right to renounce
was
not made
contingent
or
conditional
upon two arbiters named by the parties
concurring
in
deciding
that the minerals had become exhausted, or
workable
only at an evident loss under the lease. 3. Because, according to the true
construction
of the agreement, the statement in the tenth article,
with
reference to the ascertainment by arbiters
whether
the minerals had become exhausted, or
whether
they had become
workable
only at an evident loss,
was
merely inserted
for
the purpose of securing a
clause
in the lease providing
for
the ascertainment, by an ordinary arbitration, of the occurrence of these events, if it should be alleged by the tenants,
during
the
currency
of the lease, that they or either of them had occurred. 4. Because, in an ordinary arbitration, according to the law and practice of Scotland, there
was
either an oversman expressly nominated in the
deed
of submission, or power given therein to the arbiters to nominate an oversman in the event of their
differing
in opinion. 5. Because the heads of agreement
were
mere jottings, or preliminaries, of a general
description,
written,
not by professional persons but by the parties themselves, in a rough and incomplete manner,
with
a view to the preparation of a
formal
deed
of lease by a
conveyancer,
which
deed
of lease it
was
expressly stipulated should
contain
the usual
clauses
of a mineral lease; and because, according to the usual style and
clauses
of a mineral lease in Scotland, relating to the right to give up the lease, should the minerals become exhausted or
workable
only at an evident loss, provision is made
for
the
devolution
of the submission on an oversman, so as to meet the
contingency,
which
frequently
occurs, of the arbiters
differing
in opinion, and to secure a
decision.
6. Because, according to the tenth bead of agreement, the lease, and the obligation to pay rent,
did
not
continue
in
force
until it should be
determined
that the minerals had become exhausted, or
workable
only at an evident loss under the lease, but, on the
contrary,
the right to give up the lease emerged to the appellants upon the occurrence of either of these events. 7. Because there had been no proper, valid, or binding nomination of arbiters by the parties in terms of the tenth article of the heads of agreement; and because the nomination of Mr. Landale by the appellants
was
insufficient in itself, and
was
made on the
faith
of an oversman being named in the
deed
of submission, or of proper provision being made
for
such nomination should the arbiters
differ.
8. Because, according to the sound
construction
of the heads of agreement, the parties are bound to enter into a
deed
of submission, in
which
an oversman is either expressly named by the parties, or the arbiters are empowered to nominate an oversman, in the event of their
differing
in opinion, in order to render it effectual
for
ascertaining
whether
it be or be not true, as alleged by the appellants, that the minerals have become
workable
by them only at an evident loss under their lease.
The respondents supported the judgment, in their
printed
case,
on the
following
grounds:—1. According to the sound
construction
of the agreement, the respondent
was
not bound to name, or to
concur
with
the appellants in naming, an oversman, or to
devolve
on the arbiters the power of naming one. 2. A reference
was
made to arbiters mutually
chosen,
and to such arbiters only. 3. In the exercise of their powers under the tenth article, the parties had
chosen
arbiters, and the appellants
were
bound,
ante omnia, to proceed
with
the arbitration thereby
constituted.
Solicitor General (Palmer), and
Sir H.
Cairns,
for
the appellants,
were
stopped in their argument.
Chancellor
Westbury
present our impression is, that all that you
desire
to secure by this appeal might be
well
effected
for
you in the
following
manner: Affirm the interlocutor pronounced in the second action, that is, the interlocutor of July 1859, and also the interlocutor in the
first
action, but
declare
that nothing
contained
in the interlocutor of July 1859, shall, in any manner, affect the right of your
clients
under the interlocutor pronounced in the
first
action, or by virtue of the
conclusions
of the summons,
which
are not
disposed
of by that interlocutor.
Do
I make myself intelligible to you?
Sir Hugh
Cairns.—Perfectly,
my Lord.
Lord Chancellor.—That
will
prevent the operation of the
first
interlocutor being used, either
directly
or indirectly, to affect your rights in the
first
action, provided this shall occur, namely, that the reference to Mr. Landale and Mr.
Wood
shall
fail,
and become altogether abortive.
Sir Hugh
Cairns.—My
Lord, I think, in substance, and my learned
friend
the Solicitor-General agrees
with
me in saying, that that
would
answer all that
we
are entitled to ask at your
Page: 1166↓
Mr. Rolt (with
whom
was
Mr. Anderson Q.
C.),
for
the respondent.—My only objection to your Lordship's suggestion, as I understand it, is, that such a
declaration
appears to us to be entirely unnecessary, and entirely uncalled
for.
It agrees exactly
with
the terms of the interlocutor in the second appeal. It agrees
with
the reasons of the Judges, and I very much
fear
that, if such a
declaration
were
made by this House, it might be said, that it
was
intended to make some qualification of the judgment
which
disposed
of that appeal.
we
shall be anxious to hear
what
you have to say upon that point.
Mr. Rolt.—We
ought to have the
costs
of the appeal. In the reasons of appeal in the
first
appeal there is no allegation, that the judgment
was
premature or ought to be suspended. The two points argued, and on
which
the appeal is brought, are,
first,
that there is no valid obligation to refer; and, secondly, there has been no valid appointment of arbitrators, and that the appellants have a right to go on and prove that the mines are exhausted, or
cannot
be
worked
at a profit. In the reasons of the second appeal. there is no suggestion that there has been a miscarriage as to
form.
Lord Chancellor.—The
impression of the House is, that if
we
make the order proposed, it
will
be an order only proceeding on the
footing
of greater
caution,
and that, unquestionably, the respondent
would
be entitled to the
costs
of the appeals.
Mr. Rolt.—We
will
then be
content.
Court
directed
the second action, or at least suggested it.
Mr. Rolt.—That is a mistake. There was
neither a
direction
nor a suggestion to that effect. The order of the House should
contain
no
declaration
that
will
reduce the effect of our being assoilzied in the
first
appeal.
Solicitor General.—The landlord in this case
acted harshly,
for
he insisted on an arbitration,
whereas
there
were
no means of making it effectual. And as to
costs,
he
would
have acted more reasonably if he had agreed to the submission in the usual
form
to an oversman, by
which
means the
costs
of this litigation
would
have been entirely avoided.
Chancellor
Westbury
think that your Lordships
will
agree
with
me, that this is a very plain and simple
case,
which
has been embarrassed only by the nature of the proceedings in the
Court
below. The respondent agreed to let
certain
coal
mines to the appellants, and there
was
a
clause
in the agreement
which,
in plain language, imported this, that
when
the mines
were
exhausted, or
when
they
could
not be
worked
except at plain and evident loss, the appellants might give up the lease; but if there
was
a
contest
about the reason
for
giving it up, the
fact
of the mines being exhausted or being
workable
only at a loss, should be ascertained by arbiters mutually appointed.
The appellants claimed
the right to give up these mines in the year 1855, and after some
controversy
the respondent and the appellants mutually agreed on the nomination of arbiters to ascertain the
fact
that
was
in
dispute,
namely,
whether
a
case
for
giving up the lease had arisen. After that
was
done
a
further
dispute
arose,
whether
the reference to the arbiters should also include a
clause
for
the appointment of an oversman, and upon that they
could
not, in any manner, agree. Accordingly, the
first
action
was
raised by the present appellants, by a summons
which,
in its
conclusions,
adopted the
clause
of reference to arbitration as being valid, but sought a
declaration
that it involved the necessity of the appointment of an oversman or umpire, and then it
went
on to seek to have it
declared,
that in the event of the arbitration
failing
altogether, the
Court
would
ascertain, and
determine
whether
a
case
for
surrender of the lease by the tenants had or had not arisen.
In the course
of the
discussions
upon that action, it seems to have occurred to the appellants, that the relief they sought
was
too narrow, and less than they
were
entitled to, and that they had a right to take the matter higher up, and to have it
declared,
that the
clause
of reference
contained
in the agreement
was
altogether invalid and ineffectual, and that therefore it
was
the
duty
of the
Court
to ascertain, in the
first
instance,
whether
a
case
for
surrendering the lease existed. Accordingly, instead of altering the
conclusions
of the
first
summons, (as to
which,
whether
it
was
competent
for
them to
do
it or not, an interlocutor having been pronounced in the
Page: 1167↓
The second action accordingly came
on in its natural order, and
was
the
first
to be tried and
determined,
for
it
was
absurd, of
course,
to trouble themselves about the preliminary
conclusions
in the
first
action, until it
was
ascertained
whether
the
clause
of reference
was
valid in law or not. And in the second action (
which
was
the
first
tried) the
Court
of Session by their interlocutor of July 1859,
found
and adjudged, that the
clause
of reference
was
valid and binding, and then they proceeded in that interlocutor to assoilzie the
defender
altogether
from
the
conclusions
in the summons. And I think, if it had not been
for
some
difference
of opinion, and some expressions to be
found
in the judgments, the language of that interlocutor, properly
construed,
and strictly
considered,
would
have been quite right. But then probably some
difficulty
arises
from
the
fact,
that the
defender
is by that interlocutor assoilzied
simpliciter
from
all the
conclusions
of the summons in that action,
which
conclusions,
your Lordships
will
remember, are, as to part, identical
with
the
conclusions
of the
first
action.
Then the action that was
first
commenced
came
on to be
considered;
and in that action the
Court
of Session pronounced an interlocutor
which
appears to my mind to be very
correctly
worded,
and very
well
expressed, and quite unexceptionable. It is the interlocutor of June 1860, and by that interlocutor, in effect, the
Court
did
this, namely, they assoilzied the
defender
from
the
conclusions
in the
first
action, so
far
as those
conclusions
sought a
declaration,
that the reference to arbitration involved the appointment of an umpire, and in that interlocutor the
Court
said, “that according to the true
construction
of the tenth article of the heads of agreement, the question
whether
the minerals are exhausted or
workable
only to an evident loss, must in the
first
instance be referred to two arbiters.” So
far
their interlocutor in this action, secondly heard, but
first
commenced,
was
founded
on a judgment
which
they had already arrived at in the secondly
commenced
action, that
was
first
heard, namely, that the agreement to refer
was
valid in law. And they then
dispose
of the argument .of the present appellants, that the submission to arbitration involved the right of appointing an oversman,
which
they
decree
against, and then
quoad ultra the interlocutor runs in this very
correct
form
of expression: “
Quoad ultra, in respect the parties have already named arbiters, in terms of the said tenth article, supersede
consideration
of the remaining
conclusions
of the summons, to enable the parties to proceed
with
the arbitration.”
Now the whole
of the
conclusions
of the summons—that is, the summons in the action
first
commenced,
which
are by this interlocutor so
clearly
and
distinctly
saved, are the
conclusions
by
which
the present appellants sought, that, in the event of the arbitration entirely
failing
and becoming abortive, the
Court
itself should try the question
whether
a
case
for
the surrendering of the lease had or had not arisen. And I really think, that it required much ingenuity to
find
the possibility of any
doubt
being entertained upon these two interlocutors. But, as it has been suggested, that a
doubt
may be
fairly
entertained
whether,
having regard to some of the judgments that have been given, the interlocutor of July 1859, assoilzieing the present respondent
from
the
conclusions
in the second action, might possibly interfere
with
the power of the
Court
under the reservation, made by the interlocutor of June 1860 in the other action, I
would
humbly submit to your Lordships, as a matter merely of precaution, that the order of this House should run in the
following
form
of
words,
namely: “Affirm the interlocutor of the 15th July 1859, and also the interlocutor of the 8th June 1860 but
declare,
that the interlocutor of the 15th July 1859, and the affirmance thereof, is not to prejudice any question that may arise in the
consideration
of the remaining
conclusions
of the summons,
which
are reserved and superseded by the interlocutor of June 1860.”
I consider
this as in effect an indulgence granted to
what
we
may
denominate
the timidity of the appellants; and I
could
hardly advise your Lordships to accede to this matter,
which
has in a great
degree
been
dictated
by apprehension,
without
imposing upon the appellants the obligation of paying the
costs
of these appeals. If, therefore, your Lordships should agree
with
me, I
would
humbly move, that the order of this House should run in the
words
I have mentioned; but that the appellants should pay the
costs
of the respondent in both the appeals.
Cranworth
Lords, I have nothing to add to
what
has
fallen
from
the Lord
Chancellor.
I
confess
I think it is entirely unnecessary; and it appears to me to be the more
clear
that it is unnecessary, because, if there
was
ground
for
any of the apprehensions, that the appellants have
contended
for,
it
was
a ground that
would
have prevented the possibility of making the order of 1860, because I think, if the
Court
had
felt
itself bound by the preceding order in the second suit, so as to be precluded
from
afterwards going into the question
whether
there might not,
whatever
might be the result of the arbitration, be some right on the part of the appellants, then it
would
have been quite
wrong
to have made the reservation of all questions,
Page: 1168↓
Chancellor,
and I agree also that the
costs
should be paid by the appellants.
Interlocutor affirmed, with
a
declaration,
that any remaining question in the
conclusions
of the summons in the
first
action shall not be prejudiced; and the appellants to pay the
costs
of both appeals.
Solicitors:
For
Appellants,
Grahame,
Weems,
Grahame, and
Wardlaw,
Solicitors,
Westminster.—
For
Respondent,
Loch and Maclaurin, Solicitors,
Westminster.