Scottish Court of Session Decisions

Frederick W. Carter, C.A., judicial factor on the sequestrated estates of Robert Speedie & Sons, linen manufacturers, Sinclairtown, Kirkcaldy, entered into an agreement with John G. Lornie, Kirkcaldy, for the sale to the latter of two powerloom factories forming part of the sequestrated estate. The minute of agreement was dated 22nd and 23rd March 1888, and was in these terms:—

“Minute of agreement between Frederick Walter Carter, judicial factor on the estate of Robert Speedie & Sons—first party; and John Guthrie Lornie, Kirkcaldy—second party.

The first party agrees to sell to the second party, and the second party agrees to purchase from the first party, the two large linen powerloom factories situated in Sinclairtown, and belonging to the first party as judicial factor foresaid, with the whole steam-engines and machinery therein, as per inventory thereof, on the terms underwritten—

First. The price of the said factory shall be £2000 for the old factory and machinery therein, and £2000 for the new factory and machinery therein.

Second. The price of the new factory shall be payable within six weeks from the date hereof, the second party, however, to get possession earlier on payment of the price, and the price of the old factory shall be payable at Martinmas 1888.

Third. The second party shall accept the title to the said subjects as it at present stands, and subject to all exceptions of any nature, and the first party shall not be bound to grant warrandice except from his own proper facts and deeds only.

Fourth. This agreement shall be subject to the sanction of the Court of Session being obtained thereto.—In witness thereof.” …

On 11th April 1888 the approval of the Court was obtained to the proposed sale, and on 5th May Lornie paid £2000 to Carter as the price of the new factory, and thereafter entered into possession of the said new factory and removed therefrom all the looms. When the time came for paying the price of the old factory Lornie refused to accept a disposition of it on the ground that the title tendered to him for the new factory was bad. The title objected to consisted of a lease, dated in January 1874, granted by the Earl of Rosslyn as heir of entail in possession of the entailed estate of Ravenscraig to the trustees of Robert Speedie & Sons. The extent of ground included under the lease was 2 roods 6 poles, and the rent was £26, 16s. per annum. The lease bore to be for a period of ninety-nine years from Martinmas 1871, and was granted under the powers conferred upon heirs of entail by the Montgomery Act (10 Geo. III. cap. 51.) It contained, inter alia, a stipulation that the tenants “shall be bound within three years from the said term of entry to build a dwelling-house or houses of stone, and slated, of the value of at least £50, and to keep and uphold said houses, and all other buildings which may be erected on the said piece of ground, in good tenantable and sufficient repair during the currency hereof, and to leave them in such repair at the expiry hereof; and in case the said tenants shall fail to build the said houses within the said space of three years, or in case they shall fail to keep the said houses and buildings which may be erected on the said piece of ground in good tenantable and sufficient repair, then this tack shall ipso facto be void and null, without any declarator or process of law for that effect.”

The new factory was the only building which had been erected on the ground comprehended under the lease.

After raising this objection to the title offered him for the new factory, Lornie in January 1889 entered into possession of the old factory without paying the price, and removed therefrom more than 100 of the looms.

The present action was raised by Carter against Lornie to compel the latter to implement his part of the agreement of 22nd and 23rd March, so far as not implemented, by accepting a valid disposition of the “old factory,” and paying the stipulated price for it, or alternatively for £2000 in name of damages. [With this action there was afterwards conjoined an action of damages by Lornie against Carter for not implementing his part of the agreement, but further reference to this second action is unnecessary.]

The pursuer pleaded, inter alia—“(3) The defender having, in knowledge of the objections now raised by him to the title to the new factory, entered into possession of the old factory, he is bound to accept the

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conveyance thereof tendered to him by the pursuer, and to pay the price of the said old factory, the price of the new factory having already been settled. (4) The pursuer having tendered to the defender a valid conveyance of the old factory, the defender is bound to accept the same and to pay the price of the said old factory. (5) The defender having taken possession of both factories, and the machinery therein, and dealt with the same as his own, and still continuing to do so, he is not entitled to refuse to pay the price of the said subjects, or any part thereof. (7) Separatim—The defender's objections to the title to the new factory are unfounded, in respect, 1st, that on a sound construction of the Montgomery Act it is competent for an heir of entail to grant a lease of land under the said Act for the purpose of building a manufactory thereon; 2nd, that the special provisions of the lease in question, founded on by the defender, having been inserted for the benefit of the landlord, and having been waived or departed from by him, the non-fulfilment thereof does not invalidate the said lease.”

The defender offered to replace the machinery which he had removed from the factories, and pleaded—“(2) The pursuer not being able to give the defender a valid conveyance of the subjects contained in the said minute of sale, he is not entitled to sue for implement of the said minute.”

The record was closed on 26th February 1889, and on 17th June the pursuer lodged a minute stating that Lord Rosslyn had agreed to grant him a lease of the new factory under the Acts 11 and 12 Vict. cap. 36, and 16 and 17 Vict. cap. 94, and that his Lordship was taking the necessary steps to obtain the sanction of the Court thereto, and he moved the Lord Ordinary to sist the process to enable him to obtain this new lease.

A sist having been granted, the pursuer on 26th November lodged a minute, in which, under reservation of all his pleas, he stated that Lord Rosslyn had obtained the authority of the Court, and had granted the pursuer a new lease of the new factory; that the new lease had been duly executed in terms of a draft lease approved by the Court on 30th October 1889, and he tendered the said lease to the defender as a valid title to the new factory and in implement of the minute of agreement of sale.

The duration of the new lease was to be for eighty-one and a-half years—from Whitsunday 1889 to Martinmas 1970—being the unexpired portion of the former lease, and it was set forth that the consideration for the lease was an annual payment of £36, 16s., payable to the extent of £26, 16s. by the tenants for the time of the subjects leased, and to the extent of £10, secured by way of annuity, payable by the North British and Mercantile Insurance Company during the duration of the lease to the Earl of Rosslyn and the heirs of entail succeeding him in the entailed estate of Ravenscraig, &c., under a bond of annuity which the pursuer had purchased from the insurance company, and delivered to the Earl of Rosslyn in pursuance of the arrangement under which the lease was granted, “which yearly sum of £26, 16s., together with the said yearly sum of £10 contained in and secured by the bond of annuity before referred to, together make up the yearly sum of £36, 16s., being the whole amount of the annual rent or tack-duty for the said subjects as stipulated and arranged between the parties hereto, and set forth in the petition before-mentioned: Declaring, as it is hereby expressly provided and declared, that if at any time the tenants shall allow two years' payment of the before-mentioned yearly rent or tack-duty of £26, 16s. to run on into the third unpaid, they shall ipso facto lose and forfeit this tack.”

On 18th December the defender was allowed to amend his defences by adding the following pleas—“(4) The defender should be assoilzied, on the ground that even if the title which the pursuer has obtained from Lord Rosslyn is good, the same was not obtained till November 1889, and was not timeously offered to the defender, and that the delay in procuring and offering a title has been so great as entirely to defeat the purpose for which the defender originally made the purchase. (5) The pursuer not having been able timeously to implement his contract, the defender should be assoilzied.”

Proof was led on 19th March 1890, when the following additional facts appeared—The defender was a stockbroker, but he had some years before acquired the Pathhead Spinning Mill and Weaving Factory, Kirkcaldy. His object in purchasing Speedie's old and new factories was in order to use their machinery in fitting out the Pathhead mill entirely as a factory, as he expected to be able to find a purchaser for it when so altered. The machinery in the old and new factories was of about the same value as the heritable subjects sold under the agreement of 22nd and 23rd April 1888.

The Montgomery Act (10 Geo. III. c. 51), which empowered heirs of entail to grant building leases for ninety-years, provided in section 5 as follows—“Provided always, that not more than five acres shall be granted to any one person either in his own name or to any other person in trust for him, and that every such lease shall contain a condition that the lease shall be void, and the same is hereby declared void, if one dwelling-house at least not under the value of ten pounds sterling shall not be built within the space of ten years from the date of the lease, and that the said houses shall be kept in good, tenantable, and sufficient repair, and that the lease shall be void whenever there shall be a less number of dwelling-houses than one of the value aforesaid to each one-half acre of ground kept in such repair as aforesaid standing upon the ground so leased.”

Section 24 of the Rutherfurd Act (11 and 12 Vict. c. 36) provided that notwithstanding any prohibitory or irritant clauses contained in a tailzie dated prior to 1st August 1848, it should be lawful for an heir of entail in possession, upon notice to the

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next heir, with the approbation of the Court, to grant feus or long leases of part of the entailed estate; “provided always, that it shall not be lawful for such heir to take any grassum or fine or valuable consideration other than the tack-duty or rent for granting any such feu or lease.” …

On 23rd May 1890 the Lord Ordinary ( Trayner) pronounced this interlocutor:—“Finds that the defender John Guthrie Lornie is bound to implement and fulfil his part of the minute of agreement mentioned on record, and that by accepting from the pursuer Frederick Walter Carter a valid disposition containing all usual and necessary clauses of the subjects described in the conclusions of the summons at the instance of the said pursuer against the said defender; the said disposition to be adjusted (if necessary) at the sight of Mr H. B. Dewar, S.S.C., and by making payment to the pursuer of the sum of £2000 sterling, with interest thereon from 11th November 1888 till this date at the bank rates current during that period on deposit accounts, and at the rate of 5 per cent. from this date till paid, and decerns, &c.

“ Opinion. — The leading question is, whether the defender Mr Lornie is bound to implement a contract or agreement entered into between him and the pursuer Mr Carter on the 22nd March 1888, the terms of which are quoted on record? By that contract or agreement the defender agreed to purchase from the pursuer two factories situated in Sinclairtown, with the engines and machinery therein, at a certain price payable at certain specified dates. It was, inter alia, a condition of the agreement that the defender should accept ‘the title to the said subjects as it at present stands, and subject to all exceptions of any nature.” The defender refuses to implement the contract on various grounds. He maintains (1) that while the title to the ‘old factory” is unobjectionable, the title to the ‘new factory” offered to him originally (that is, the title to the new factory as it stood at the date of the contract) is null; that the title now offered to him is also null, or at all events defective; that even if the title now offered is held to be a good title he is not bound to accept it, as it has not been timeously offered; and that if he is not bound to implement the contract as regards the ‘new factory,’ he is not bound to implement any part of it, as the contract was one and inseparable for the purchase of the two factories.

This latter proposition I am prepared to adopt, and I think it was not seriously contested by the pursuer. The main question therefore regards the title to the new factory offered to the defender.

The title to that factory at the date of the contract in question consisted of a long lease granted under the provisions of the Montgomery Act by the Earl of Rosslyn to Speedie & Sons, dated 12th and 20th January 1874. The lease itself is conform to the statutory provisions, and no objection is stated against its validity. It provides that the tenant shall be bound, within three years of their term of entry (declared to be the term of Martinmas 1871), ‘to build a dwelling-house or houses of stone, and slated, of the value of at least £50,’ &c. In fact no dwelling-house was ever erected on the ground, although a spinning factory of very much greater value than £50 was, and the defender maintains that the fact that no ‘dwelling-house’ was erected on the ground nullifies the lease under the express provision of the 5th section of the Montgomery Act. The pursuer's answer to this contention is that the Montgomery Act was an enabling Act, and is to be liberally construed, and that looking to the purpose for which the Act was passed (as expressed in section 4), the erection of a factory may be regarded as compliance with the requirements of the statute as one of the things which might conduce to the formation of a ‘village.’ In support of this view I was referred to the opinion of Lord Kinloch in Miller v. Carrick, 5 Macph. 718. With the greatest deference to that opinion, I am unable to hold that the building of a factory is a compliance with the statutory requirement, which in definite and precise terms exacts the erection of a dwelling-house. No doubt the existence of a factory might lead to the construction of dwelling-houses, and the consequent formation of a village, and the erection of factories is not forbidden. But what the statute requires as a condition of the validity of a lease granted under its provisions is the erection of a dwelling-house, and that has not been complied with. The statutory nullity has therefore, in my opinion, been incurred; by no liberality of construction can I read ‘factory” or ‘spinning mill” for ‘dwelling-house.’ It follows from what I have said that the defender was not bound to accept such a title to the ‘new factory.’ The clause in his contract binding him to accept the pursuer's title as it stood subject to all exceptions does not affect the defender's right to reject the title offered to him. That clause merely binds the defender to accept a title, defective it may be, and as it stands not marketable, but a title which can be made good. It does not bind him to accept what is not a title at all. The pursuer, however, does not now insist on the defender accepting the title as it originally stood. He has secured at his own expense a title to the subject sold from the Earl of Rosslyn, which appears to me to be open to no objection, and this he offers to the defender. That title, as a valid title to the new factory, I think the defender is now bound to accept. I repel the defender's plea that he is not bound to accept that title because not timeously offered. That plea was only put upon record after the new title had been tendered to the defender. But he had been in actual possession of the factory and its machinery from the date of entry stipulated in his contract, and had treated the machinery therein as his own after he knew of the objection to the original title. No one has ever interfered with his possession or challenged his title.

This case I regard as one not only distinguishable from but in contrast to the case of Kelman, 5 R. 816, to which I was

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referred by the defender. The views expressed by Lord Gifford in that case regarding the right in the general case to rescind a bargain where a title has not been timeously offered are, I think, applicable to this case.” …

The defender reclaimed, and argued—The titles tendered for the new factory were invalid, and were not such as the defender was bound to accept under his agreement with the pursuer. Clause 3 of the agreement had reference to the expense of curing the defects in a title which could be made good, and did not bind the defender to accept what was no title at all— Carruthers v. Stott, May 26, 1825, 4 S. 34. The lease first tendered for the new factory—the Montgomery lease—was clearly invalid, as no dwelling-house had been erected in terms of the lease, and as required by the Act 10 Geo. III. c. 51, sec. 5. The second lease offered was also invalid under the Entail Acts, as it was granted in part for a consideration other than rent. The tenant's goods could not be distrained for nonpayment of the sum due by the Insurance Company under their bond of annuity—Rutherfurd Act (11 and 12 Vict. c. 36), sec. 24. The agreement was not separable into two contracts, but was an agreement for sale of both factories. The defender was therefore quite entitled to withhold the price of the old factory, and decline to accept a disposition of that factory on the ground that he was not offered a valid title to the new factory, and he had done nothing to forfeit that right. He should accordingly be assoilzied.

Argued for the pursuer and respondent — The agreement, it was admitted, was not separable into two contracts, but the defender was bound by its terms to accept one or other of the titles tendered to him for the new factory— Waddell v. Pollock, June 19, 1828, 6 S. 999; Rowands v. Cochrane, November 24, 1769, M. 14,178. The validity of the titles offered was not open to serious objection. As to the Montgomery lease, the stipulation contained therein for the erection of dwelling-house and the terms of the Act had been substantially complied with by the erection of the factory, and the lease was quite a good title to the new factory— Stewart v. Murdoch, January 27, 1882, 9 R. 458; Miller v. Carrick, March 29, 1867, 5 Macph. 715, June 15, 1868, 6 Macph. (H.L) 101. With regard to the second lease, it was not invalid under sec. 24 of the Rutherfurd Act. What that clause struck at was the taking by an heir of entail of a grassum in place of rent, or considerations ejusdem generis, which would defeat the rights of succeeding heirs of entail. The annuity payable by the insurance company was not a consideration of that kind. It was only payable to heirs of entail, and the bond of annuity, which was a perfectly safe and good bond, could only be discharged by the heirs of entail as a body. That lease also had been granted under the authority of the Court, and the interlocutor approving of it had become final. If, therefore, the defender wished to object to the validity of the lease he must first bring a reduction of that interlocutor—Act 16 and 17 Vict. c. 94, sec. 24. Further, the defender was barred from now objecting to the title offered him, as his actings amounted to an acceptance of that title, for he had entered into possession of the old factory, and removed part of the machinery in the knowledge that the title to the new factory was open to question.

At advising—