Scottish Court of Session Decisions

Lord Hunter's OPINION.—This is an action by the proprietrix of Inverailort against a firm of timber merchants carrying on business in Govan. The pursuer sold a certain amount of timber growing upon her estate to the defenders for a certain price. It was a condition of the contract that the timber should be removed by the defenders within a specified period of time. The defenders have not in fact removed the timber within that period of time. Under the contract it is provided that there shall be payable to the pursuer a penalty of ten shillings a day for every day's delay beyond the specified period.

There has been delay, I understand, for more than a year, and the action takes this form:—The pursuer sues, first, for payment of a year's penalty, or a year's liquidate damages, in respect of the delay; then, for a declarator that there is a liability upon the defenders to pay at the rate of ten shillings a day for all delay beyond the year that has expired.

The position of the defenders is this:—They say the action is premature, because the claim for damages in respect of delay is a claim that only emerges when the contract has been completed. Alternatively, they contend, in the first place, that the stipulated payment under the contract in respect of delay was in the nature of penalty—a sum which the Court might modify according to the circumstances under which the claim was made, and depending for its insistence in by the pursuer upon her establishing that she had actually suffered damage. In the second place, they contend that the delay that has taken place here beyond the contract period has arisen from circumstances for which they were not responsible, and, in reality, because of the fault of the pursuer in not fulfilling conditions, express and implied, imposed upon her by the terms of the contract. In particular, they allege that it was an implied condition in such a contract as they had entered into with the pursuer that reasonable facilities should be provided to them for the removal of the timber, and they say that they did not get such reasonable facilities. To this the pursuer makes answer that it was arranged between the parties that one road should be provided, and that that road was in fact provided. The contract does not give one any guidance in the matter, and where no guidance is given upon a matter such as this, I think the question of the pursuer's right to recover must depend upon whether or not reasonable facilities had been given. The defenders have also alleged that it was really part of the contract that, although one road alone should be provided for a certain time, after that limited period of time three roads should be made available, and they suggest that, without such facilities, it was an impossibility for them to complete the contract within the stipulated period of time. On that matter, it appears to me that I cannot form an opinion without knowing the facts, and, although perhaps the defenders have not very clearly averred when the arrangement was made as regards receiving the three roads, I take it that it was at the interviews that are referred to by the pursuer in her condescendence. There is another small matter which will also require to be proved, that is as regards the question of whether accommodation was provided for the defenders' horses as agreed to by the pursuer in the contract. On that there is a dispute between the parties.

Having indicated the defenders' position, I come to their third plea that the action is premature. I have some doubts as to whether the action is not premature, and I indicated my doubts to the pursuer so that the pursuer might have an opportunity of amending her record by putting in a declarator that the payment under the contract was really a payment of the nature of liquidate damages and not a penalty. But the pursuer has not considered it necessary to amend; and, although I have doubts about the matter, I am not prepared to say in this case that the action should be thrown out. I think the real question between the parties, viz., as to whether the pursuer can insist in her claim at all, will arise after proof upon the points I have already indicated as arising out of the defence to the action.

So far as concerns the defenders' contention that the sum is a sum payable as penalty that the Court can modify, my opinion is against the defenders. It appears to me that the parties here have arranged for a moderate payment of so much per day when delay occurs, and, when delay has occurred in such circumstances, I do not think it is for the Court to revise the amount the parties have agreed upon. I think, if there may be damage consequent upon delay, and it is clear that there may be damage, although it is difficult to say what it may be or to prove the amount of damage, and parties fix beforehand upon a reasonable sum, then the Court will take that sum as a pre-estimate of damage, and will not interfere with what has been arranged.

I propose to repel the first, second, and fifth pleas in law for the defenders, and allow parties a proof of their averments upon the question as to the causes for the delay, the defenders to lead. I think the defenders are prima facie bound to establish that the reason for their delay beyond the time stipulated in the contract arose from causes for which the pursuer is responsible, and, therefore, on that part of the case, they are really pursuers in the issue.

Lord Salvesen.—In this case I confess that I was much impressed with the ingenious and vigorous argument which was presented on behalf of the reclaimers, but, having now fully considered the case in all its aspects, I am prepared to adhere to the Lord Ordinary's judgment.

The decision really depends upon the construction which we put upon this simple contract between the pursuer and the defenders. It was agreed that some 1300 standing trees were to be purchased by the defenders, who bound themselves to take away the whole timber so purchased by a given date. The purchase price was payable by instalments at various intervals which are now all past, and we are told that the whole purchase price has been duly paid. Accordingly, the property in the trees, so far as they have been cut down at all events, has passed to the purchasers, but they are situated upon the land belonging to the seller. In these circumstances, it was natural and necessary that some provision should be made for the restoration of the woods to the owner's occupation after a reasonable time had been allowed for the removal of the timber. Parties applied their minds, before the contract was made, to the question of what was to happen if there was delay in removing the timber, and they came to an agreement that there was to be what is called a “penalty” of ten shillings a day paid until the timber had all been removed.

In my opinion this so-called “penalty” is really in the nature of a pre-estimate of damage. Nothing is said against the reasonableness of the sum that the parties have fixed, having in view the kind of damage which it was anticipated the proprietrix would suffer from a breach of this contractual obligation. The main damage, I take it, was the loss of privacy or amenity, which might conceivably affect the subjects equally over the whole period when operations were going on. Under a large contract such as this, the contractors might have had the same staff on the ground during the whole period, and yet have found that that staff was inadequate to cope with the removal of the timber. But I see nothing to suggest that this is to be treated as a penalty, in respect that the loss at one time might be utterly different and even infinitesimal as compared with an earlier period. It seems to me that, as regards the main subject of damage—loss of amenity—it might be substantially the same so long as any of this wood remained unremoved from the premises of the owner of the land. Accordingly, I have come to the conclusion that we must treat this agreement for a penalty as if the words “liquidate damages” had been used instead.

The only other question is: Can the pursuer bring the action now for payment of the sum contracted to be paid for each day's delay, or must she wait until the contractor in his own time thinks fit to remove the last trees that he has purchased?

The Court can always prevent any improper multiplication of proceedings, but I cannot hold that the proprietrix here is acting improperly in bringing an action after the expiry of a year for a sum calculated at ten shillings a day for that year. According to the true intention of the contract, I think the ten shillings were to become immediately exigible, and that the contract is to be construed as if it had contained an express clause to that effect. The other construction—that, while there was a stipulation as to the payment of this sum per day, the amount was not to be exigible until the contract was completed—does not seem to me to be according to the true intention of the parties. I agree with the argument that was presented by Mr MacRobert that, this being a contract drawn up by a layman, it meant that the contractor could go on violating this condition with no other consequence than that he should have to pay ten shillings a day so long as he allowed his property, to wit, the felled trees, to remain on the lands of the pursuer.

I do not think that in so deciding we are, in the least degree, modifying or altering anything that has been laid down in previous cases. This is an unusual contract in this sense, that there was to be no adjustment of accounts at the end of the day, as there is in most building contracts and contracts for the construction of vessels and the like, where such penalty clauses are very familiar. The seller has received all the money that she was entitled to get from the contractors had they fulfilled the contract by the stipulated date, and all that remains is the liquidation of the sum to be paid for the continued presence of this timber on her ground.

The defence on the merits is that the pursuer by her own acts prevented the timber being removed with the dispatch with which it would otherwise have been taken away. That defence can be most appropriately tried now when the witnesses are available, and it is a defence which is applicable to this particular period and not necessarily to the subsequent period during which the contractors may still be in breach of their obligation to clear away their wood.

I accept the statement of the law as laid down by the Lord Ordinary at the end of his opinion; and, on the whole matter, I am of opinion that he has reached the right conclusion, and that we should affirm his judgment.

Lord Mackenzie.—I am of the same opinion.

The question argued to us was a question of law depending upon the construction to be put upon the agreement entered into between the parties. In my opinion, the clause which provides for a payment of ten shillings a day provides, not for a penalty, but for liquidate damages. I think the second paragraph would convey to the ordinary layman only one meaning, namely, that what the contractor was to get for his payment of £1750 under the first paragraph was the wood and the right to occupy the policies down to 1st April 1918 and nothing more, and, if he required a longer period, then that he had to make a further payment of ten shillings per day.

The subject-matter of the contract requires to be borne in mind as it is described in condescendence 2—that is “about 1300 standing larch trees in the immediate vicinity of her residence, Inverailort Castle, and comprising practically the whole of the mature wood then surrounding the castle.” The defenders admit that that is a correct description of the subjects sold. The averment in condescendence 11 in regard to the effect of the operations is just what one would have expected: “The operations conducted by the defenders under and in terms of the said contract have occasioned considerable loss of privacy and amenity and disturbance of the regular working of the estate as well as interference with fences, drains, and the occupation of certain parts of the pursuer's estate in respect of the wayleave aforesaid.”

The purpose of inserting this stipulation in the contract was to stimulate the defenders in carrying on the work with all due dispatch. There is a total absence of averment on the part of the defenders to support the plea that this is of the nature of a penalty. The mere fact that the word “penalty” occurs in the instrument does not by itself carry one very far, and there is no averment that the ten shillings a day was exorbitant, that it was not proportionate to the loss that would be suffered by the proprietrix. One can well understand why there should be an absence of these averments, because the ten shillings a day seems to be a moderate figure; and I am unable to follow the argument that, as the work proceeded, so the consequent loss of privacy and amenity and the disturbance to the regular working of the estate would diminish. It seems to me that, on a fair view of the situation of matters, the disadvantages to the proprietrix would remain until the wood had been entirely cleared away.

That being so, the right to a substantial sum has already vested in the proprietrix as due in respect of the period of time which has elapsed since 1st April 1918. I am unable to see that the defenders can take any advantage from such cases as that of Crear v. Morrison, where it was held that you cannot sue for a debt prior to the date when it becomes due. In the present case, a considerable amount has already become due under the contract, and, accordingly, I think that the course proposed by the Lord Ordinary is correct.

A great deal was made of a case decided in this Division—the British Glanzstoff Manufacturing Co.—and it was maintained that no action would lie on such a clause as this, unless and until the contract had been completed. The contract there was of a complicated character. The judgment turned upon the point that there were two options given to the owner; the one was to take the matter out of the hands of the contractor, the other was to allow the contractor to go on, and then enforce his right under the contract. He chose the former of the two alternatives; and it was pointed out that, having elected to abide by one group of provisions in the contract, he could not resort at the same time to another.

Accordingly, I think that that case affords no support to the argument advanced by the defenders in the present case.

Lord Skerrington.—Although this contract was not drawn by a lawyer, I should be slow to say that the parties did not mean what they said when they described the ten shillings a day as a “penalty.” I think that they intended to protect the interests of the seller by providing the purchaser with a strong motive for punctually fulfilling his contract. But that consideration by itself does not make this stipulation unenforceable. The question still remains, as Lord Robertson pointed out in the Clydebank case, whether the one party had no interest to protect by that clause, or whether that interest was palpably incommensurate with the sum agreed on. In other words, if this ten shillings a day is a random sum, the Court will not enforce payment; on the other hand, if it represents a reasonable pre-estimate of the loss which the pursuer might suffer by delay in having her ground cleared, then the stipulation ought to be enforced. In my view it was a stipulation not merely in the interests of the seller but also in the interests of the purchasers, because one object was to protect the purchasers against possible claims of an exorbitant kind which they might find it difficult to meet.

As has been pointed out, the subject-matter of this contract is one which made it peculiarly appropriate that the parties should, in their several and separate interests, assess the damages in advance. The injury which the seller of the trees might suffer through her ground being for an undue time occupied by trees, either standing or cut down, would probably arise under three heads: injury to amenity, or to sport, or to estate management. The damage under each of these heads is obviously difficult to translate into pounds, shillings, and pence. Accordingly, it was reasonable on the part of the contractors to fix a specific sum as the damages which should be recoverable in respect of a breach of this particular stipulation.

There is nothing in the circumstances, so far as we know, to suggest that ten shillings a day was at all exorbitant, and I think it right to note that the Dean of Faculty pointedly declined to ask for a proof of facts and circumstances to elucidate this question. The fact that the agreed-on sum is so much per day goes far to show that what the parties had in mind was not a random sum but a true estimate of conventional damages.

I was, at first, unfavourably impressed by the fact that no attempt had been made to fix some proportion between the number of trees left standing or lying or the acreage occupied by them on the one hand, and the penalty on the other hand. On further consideration, it becomes clear that it would be difficult, if not impossible, to assess the damages on any such basis, because a group of trees, left standing or felled, in any one place might cause much more injury to amenity, sport, or estate management than a larger group in another place; and accordingly, if the parties were to assess the damages in advance, the only practical way was to take an average figure.

The only other question is whether this penalty was intended to become due from day to day, or whether it was not to accrue as a debt until the contract had been completely executed by the purchasers. It was suggested that the purchasers had it in their power to reduce this stipulation to a mere nullity, because they had only to be bold enough to throw up the contract and say that they would not fulfil it in order to relieve themselves of it. For my part I do not understand how a contract, which has been entirely executed with the exception of the removal of felled timber which is the property of the purchaser, could be rescinded in the manner suggested. Even if that could be done, a right already vested would not be thereby divested. The purpose which the parties had in view would be defeated, if the penalty could not be exacted immediately but was to be payable only if and when the purchasers thought fit to complete their contract.

Accordingly, I agree that the Lord Ordinary has come to a sound conclusion.