Warner v. Cunningham [1815] UKHL 3_Dow_76

UKHL
Warner v. Cunningham
[1815] UKHL 3_Dow_76
REPORTS OF APPEAL CASES IN THE HOUSE OF LORDS, During the Session , 1814—15. 55 Geo . III.SCOTLAND.APPEAL FROM THE COURT OF SESSION.

No. 6

Warner Appellant v. Cunningham Respondent

April 25 , 27 , 29 , 1814 . May 19 , 1815 .PARTNERSHIP.Where the proprietors of two adjoining estates, the one containing fields of coal, the other, besides coal, having salt-works belonging to it proper for the consumption of the small coal, entered into a contract for 124 years, to carry on the coal and salt-works as a joint concern, and for that purpose executed to each other mutual leases or tacks, that is, Warner set in tack for 124 years, to Cunningham, his heirs and assignees, and to himself, Warner, his heirs and assignees, equally betwixt them, certain seams of coal, and Cunningham in the same manner set in tack for 124 years to himself and Warner, and their respective heirs, certain coal-fields and salt-pans; held that this was a lawful contract, and binding on the heirs taking up the succession and representing the parties; and that when the concern was prosperous, and there was no reasonable apprehension of loss, the heir of one of the parties was not entitled to a dissolution to the prejudice of the other party.The Appellant's father, Mr. Warner, of Ardeer on the western coast of Ayrshire, had considerable fields of coal within his property, and his neighbour Mr. Robert Reid Cunningham, of Auchinharvie, the Respondent, besides some coal, had salt-works on his property, proper for the consumption of small coal. The expediency of a connexion, so as to carry on the coal and salt works together,

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First contract, 1774

“And the parties judging it proper to have their agreement extended in form, and for the better securing the same, that the mutual tack hereinafter written be executed, therefore the said Patrick Warner hereby sets in tack to the said Robert Reid”
(afterwards Cunningham) “himself, and his heirs or assignees, and to the said Patrick Warner himself, his heirs or successors, proprietors of Ardeer, equally betwixt them the said Robert Reid and Patrick Warner, all and haill the whole seams or seam of coal within all

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And in the close of the deed, both parties bind themselves in warrandice of the mutual tacks, as follows:
“And as on the one part, the said Patrick Warner obliges him and his foresaids to warrant the tack herein granted by him, so the said Robert Reid obliges him and his foresaids to warrant the tack on his part; and both parties bind and oblige them to perform the premises, hinc inde , to others, under the penalty of 50 l .” &c.
Under this contract the concern was carried on apparently to the satisfaction of both parties, till 1783, when it was thought proper very considerably to extend the scale of their operations, and for this purpose to add a period of ninety-nine years to the endurance of the contract and tacks, and to include some additional fields of coal, and accordingly a second contract was entered into for these purposes, previous to which Cunningham had

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Second contract, 1783.Capon-crag, and that for the like space of 124 years, from the said 20th day of April, 1770, for the yearly rent of 100 l . sterling, including in this let the coal in Little Dubs and Bog, and also whatever coal he may succeed to in the Broom. And they the said parties engage to advance equally in carrying on the works, and shall equally share in the profit and loss to be made thereon, for and during the space of 124 years, during which space the whole obligations and articles contained in the former contract are hereby prorogated; and the said Patrick Warner, for himself and his heirs, hereby renounces the power and liberty reserved to him and his heirs, of annulling the said contract at the end of twenty-five years, or any time whatever; but providing, nevertheless, that if the said coal shall happen to be wrought out, or become not workable on any account, conform to the opinion of men of skill to be mutually chosen, then, and in that case, this contract, from thenceforth, shall no longer be binding on both parties: but if the coal continue workable after the expiry of the above space of 124 years, the parties, in the strongest manner, recommend a joint working of the said coals, and desire their heirs to continue the contract as long as the coal can be wrought to advantage.”
“The parties now finding that the endurance of the said tack or contract is too short; that it will tend to their mutual benefit, and to the advantage of their heirs, that the same shall be prolonged and continued for a much longer space of time; and albeit their first intention was to ship off coals at Saltcoats, they afterwards enlarged the plan, and have laid out a very considerable sum of money at the colliery in the Misk, from which they now ship off a considerable quantity of coals at Irvine;—the parties, therefore, by these presents, not only prorogate the foresaid tack or contract on both sides, for the further space of ninety-nine years; but also of new, the said Patrick Warner sets to himself and the said Robert Reid Cunningham, equally betwixt them and their respective heirs, the foresaid coal in the whole lands in Stevenson parish belonging to him the said Patrick Warner, with whatever land shall be necessary for coal-hills, bings, roads, and canal, and that for the space of 124 years, from and after the foresaid 20th April, 1770, for the foresaid yearly rent of 100 l . sterling; and the said Robert Reid Cunningham sets to himself and the said Patrick Warner, equally betwixt them, and their respective heirs, the foresaid salt-pans, materials thereof, and garnels, and such land of his as is used for the canal and the coal in his lands lying east of the

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In consequence of the expenses which these additional operations required, a debt of between five and six thousand pounds was incurred, for the payment of which Warner was under the necessity of mortgaging his estate. Till 1792, Warner

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Action raised.Two separate actions were then raised against the Respondent, in the name of the Appellant and

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The other was an action of reduction for setting aside the second contract. The reasons of reduction were:—1st, that the contract itself was vitiated and erased, &c. and—2d, the said contract and tack “was elicited and impetrated by the defender, through gross fraud and circumvention on his part, and through facility on the part of the granter, without any onerous and just cause, and to his and the Pursuers great hurt and enormous lesion.” It therefore concludes, “that the foresaid contract and tack, with all that has followed or may follow upon the same, ought and should be reduced, retreated, rescinded, cassed, annulled, decerned, and declared, by decree of

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A third action was raised to reduce the Misk lease, on the ground of incapacity in Warner, and advantage taken of it; and after some previous proceedings the cause came on to be heard before the Lord Ordinary (Meadowbank), who pronounced the following interlocutor:—Jan. 17, 1797. First interlocutor of the Court of Session appealed from.contract of partnership, rendering it impossible for the ancestor to bind his heir to succeed to him as a partner. But the Lord Ordinary being, nevertheless, of opinion, that if the partnership challenged was obtained by deception practised against the late Mr. Warner, a reduction of it is competent; and also, that if it is a losing concern, and threatens to involve the Pursuers in future loss, or if the Defender's conduct as manager has been such as to render his fidelity or ability for the undertaking justly suspected, it must be competent to the Pursuer to get free of the concern, by obtaining a dissolution of the partnership, and a sale of its property, whether heritable or moveable, and thereupon a final division of the profits and loss. Appoints the Pursuers to put in an articulate condescendance of facts, without any argument, of what they allege on one or all of these grounds for getting free of the partnership.”
“The Lord Ordinary having considered the condescendance for the Pursuers, answers, replies, and duplies, and being of opinion that it is for the interest of the parties, before exposing them to the expenses of a proof, to have the points of law pleaded by the Pursuers determined: Finds, That as the Pursuer Mr. Warner represents his father, he is bound to fulfil his lawful engagements: Finds, That it was a lawful engagement for him to enter into a copartnery connexion with the Defender, for a term beyond the probable endurance of his own life, where the subject of the concern was to consist of coal and salt-works, on which a great expenditure was required to render them profitable, and a tract of years to realize that profit: Finds it was a lawful provision in such a contract, to appoint the Defender manager of the concern during his life; and that of consequence, there is, in hoc statu , little room for the Pursuer's founding on a cordial co-operation of partners, as essential to the

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Jan. 24, 1798.This interlocutor having been brought under the review of the Court in a reclaiming petition, after considering it with the answers, the Court adhered. The law having been thus finally determined in the Court of Session that the contract was binding on the heir, as representing his father; a condescendance was given in as to the other points, and a proof was allowed, and a great deal of evidence taken. After the evidence was closed and before decision upon it, the Appellant, by permission of the Court, amended his summons of reduction by adding the following words, “that whether the said contract and tacks should be reduced or not,

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The Court, in 1802, then pronounced the following Judgment:—

Dated 9th, signed 12th Feb. 1802.
“The Lords having advised the state of the process, and having also considered the amendment allowed to be given in by the Pursuers of their summons of reduction of the coal contracts, conjoin the process of reduction of the Misk lease, with the previous process of declarator and reduction regarding said coal contracts; and in these reductions repel the reasons thereof, assoilzie the defender, and decern; find him also entitled to the expenses of these reductions, and allow an accompt thereof to be given in; but before answer as to the other conclusions of the Pursuer's actions, as now amended, appoint the parties to prepare memorials on the case, and to see and interchange the same betwixt and the 4th day of May next.”
It being thus decided that there were no grounds, from deception or otherwise, to reduce the contract and tacks as void from the beginning, the question came to this, whether in terms of the amendment there was a reasonable apprehension of loss as to call for a dissolution hinc inde . A correspondence having taken place with a view to a compromise,

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Feb. 7th and 14th, 1809. Third interlocutor of the Court of Session appealed from.period, it seems not to be disputed that above 4000 l. per annum of profits have been divided betwixt the parties; so that the concern, instead of having threatened impending ruin, as held out by the Pursuer when the memorials were ordered, has proved the source of great emolument to both the Pursuer and the Defender: Therefore, in hoc statu , sustain the defences against any conclusion in the Pursuer's libel, not formerly disposed of by final interlocutors.”
“The Lords having advised the mutual memorials for the parties,—Find the Pursuer barred by final interlocutors from maintaining in this Court, that he was not bound by either or both the contracts of copartnery entered into by his father with the Defender for long terms of years, or challenging these contracts on account of fraud, lesion, circumvention, or facility; or challenging the leases mutually granted by his father and the Defender as following the fate of the contracts: and as to the point, whether, when the investigation took place, there were sufficient grounds to entitle the Pursuer to get free of the concern as a losing one, or to have the Defender removed from the management, on account of want of skill, or want of fidelity then detected: Find, That whatever grounds or appearances of grounds, there might have been at the time for one or more of these claims, there has been unreasonable and unjustifiable delay in putting in the memorials with respect to this matter, implying a consciousness, that, as circumstances then stood, these claims would not appear tenable, under the very full and recent investigation which had taken place: Find, that it is incompetent now to insist in this matter, without taking into consideration the subsequent events that have occurred in this concern down to the present time, during which

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From these interlocutors viz., the Lord Ordinary's of the 17th Jan., 1797, adhered to 1798, of the Court, Feb. 12, 1802, and this last one of 1809, Warner appealed.For the Appellant it was argued, that from the very nature of the contract of partnership, which depended more than any other upon a dilectus personœ dilectus personœ , it was impossible that an original party could bind his heir so as to prevent his withdrawing from the concern at the death of that party: that as the contract is founded upon mutual confidence, and a sense of mutual benefit, consent was necessary not only to its formation, but to its continuance, Stair b. 1. t. 7. s. 4.—and that by the Roman law, which was also as to this point the law of Scotland, either party might at any time renounce, answering only to the other in damages, and that if the party himself could not be bound to continue the concern against his will, much less could the heir be so bound; and that the opinions of the text-writers on the law of Scotland were in this respect conformable to the Roman law, Bank. b. 1. t. 22. s. 18.—Stair, b. 1. t. 16. s. 5.—Ersk. b. 3. t. 3.

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1 Dow, 73.For the Respondent it was argued, that there was no authority in the laws or customs of modern nations by which a contract of copartnership, extended by special provision to the heirs and successors of the parties, was thereby rendered incompetent, null, and void; that neither the heir nor any one else could be bound to accept and make

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Counsel: Leach and Horner for the Appellant; Romilly and Cunningham for the Respondent.May 19, 1815.Judgment.Lord Redesdale . The contract of 1770 and 1774 had been complained of as unfavourable to the Appellant, who was stated to have derived no advantage from it, proportionate to the property which he had contributed. And in the farther contract of 1783, it had been said that Warner had been imposed upon, by the accounts of profits exhibited by Cunningham. Their Lordships would see that this contract being entered into in 1783, the parties had been engaged in the business of the partnership for thirteen years before, so that they had all that time to inform themselves of the nature and prospects of the concern. The second contract was in effect a prorogation of the former with some little addition, and after several years' trial it appeared that the plan of working the Misk colliery, and shipping coals at Irvine, was given up; and that a considerable debt was incurred by the company, for the payment of which Warner mortgaged his estate, the fact being that Cunningham was not in circumstances to advance the money, which was therefore supplied by Warner. In 1792 some dissatisfaction arose on the part of Warner, who was then stated to be about eighty years of age,

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The heir representing his father bound by the copartnery contract and leases.The concern of a nature to require a long time to realize the profits.The first question which was raised, and which was a material one, was that which was decided by the first interlocutor, viz., whether Warner the father could legally bind his heirs as well as himself by the contract of 1783, for 124 years, from 1770. On that point it had been contended that this was a personal contract, and that the father could not bind his heir to engage in it unless the heir thought fit to do so; as otherwise the consequence would be to involve the whole property of the son in the contract. The answer was, that the question was not whether a father could bind his son or heir to enter into a copartnership whether he would or not; but whether the son, as he represented the father and took up the succession, was bound to fulfil the engagements attached to that succession.

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Deception.Apprehension of loss.Management.That reduced the question to the point of deception, whether a reduction was competent on that ground. On this point evidence had been entered into, and it had been contended that Warner was a man far advanced in life, and had been imposed upon in the contracts of 1770, 1774, and 1783. Now it was to be observed that the verbal contract in 1770 was acted on for four years, and Warner was not then so advanced in life that he could not understand it, and he might have refused

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Upon the whole therefore it did appear to him that there was no ground to invalidate the contracts, and that there was no ground to invalidate the leases, which leases were made solely for the purposes of the contracts at a nominal rent which was

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Judgment accordingly affirmed.Solicitors: Agent for Appellant, Richardson.Agent for Respondent, Spottiswoode and Robertson.