United Kingdom House of Lords Decisions

In 1906 Greenock Harbour Trustees raised an action against the Glasgow and South—Western Railway Company, in which they sought to have the defenders ordained to deliver to the pursuers a valid disposition of certain lands, to accept from the pursuers a valid disposition of certain other lands, and to pay certain sums as being due on a balancing of accounts, all in implement of an agreement between the parties dated 10th, 15th, and 16th March 1881. The only question of general interest in the case, the agreement being very special, was as to whether interest on the price of the lands should be chargeable by the one party against the other—if so, from what date and at what rate.

The clauses of the agreement which gave rise to the case and were in question were these—“3. The company shall, within three years after the passing of the Bill into an Act, acquire the properties lying between the turnpike road leading from Port Glasgow to Greenock and the river Clyde belonging to the Marine Investment Company, the Clyde Pottery Company, William Watson, Messrs Sommerville & Company, and John Fullarton (in this agreement called ‘the owners’), with all the rights and privileges thereto belonging, and shall thereupon sell to the Trustees so much of the foreshore of the river Clyde as lies to the north of the line C, D, E, F, G, shown on the plan, at the prices per square yard at which the company purchased the same. 4. The company shall purchase from the Trustees the land and foreshore of the river Clyde, coloured yellow on the plan, at the average price per square yard of the land to be purchased under article 3 hereof. 5. After the company shall have acquired the properties belonging to the owners, they

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shall convey to the Trustees, free of cost, all rights and privileges affecting the foreshore and alveus of the river to the north of the said line C, D, E, F, G, including any right and title to an access or accesses to the river from the said properties, or any of them.”

The circumstances under which the agreement was made and the action raised were thus narrated by the Lord Ordinary ( Salvesen)—“In 1880 the pursuers obtained parliamentary powers to construct in the east end of Greenock a large new dock, since completed and now known as the James Watt Dock. In the following session of Parliament the defenders promoted a Bill in which they sought power to construct certain railways for the purpose of connecting their system with the new dock. The pursuers presented a petition against the Bill, but agreed to withdraw it on the terms contained in the agreement entered into between the parties, dated 10th, 15th, and 16th March 1881. The terms of this agreement were finally adjusted in a committee room of the House of Commons just before the evidence for the promoters fell to be led. Perhaps this circumstance may explain the difficulties which have arisen as to its construction.

“For the purpose of constructing the undertakings of both parties it was necessary that ground should be acquired on the foreshore to the west of what was then Inchgreen Island. This stretch of land was owned principally by the pursuers and the five persons named in the third article of the agreement. Much of the ground was submerged at high water, and some of it, including what belonged to the pursuers, was used as timber ponds into which the timber was floated at high water and left lying in the mud at low water. Access to these timber ponds was obtained by what were termed ‘water passages.’ These passages did not differ from any other portions of the foreshore except in so far as they were indicated by a row of stobs on each side which served both to mark the passages and to guide the timber into the ponds. At the extreme west end of the ground there were two plots belonging to the Clyde Pottery Company and to William Watson, which were separated by a street called Pottery Street extending from the high road between Greenock and Port Glasgow down to low water-mark. This street had never been properly formed.

“For their undertaking, which included the construction of a quay wall, the pursuers required the seaward portion of the ground in question along its entire length, and they ceased to have any use for the plots 5 and 6 on the plan, which had been feued by the pursuers from the superior and were let as timber ponds. On the other hand, this area and the contiguous ground to the west were required for the Railway Company's lines and other works. Accordingly in the agreement a line with the lettering C, D, E, F, G, was drawn through the foreshore in a direction from west to east; and the general scheme of the agreement was that the pursuers were to have the whole ground to the north of this line while the defenders took the ground between the line and the road to Port Glasgow. For both parties it was essential that they should be fully vested in the property of their respective portions of the land in question.

“After the agreement had been executed the defenders proceeded to acquire under their compulsory powers the properties belonging to the five persons named in article 3. The price of one of the properties was settled by agreement, the prices of the others were all determined by the award of arbitrators or juries under the Lands Clauses Act. It then occurred to the defenders that neither they nor the pursuers could obtain a complete title to the whole lands required unless they got a disposition of the solum of the water passages from the superior. They differed as to the price to be paid—the defenders maintaining that the solum of the passages, burdened as it had been with a right of access to the timber ponds, was valueless, while the superior demanded a substantial price. This matter also was referred to arbitration, and on the defenders paying the sum awarded by the arbiter a disposition was granted in their favour which completed their right of property in the passages in question. Meanwhile both parties were engaged in constructing their several undertakings; and since Whitsunday 1885 each has been in possession of the ground on the north and south respectively of the line C, D, E, F, G. The conveyances to be granted under the agreement have never been adjusted; nor have the prices payable been settled. This great delay may be explained in various ways, but is I believe mainly due to the different views taken as to the meaning of the agreement. After protracted negotiations parties have failed to come to terms, and the pursuers have now brought this action to have the various matters in dispute settled by a court of law.”

The averments on the question of interest were—“(Cond. 8) … The pursuers have repeatedly called upon the defenders to implement their part of the said agreement, but the defenders have refused or delayed to do so, and the present proceedings have accordingly been rendered necessary. The sum first sued for is the difference between the purchase price payable by the defenders to the pursuers and the purchase price payable by the pursuers to the defenders. Interest is due to the pursuers on this sum since Whitsunday 1885, when, as above condescended on, the parties entered into possession of the respective subjects.… (Ans. 8) … Explained that even if the agreement had been effectual and operative, no interest is due to the pursuers, as no right to interest commenced until the pursuers had established their debt against the defenders and the precise amount thereof, and up till now the pursuers have made no attempt to do so. The agreement not being operative, no question of interest arises. Explained further that the rate of

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interest, if any, exigible is grossly overstated, as the lands were waste and incapable of yielding any substantial return.”

And the pleas were—For the pursuers—“2. The pursuers and the defenders having respectively entered into possession under the said agreement of the said subjects specified in the third and fourth and in the fifth declaratory conclusions of the summons as at Whitsunday 1885, the pur suers are entitled to decree for the difference between the prices thereof, with interest from the said date, in terms of the first branch of the petitory conclusion of the summons.” For the defenders—“5. No right to interest has emerged in favour of the pursuers in respect (1) that implement of the agreement according to its terms has never been possible; and (2) that the defenders have always been ready and willing to meet the demands of the pursuers, who have left that obligation unascertained and unexamined, and the defenders therefore fall to be assoilzied from the conclusions of the summons relative to the claim of interest. 6. In any event, the interest charged falls to be assessed at a lower rate than 5 per cent., in respect that the subjects in question are not capable of yielding such a rate of interest.”

On 10th July 1907 the Lord Ordinary ( Salvesen) found “that the parties obtained full possession of the subjects required for the purposes of their respective undertakings, not later than Whitsunday 1885, and that each is liable to pay interest as from that date on the purchase price of the land to be conveyed to them respectively, as fixed by the said agreement.” On 17th July he fixed the rate at 31/2 per cent.

Opinion—“… The last question is as to the point of time from which interest falls to be calculated. Mr Hunter for the defenders argued that interest can only run from the date of the summons on the ground that the debt is not liquidated until a decree has been pronounced; and it was the pursuers' own fault that it has not been liquidated at an earlier period. He relied mainly upon two cases— Carmichael, 8 Macph. (H.L.) p. 119, and especially on the opinion to be found on p. 131; and Durie's Trustees, 22 R. 34. The latter case has, I think, very little bearing, because the question there arose in connection with a claim of relief from public burdens imposed by the disponer on his disponee. The disponer had delayed for thirty-one years in obtaining the apportionment which was a necessary condition of his claim for relief; and accordingly it was not unnaturally held by a majority of the Judges that no interest was exigible. The prior case was also different in its circumstances, and interest was refused because there was no contract, express or implied, under which it could be demanded, and no suggestion that the principal sum had been wrongfully withheld and not paid on the day that it ought to have been paid. A different question arises where the disponee of land has been put in possession before payment of the purchase price has been ascertained; and there is a long series of decisions to the effect that interest runs from the date of possession in such a case even if the purchase price may not be ascertained until long afterwards. I refer to Wallace, 3 S. 525; Spiers, 5 S. 764; The Stirling and Dunfermline Railway Company, 19 D. 598 and 621; The West Highland Railway Company, 21 R. 576, and Johnston, 22 R. 925. In all these cases the rule that where a purchaser has obtained possession of the subjects he is bound to pay interest from the date of his possession was recognised. Lord Cowan in support of this view in the Stirling and Dunfermline case said—‘It would be contrary to all equity to allow the purchaser to possess the subjects with their fruits without accounting for interest on the price which he has continued to hold in his hands. The interest is the equivalent for the fruits, and drawing one he must pay the other.’ No doubt there hag been great delay here in ascertaining the amount of the purchase prices due to the pursuers and defenders respectively; but for that delay the defenders are most to blame. They at no time took any steps to have the questions determined, although it seems to have been recognised that it was for them to draw the appropriate conveyances, while Mr Wilson for the pursuers was constantly urging the officials of the railway company to take the matter up except between 1894 and 1900, when he seems to have been content to let the matter lie dormant. I accordingly hold that each party is entitled to debit the other with interest from Whitsunday 1885, when each had full possession of the respective properties which fell to be conveyed under the agreements. I shall, however, be glad to hear parties as to the rate of interest.…”

On 19th June 1908 the First Division, on a reclaiming note for the defenders, while varying certain other findings, adhered to the Lord Ordinary's interlocutors quoad the question of interest.

At advising—