by Professor Hector MacQueen, Emeritus Professor of Private Law, Edinburgh Law School*
Back in 2012 I was honoured to be asked to deliver that year’s James Wood Memorial Lecture in Glasgow University Law School. My title was “Private Law, National Identity and the Case of Scotland”. But I thought that before I started on the substance, I should say a few words about James Wood. No previous lecturer appeared to have done so and before the invitation I did not know anything about him. The life and remarkable business career of James Wood of Wallhouse in Torphichen, West Lothian are however well set out in the Dictionary of Scottish Business Biography.[1] Born in Paisley in 1840, from his early 20s he was a coal merchant and mine-owner around the greater Glasgow area. In 1871 Wood expanded his mining interests into, first, Armadale (West Lothian) and then other places in the county such as Bathgate. His business activities in the area extended in due course to gas, brickworks, steel works and the shale oil industry as well as coal-mining. The business, which was run in partnership with his brother William, came to have offices in London and New York, as well as Glasgow. William looked after sales and merchanting while James concentrated on colliery development and operations. Having been chairman of the Pumpherston Shale Oil Company from the mid-1880s, James became a more or less professional company director after 1900, working in a wide variety of Scottish companies. As his biographer remarks, “his experience and expertise in the business world made him a much sought-after figure to serve on company boards.”
In all his work I speculated in 2012 that Wood must have come across private law regularly: making contracts certainly; perhaps also having to deal with the claims of employees for personal injuries given the rather dangerous nature of the industries in which he operated. He was also a substantial property owner: first of the estate of Bathville (near Armadale) and then, from 1903, the estate of Wallhouse just north of the village of Torphichen. In the economically difficult 1890s, however, the partnership of James and William Wood and the partners themselves were sequestrated: a process that began in September 1894, was still under way in 1896, and was concluded only in 1900.[2] It seems to have been triggered by over-extension of the company’s interests in Welsh mining enterprises that subsequently failed. Wood appears to have recovered remarkably swiftly from this setback. This may have been because in 1893 his colliery businesses had been incorporated as James Wood Ltd, separating them to at least some extent from the later partnership sequestration. Another company, James & William Wood Ltd, had been set up by friends of the brothers just before the sequestration in 1894, and according to newspaper reports at the time the purpose of this was to buy the furniture, plant and coal stocks of the businesses.
Although the sequestration was obviously a complex affair that took a long time to conclude, Wood’s businesses and his commercial reputation do not seem to have suffered any resulting long-term damage. In 1902 he sold his colliery businesses to a recently formed mining conglomerate called United Collieries Ltd and became one of its directors, albeit with no active role in its collieries’ management. That was the first step towards the directorship portfolio career mentioned earlier. There were no further blips in Wood’s progress to the personal opulence that enabled at least one further private law dimension in his career: the setting up of the trusts and endowments that still bear his name. For this he must have made use of another private law instrument, the last will and testament. The James Wood Bequest Fund was set up in 1940 according to its record on the website of the Office of the Scottish Charity Regulator (OSCR). This was some seven years after Wood’s death at the age of 93. The Fund still disburses the money he made, not only to support lectures in the Glasgow Law School, but also in good works of various kinds in Armadale, Bathgate and other places in West Lothian and the west of Scotland. In this Wood was continuing a pattern of public benefaction that he had established in his lifetime, with the gift of a public park in Armadale in 1902 to mark King Edward’s coronation, later supplemented by a bandstand and fountain. Public parks were also donated to the Blackridge and Torphichen villages. In all this Wood is a good example of the generally paternalistic Victorian coal owner’s attitude towards the communities from which they acquired their wealth, even if they bitterly opposed the unionisation of their workforces.[3]
There I left James Wood’s private law connections in 2012. But recently brushing up on the history of error and misrepresentation in the Scots law of contract I re-read for the first time in many years the case of Woods v Tulloch (1893) 20 R 477. My purpose in so doing was to see whether its outcome would have been different today. But when I opened the report of the case my eye was immediately caught by the names of the pursuers (the parties claiming to be in error in the case). They were James and William Wood, coalmasters, Glasgow, i.e. our man and his brother and business partner. On 3 March 1891 the brothers had entered a minute of agreement to buy the estate of Greenhills in the county of Stirling from John Tulloch. The estate was said in the contract to be 132 acres “or thereby” in extent. The Woods were to be “at liberty to put down bores, and otherwise prove the property within one month of the date hereof, on condition of paying all damages incurred either to the first party or his tenants.” Clearly the suitability of the ground for mining activity was to be tested before the sale was finalised. Within a month the brothers were to “declare whether they intend to go on with the purchase or to resile therefrom.” The sale was accordingly subject to a resolutive condition. But that condition was never fulfilled, the Woods having failed to make any declaration within the specified time and having then refused to implement the contract. Mr Tulloch obtained a decree of declarator that the contract was completed plus an order for specific implement.[4] The Woods sought reduction of that order and of the contested contract, on the ground that material misrepresentation by Mr Tulloch inducing essential error on their part invalidated the contract. They relied on the inaccuracy of statements said to have been made by Mr Tulloch in pre-contractual negotiations about the acreage of the estate (132 acres when in fact it was 125) and its rentals (£157 when actually £120-10 shillings). Mr Tulloch denied making any such statements. In a relevancy debate Lord Kyllachy held for Mr Tulloch and that decision was affirmed by the First Division (Lord President Robertson and Lords Adam, McLaren and Kinnear).
The case is well-known as the last clear statement of the doctrine that non-fraudulent pre-contractual misrepresentation which did not give rise to error in the essentials of a contract had no effect on that contract’s validity. The Lord Ordinary (Kyllachy) rested his understanding of what made an error essential upon the statement in Bell’s Principles section 11 as accepted by Lord Watson in Stewart v Kennedy (1890) 17 R (HL) 25, 28:
“I concur … as to the accuracy of the general doctrine laid down by Professor Bell [Principles para 11] to the effect that error in substantials such as will invalidate consent given to a contract or obligation must be in relation to either (1) its subject-matter; (2) the persons undertaking or to whom it is undertaken; (3) the price or consideration; (4) the quality of the thing engaged for; if expressly or tacitly essential; or (5) the nature of the contract or engagement supposed to be entered into. I believe that these five categories will be found to embrace all the forms of essential error which, either per se or when induced by the other party to the contract give the person labouring under such error a right to rescind it.”
Lord Kyllachy set out his reasons for rejecting the Woods’ arguments on error with admirable clarity:
“There was no error as to the identity of the subject, or as to the persons contracting, or as to the price, or as to the nature of the contract. The error alleged was as to certain qualities of the subject which, it is impossible to assert, were either expressly or tacitly essential to the bargain. The acreage and rental of an estate are in general no doubt material elements in a sale of land. But they were not more essential here than in every other case of sale. In point of fact, they were less than in the general case, for the sale here was of a mineral estate. How can it be said that the extent of the alleged error, either with respect to the acreage or the rental, made the subject a practically different subject from what was bought and sold? It would really, I think, be difficult to find a better example of what is not in law essential error than the error alleged here.”
Lord Kyllachy’s opinion was issued on 20 July 1892 and the First Division’s on 7 March 1893. The latter was only ten days before the House of Lords issued its judgment in the Scottish appeal of Menzies v Menzies (1893) 20 R (HL) 108. In this case Lord Watson at pp. 142-3 uttered the dictum which, as it has turned out, has moved the law of error beyond its statement by Bell as quoted in Woods v Tulloch:
“Error becomes essential whenever it is shewn that but for it one of the parties would have declined to contract. He cannot rescind unless his error was induced by the representations of the other contracting party, or of his agent, made in the course of negotiation, and with reference to the subject-matter of the contract. If his error is proved to have been so induced, the fact that the misleading representations were made in good faith affords no defence against the remedy of rescission.”
As interpreted by later courts, this means that a plea of error must be supported by averments of misrepresentation but that the error induced thereby need not be in any of Bell’s list of essentials. What matters is whether the misrepresentation induced the representee to enter the contract. The scope of the law of error was thus simultaneously narrowed and widened.
Would Woods v Tulloch have been decided differently had its decision come after Menzies v Menzies? There seem to be at least two views on the effect of misrepresentation on contracts in Scots law: (1) that, even if the representation induced the other party to contract, it must be as to a matter sufficiently material to the reasonable person before the contract is voidable; or (2) that where a person was as a matter of fact induced to contract by a misrepresentation, the representor has no right to profit from his or her misrepresentation, no matter how innocently made (see Gloag & Henderson The Law of Scotland, 15th edition (2022) para 7.32). I am inclined to regard (1) as the more accurate statement of the law (see MacQueen & Thomson Contract Law in Scotland 5th edition, 2020, para 5.54(4) and (5)) and to think that Lord Kyllachy would also have taken that view on the facts of Woods v Tulloch. How material to the Woods’ motivation in contracting to purchase Greenhills were statements about its acreage and rentals when the fundamental intention was to exploit the ground as a coal mine if workable as such? Lords Adam and Kinnear used the terminology of materiality in rejecting the Woods’ argument. It is also worthy of note that the contract included an express statement that the ground was “132 acres or thereby” (which was held not to be a warranty) while having nothing at all to say about the rentals. That suggests the comparative lack of importance these matters had for the Woods; perhaps even that any representations made about them pre-contract did not in fact induce them to contract.
My conclusion is therefore that Woods v Tulloch would have been decided in the same way even if it had come after Menzies v Menzies. A final observation in support of that conclusion is that the Woods’ behaviour in this transaction seems hardly in accordance with a good faith approach to contractual obligation. They failed to exercise the withdrawal option in the contract (despite its being extended by a further month), then attempted to evade the consequences of having so failed with the plea of error induced by misrepresentation. Given what can be told from newspaper reports of the sequestration proceedings two years later, one wonders if all this had anything to do with financial exigencies already being encountered as the result of a business strategy of growth by acquisition.*
* My thanks to Lorna Richardson for useful comment on an earlier draft of this contribution.
[1] Sheila Hamilton, “James Wood”, in Anthony Slaven and Sydney Checkland (eds), Dictionary of Scottish Business Biography 1860-1960 Volume 1: The Staple Industries (Aberdeen: Aberdeen University Press, 1986), pp 79-82.
[2] See Glasgow Herald, 8 September 1894 (Scotch bankrupts”); 15 September 1894 (“Sequestration of Messrs James and William Wood”); 3 November 1894 (“The Failure of Glasgow Coal Merchants”); National Records of Scotland (NRS), CS46/1896/1/27; CS318/43.
[3] Roy Church with the assistance of Alan Hall and John Kanefsky, The History of the British Coal Industry Volume 3: 1830-1913: Victorian Pre-eminence (Clarendon Press: Oxford, 1986), p 546. At ibid, p 545, Wood is awarded a knighthood which he did not in fact receive.
[4] For the interim decree of declarator and for implement see NRS, CS46/1892/2/53.
