Courting controversy

In a note to the last agriculture briefing (Journal, June, 48) the Editor mentioned that we would feature two decisions which were handed down after the last article was prepared. The article itself also mentioned the eagerly awaited first decision from the Land Court on a review of rent under a 1991 Act lease following the passing of the 2003 Act. This has since been issued, as has another decision on a provision on which we have been awaiting guidance since the 2003 Act was passed.

In this article, all of these cases are covered but, because of space constraints, only very briefly and there is no substitute for the reader studying each opinion itself.

Loudon v Hamilton

Although heard in October 2009, the written decision in this appeal was not issued until April 2010 ([2010] CSIH 36), the Second Division having taken the unusual step of calling for the process to help it to determine questions relating to interim interdict.

The appeal was against the decision by the Land Court that the tenant did not have a 1991 Act tenancy. The tenant argued that a 1991 Act tenancy had been agreed from the outset; the landlord contended that it had always been a grazing let. The appeal failed and, indeed, the Lord Justice Clerk called it “another opportunistic attempt by a grazing tenant to acquire a tenancy to which he has no right”.

The case is of most interest for the caustic remarks meted out by Lord Gill on the appellant and his pleadings (which were described as “prolix”). He described as “deplorable” the fact that the appellant knew that only weeks after the date of the alleged agreement he made a declaration in his IACS application that he held the land on a seasonal let (a declaration repeated in subsequent years), that he supported the claim with “scandalous averments” that the landlord’s schedule of unpaid rents was an attempt at a sham, and “worst of all”, that the appellant had caused trouble and inconvenience to the respondents by obtaining interim interdict on averments not established at the Land Court proof.

Lord Gill also commented on the procedure adopted in the case by the Land Court in granting interim interdict on the strength of a letter from the tenant’s agents. He suggested that in future, where interim possession of land is in issue, it would be wiser (1) to grant interim interdict only in circumstances of real emergency and after hearing submissions for the applicant; (2) in the absence of such an emergency, to hold a hearing only after adequate notice has been given to the other side; (3) to apply a stringent test in assessing the reliability of the representations made by the applicant; and, (4) if minded to grant interdict, to take into account its power to require the applicant to lodge caution.

Mount Stuart Trust v McCulloch

In this case the lease provided that, where the breach upon which the landlords founded was remediable, the lease could not be irritated unless two months’ notice requiring the tenant to remedy the breach had not been complied with. The landlords argued that late payment of rent was not remediable and that, accordingly, the two months’ remediation notice was unnecessary. Both the Land Court and the appeal court ([2010] CSIH 21, 25 March 2010) disagreed with the landlords and the irritancy failed.

It was, accordingly, unnecessary for the appeal court to consider the tenant’s cross appeal to the effect that, because his application to the Land Court for determination of the rent from Whitsunday 2004 was outstanding, the rent at Whitsunday 2008 was illiquid and unascertained and, therefore, not due. The appeal court indicated, however, that the uncompleted review of rent did no more than to create a contingency that, if it was pursued to conclusion, the Land Court might vary the rent, and that the current rent continued to apply until it was varied.

Morrison-Low v Paterson

Much has already been written about the controversial rent review decision of the Land Court in the Moonzie case (SLC/233/08, 2 June 2010).

A paragraph or two cannot possibly do justice to a very thorough review by the Land Court of how s 13 of the 1991 Act, as amended, falls to be applied. The “headline grabbers” have been (a) that limited duration tenancies and short limited duration tenancies are admissible as comparables in a 1991 Act rent review; and (b) that while the hypothetical tenant should be assumed to hold a suitable level of single farm payment entitlements, the payment itself was not part of the earnings of the farm except a notional provision for enabling the tenant to realise SFP, assessed by reference to the cost and trouble of leasing naked acres.

The court saw its aim as being to find the open market figure taking into account statutory “disregards”, including the tenant’s occupation of the holding and scarcity, on which matters it provided useful guidance. It rejected the landlords’ 1991 Act comparables, which on the evidence had all been agreed on the basis that SFP had been part of the tenant’s income and, accordingly, decided the case solely in relation to “current economic conditions”, as to which it considered that a “snapshot” budget at the review date did not provide a proper reflection and a broader approach had to be taken.

It also considered the role of expert witnesses and some valuation matters including marriage value, potato growing (it was legitimate to include this in budgets even though the lease prohibited subletting, as it was possible for the prospective tenant to make other arrangements with the potato grower at the same return as subletting), fertilisers, tenants’ capital, borrowing, agri-environment schemes, cottages, and division of profit (where it made the rather surprising allocation of 80% to rent and 20% to the tenants).

The court fixed the rent at £20,800 per annum compared with the then current figure of £22,000, against the landlords’ proposal of £32,000 and that for the tenants of £10,266.74 (which smacks rather of compromise).

The decision has been appealed by both the landlords and tenant.

Salvesen v Riddell

The Land Court (SLC/3/09, 29 July 2010) has held that notice of dissolution of a limited partnership issued on 3 February 2003 (that infamous night in the history of landlord/tenant relations) against 28 November 2008 was not served otherwise than for the purposes of depriving the general partners of rights deriving from s 72 of the 2003 Act. This has given the general partners full security of tenure as if they are now 1991 Act tenants, as opposed to the three years additional occupation (only) which, had it applied, s 73 would potentially have given them. Readers may remember that, when the provisions (ss 72 and 73) giving general partners limited additional occupancy following the dissolution of their partnerships came before Parliament at the final stage, an exception was made for partnerships dissolved by notices served between 16 September 2002 and 1 July 2003.

In doing so the court took the view that it had to construe s 72 as it stands notwithstanding that, on 3 February 2003, the landlord had a perfect right to give notice against 28 November 2008. That the retrospective effect of the Act might be seen as penal, giving the general partners full security of tenure, by contrast with a notice of dissolution given after 1 July 2003 (which extended security for three years only), was irrelevant, though the court wondered if this had really been the intention of Parliament.

This decision has been appealed.

We close by pointing out that, by the time you read this, Alasdair will have retired as a partner of Anderson Strathern, though he continues as a consultant. Alasdair is grateful to the very many people who have commented favourably on his briefings in the Journal, and (so he hopes) also to the silent majority of the readership, for bearing with him. You have, however, not heard the last from Alasdair: knowledge management (including writing articles) is to be part of his consultancy diet.

[For which I am, indeed, grateful, as I am to Alasdair for his unfailing support in my time as Editor – PN]

• Alasdair G Fox and Fiona M Stephen, Anderson Strathern LLP