FULL COURT

(Lord McGhie, A Macdonald, J A Smith)

VISCOUNT REIDHAVEN v MRS M MacDONALD-GRANT (AP)

(Application RN SLC/115/00 – Order of 3 July 2007)

AGRICULTIRAL HOLDINGS – SUCCESSOR – NOTICE TO QUIT – COURT GIVING CONSENT TO NOTICE – COURT IMPOSING CONDITION – CONDITION NOT FULFILLED – WHETHER CONSENT CONDITIONAL – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 1991 SECTION 25(4)

By order of 23 April 2002 the Court granted consent to the operation of a notice to quit “subject to the condition that the landlord Applicant shall enter into a formal lease and variation of partnership agreement to reflect the amalgamation of the subjects [with an neighbouring farm] copies of which documents shall be lodged with the Court within a period of one month from the date of this Order”. The respondent subsequently took steps to appeal by way of Special Case and presented a motion for rehearing. Both were ultimately abandoned. Formal lease and variation of partnership agreement had been duly executed but because of the appeal procedures the need for lodging of copies was overlooked. The landlord sought to be allowed to lodge the agreements out of time. The Court was satisfied that the failure to lodge the documents in question was an excusable oversight and that the delay in seeking to be allowed to lodge them late was explicable. However, counsel for the landlord accepted that the Order consenting to the Notice to Quit had been conditional on the lodging of the duly executed agreements and that, in the circumstances, the original Order would fall. Having regarded to all the circumstances including the apparent need to re-open the question of the “fair and reasonable landlord provision, the Court declined to allow the documents to be received late. The decision was appealed on the basis that concession was erroneous. No procedural issues were raised on behave of the tenant. The short issue before the Court was one of competency and turned on the proper construction of section 25(4). Did the Court have power to make its consent conditional under the provisions of that section?

HELD (1) The power given by section 25(4) was a very restricted one and it applied only “where consent is given”; (2) although the Court might achieve the result of making consent conditional in an appropriate case by deferring its consent the scheme of the section did not allow consent to be conditional on conditions imposed under subsection (4); (3) Accordingly the notice to quit had been effective even although the condition had not been fulfilled.

The Note appended to the Court’s Order is as follows:-

This was, in form, an appeal from a decision of a Divisional Court refusing to allow late lodging of a lease. However, the parties were agreed that the issue between them turned on the proper construction of the provisions of section 25(4) of the Agricultural Holdings (Scotland) Act 1991 and of the Order of 23 April 2002. It is, accordingly, unnecessary to set out the full detail of the history of the case or to consider the questions of the inter-relationship of appeal and rehearing which were hinted at in the written submissions.

The Order included the following provisions: “Consent to the operation of the Notice to Quit referred to in the Application but subject to the condition that the landlord Applicant shall enter into a formal lease and variation of partnership agreement to reflect the amalgamation of the subjects of the Application (Toum farm) with the farm of Kinchurdy (including Balnacruie and Balnafoich) as one tenanted unit, copies of which documents shall be lodged with the Court within a period of one month from the date of this Order; POSTPONE the operation of said Notice to Quit until the Twenty-eighth day of May 2002”.

The respondent subsequently lodged a requisition for Special Case and a motion for rehearing, both of which were ultimately abandoned. Because of these procedures the Court, by Order of 4 November 2003, postponed the effective date of the operation of the Notice to Quit to 28 November 2003. The fact that the formal lease and variation of partnership agreement had not been lodged was not noticed at that time. Apparently it came to the attention of the landlord in the course of separate proceedings in the Sheriff Court for removal of the tenant. The landlord sought to be allowed to lodge the agreements out of time.

The Court was satisfied that the failure to lodge the documents in question was an excusable oversight and that the delay in seeking to be allowed to lodge them late was explicable. However, the Court had concerns about the implications of the failure to meet the terms of the condition set out in the Order. At a hearing counsel for the landlord accepted that the Order consenting to the Notice to Quit had been conditional on the lodging of the duly executed agreements and that, in the circumstances, the original Order would fall. She accepted that the landlord would require to abandon the proceedings for removal based on that conditional Order. It was not seriously disputed that if the Court had to reconsider the matter it would be necessary to make a fresh assessment of the proviso. The Court said that, “having regard to the lapse of time, it is likely that any fresh decision on the proviso would be a narrow one. Assessment of the attitude of a fair and reasonable landlord in the very unusual circumstances of this case would present certain difficulties”. There was no doubt that the question of whether the landlord should be allowed to lodge the relevant documents late, was a matter for the discretion of the Court. Taking account of the various difficulties which the Court discussed in their note, they concluded that the motion to allow the agreements to be lodged late should be refused. It was plain that the whole discussion was based on the premise that the initial consent was conditional on timeous lodging of the documents. Had the condition been treated as separate from the consent, there would have been no reason not to allow the documents to be lodged late.

We heard the appeal at Edinburgh on 5 June 2007 when Mr Lewis Kermack, Solicitor, appeared for the landlord applicant and Mr A W Devlin, Advocate, appeared for the respondent. At the outset, we repeated formally an explanation for the unusual circumstance of the Chairman as member of the Full Court, hearing an appeal from a decision of a Divisional Court which included him. It had been expected that any such appeal would require to be dealt with by way of Special Case but parties were aware of the situation and had raised no objection to the Court now dealing with the issues.

Authorities

Arbroath Town Council v J Carrie & Son 1972 SLCR (Appendix) 114
British Airports Authority v Secretary of State, 1979 SC 200
Earl of Morton v Hamilton 1977 SLCR Appendix 136
Haddo House Estate Trustees v Davidson 1982 SLT (Land Ct) 14
MacKenzie v Lyon 1984 SLT (Land Ct) 30
Martin-Smith v Smale [1954] 1 W L R 247; [1954] 1 All ER 237

Textbooks

Sir Crispin Agnew, Law of Agricultural Holdings, 1st Edition
Lord Gill, The Law of Agricultural Holdings in Scotland, 3rd Edition
Scammell and Densham’s Law of Agricultural Holdings, 8th Edition
Muir Watt and Moss Agricultural Holdings, 14th Edition
F A R Bennion Statutory Interpretation, 4th Edition

Statutory material

Agricultural Holdings Act 1948
Agricultural Holdings (Scotland) Act 1949 (“the 1949 Act”)
Agriculture Act 1958
Agricultural Holdings (Scotland) Act 1991 (“the Act”)
It should be noted that subsequent references to sections are references to provisions of the 1991 Act unless otherwise specified.

Submissions for the appellants

Mr Kermack contended that the concession made on behalf of the landlord applicant at the hearing had been incorrect. The Court, accordingly, had been misled and had erred in treating the issues before it as matters of procedure and discretion. The real issue was one of competency and turned on the proper construction of section 25(4). In terms of section 25(3) the provisions of section 24(3) giving the Court a general discretion to impose conditions had no bearing. The power given by section 25(4) was a very restricted one. Critically, it applied only “where consent is given”. The Court had in fact decided that the case fell under Case 2 and that it did not appear that a fair and reasonable landlord would not insist on possession. He contended that, at that stage, the tenancy terminated. He referred to section 85 and the discussion of the definition in Gill 14.01.

The substantive obligation on the landlord was to amalgamate the units. This required practical working of the farm: MacKenzie v Lyon; Gill 18.13. Termination could not possibly be conditional on implement of such a condition as the obligation only arose after termination. In the present case the former tenant had prevented amalgamation because she refused to remove despite the landlord’s active steps to put her out.

He dealt in some detail with the history of the relevant provisions relating to succession and referred to Haddo House Estate Trustees v Davidson for a summary of that history. He then discussed the nature of the conditions envisaged by section 25(4) under reference to Earl of Morton; ArbroathTown Council; Gill18.44; and Agnew page 180. He submitted that the actual termination could not be conditional on any condition imposed under these provisions. Their true purpose was confirmed by section 27: Gill 18.47.

Mr Kermack also looked at the history of section 27 referring to the provisions of section 30 of the 1949 Act and its amendment by paragraph 40 of Schedule 1 of the Agriculture Act 1958. The scheme of the legislation had not changed although the penalty effects were now admittedly of much less significance.

He dealt with the various assertions set out in the tenant’s written Answers to the grounds of appeal. The words “subject to” were not sufficient to make the consent conditional. It was appropriate to read the Court’s Order of 23 April 2002 in a sense consistent with the proper construction of the statute. If it could not be read in that sense it was ultra vires. He accepted that the effect of his submission was that the whole question of late lodging was irrelevant to the question of removal. However, although the Order of 18 May 2006, refusing to allow the documents to be lodged late would not, in itself, impede removal on the basis of his main argument, the terms of the note plainly required to be corrected.

Submissions for the tenant respondent

Mr Devlin sensibly made no attempt to found on any technicality arising from the departure from the explicit concession made in the Court below or from the fact that Mr Kermack appeared, in essence, to be attacking, not the decision of the Divisional Court in 2006, but that of the Full Court in 2002. It is sufficient to say that we accept that there is no strict rule that a party is bound by earlier concessions on issues of law and that, in the particular circumstances of this case, the possible procedural anomaly is more apparent than real. We agree that the substantive issue is that of construction of section 25(4). The Order of 2002 falls to be read as consistent with the statutory provisions, if possible.

Mr Devlin stressed that the question at the heart of the appeal related to the extent and effectiveness of the Court’s jurisdiction. If the Court did not have power to make the consent to the notice conditional upon the landlord’s performance of a particular condition this would greatly limit the power of the Court. This would not help landlords. If a Court had doubt as a landlord’s intention to amalgamate, it would require to take the safer course of refusing to grant consent if it could not impose a condition intended to help secure amalgamation.

Counsel then turned to examine the provisions of section 25(4). He noted that imposition of the condition was mandatory where the Court was satisfied that it was necessary to secure that the holding would be amalgamated. The Court had a wide discretion as to what was “necessary” but the purpose of the condition was to secure the amalgamation. Parliament plainly recognised the importance of securing that. The condition imposed in this case was one which was not challenged as unnecessary for that purpose. It was designed to secure amalgamation and did no more. Dicta in MacKenzie v Lyon were in a different context. It was misleading to suggest that the condition was predicated on whether amalgamation had in fact taken place. It was simply a condition designed to secure that it would happen. He referred to Agnew, page 181. The condition was not ultra vires. The condition was not intended to give the tenant further occupation. It was the consent which was conditional. The condition did not provide that the tenant could remain but that the documents required to be lodged. Nothing in the Arbroath Town Council case was relevant to the point. The power was to impose conditions relating to amalgamation and that was what had been done. In short, the condition was properly imposed and, until fulfilled, consent could not take effect. The tenancy was not terminated.

Counsel drew attention to a decision in point which appeared to be against him. He submitted that it could be distinguished. That was Martin-Smith v Smale. He noted that the report in the All England Reports dealt more fully with the procedural implications than the other report but pointed out that the rubrics in both the Weekly Law Reports and the All England Reports were not entirely accurate. He explained the procedural context of that case. The Court was considering whether a particular consent was conditional. It did not require to decide whether such consent could have been conditional. The condition in that case necessarily required vacant possession before it could be implemented. This was to be contrasted with the present condition. It was also important to have proper regard to the legislative context. At that time the landlord faced effective statutory sanctions if there was any failure to fulfil his own obligations. Plainly the condition was not for the benefit of the tenant.

Mr Devlin set out the history of the English statutory background to establish the context of the English decision. It was similar to the Scottish material in providing a radical remedy at that time. In construing the present Act it was important to have regard to the fact that the sanction now available was of little practical effect. He also pointed out that to the best of his researches the case had never been cited, let alone approved, in any judicial proceedings since 1954. He advised us of citations in Muir Watt and Scammel and Densham. He pointed out that Lord Gill (at 18.44) dealt with the provisions but made no reference to the case. He submitted that the case had to be seen in the context of the legislative provisions in force at the time. Dicta in Scammel and Densham at page 175 and 176 showed the lack of utility of the present statutory penal regime. Counsel went on to discuss the detail of the dicta and a possible contrast between the views of Lord Denning and Lord Romer. The Land Court did not require to follow the decision.

Essentially the issue turned on proper construction. The appellant’s argument would defeat the purpose of the legislation. The intention was that the condition would “secure” amalgamation. It was appropriate to adopt a construction which aided that purpose rather than defeated it. He referred to Bennnion for the principles set out at pages 867, 884 and 885. He accepted that the examples discussed by Bennion were not in point but the principles set out had a clear bearing on the proper approach.

He turned to deal with the proper meaning of the word “condition”. On the appellant’s construction the word had no sensible meaning. The ordinary meaning was that one thing was conditional on the other. He stressed that the ordinary meaning was obvious. It was unnecessary to cite dictionary definitions to that effect. In response to the Court’s suggestion that the words “terms” and “conditions” were often confused, he submitted that it would be a very strained construction to refer to this “condition” as being simply a “term”. It was part of the consent provisions. This was consistent with his main submission that the fundamental question was that of the scope of the jurisdiction of the Court. Was it to have a power which was of weight or one which was essentially meaningless? He emphasised that it was misconceived to regard this as a penal provision. The fact that the consent might be invalid was implicit in the condition. There would be no consent if the condition was not fulfilled. There was no question of the consent becoming invalid as a penalty. He added that although there was reference, in the context of the English law, to the possibility of a remedy in fraud if it transpired that the landlord had misled the Court, it was important to point out that this required a high standard. A Court would recognise this. Accordingly if they could not impose an effective condition a Court would necessarily become much more conservative in assessing evidence of intention. He concluded by saying that it was all a matter of interpretation. The Court should prefer his approach accepted by the landlord in the early stages and should refuse the appeal.

Submissions in response

Mr Kermack in response made some reference to a decision in Rowse v Mitchell in relation to the issue of fraud but did not give a full citation and did not appear to rely to any extent on the case. He stressed a passage from Gill at 18.44 to the effect that the reason for section 25(4) being restricted to cases 2 and 6 of the second schedule was that they both referred to future purpose. He repeated his submissions that the Court could impose the condition after consent. By that stage the lease was over. There was a penalty for breach of condition. A conditional consent was not within the armoury of the Court. The power of the Court was to grant or withhold consent. If it granted consent it could also impose conditions. He accepted that the Court might be able to avoid the conservative approach suggested by Mr Devlin on the basis that it could continue the original hearing in order to have evidence of arrangements being made with a new tenant to take over the holding. It was a feature of the present case that there had been no attempt to lead any such evidence.

In relation to the decision in Martin-Smith v Smale, he said that he would accept Lord Denning as correct and that the dicta of Lord Romer were wrong. However, both had agreed that the tenant’s arguments were irrelevant. He accepted that the decision supported his general argument but he did not require to rely on it.

Mr Devlin stated that it was important to remember that this was an appeal about documents being received late. He noted that the original period allowing the tenant to remain was not a period of two years but simply of one month. There would have been ample time for the landlord to implement his obligation to amalgamate. He stressed that the consent required was consent to “operation of the notice”. That consent was a preliminary requirement of the notice having effect. The notice did not have effect until a stage after that consent. The inescapable fact was that the word “condition” was the word used in the Act. It could not simply be wished away or given a meaning it would not normally have.

Discussion

Our Order granted consent “but subject to” the condition relating to the lodging of agreements. Essentially the concession made before the Divisional Court was that it should be understood as equivalent to saying: “we shall consent if the landlord lodges an agreement” or possibly as equivalent to saying: “we shall consent if the landlord lodges an agreement but not otherwise”. We do not think the distinction of critical importance to the present issue but it should not be lost sight of. Put in either way, the Court would not have reached the stage of consenting but would simply be indicating an intention. An approach consistent with this proposition might have been followed. An example may be found in EdinburghUniversity v Craik. However, it is clear that in the present case, the Court purported to act in reliance on their powers under section 25(4). If so, the distinction between consenting and intimating an intention to consent requires examination.

We accept that the primary purpose of section 25(4) is not to create a system of conditional consent. A tract of Scottish examples shows it being used as a means of control of the landlord’s activities after the tenant has gone. In other words after the consent has become fully effective. No Scottish example was cited to us of the consent being intended to be conditional on performance of the condition. The terminology of the Order of 23 April 2002 is consistent with established practice in contexts where the words “subject to” could have had no reference to the consent itself. In other words, the Order is capable of being read in the traditional way and being consistent with the consent being fully effective despite the condition. It, accordingly, seems to us that there are two questions: must the Order now be read in a different way making the consent conditional and, if so, was such an Order within the powers given to the Court by section 25(4). We think a short answer to the present dispute can be found by saying that there is nothing in the Order or the note appended to show that the Court intended to make consent conditional. The style used was that considered appropriate in circumstances where the consent could not have been conditional on performance. The mere fact that it was a condition which could have been performed before the tenant physically left is not, in itself sufficient to demonstrate an intention to make the consent conditional. In the Note the Court said explicitly: “We accordingly consent to the operation of the Notice to Quit. It will take effect from 26 May 2002 which will give ample time to deal with the current stock.” The Court then went on to discuss conditions under reference to section 25(4).

On that view of the proper construction of the Order, it is strictly unnecessary to deal with the extent of the power conferred by that provision. However, the arguments were not focused in quite that way and we consider it appropriate to deal with this matter on the basis of the second question. If the Order falls to be read as making the consent conditional was that within the powers given by section 25(4)?

Before attempting analysis of the provisions of the sub-section it is appropriate to say that we are satisfied that nothing in the Scottish cases to which we were referred provides any reliable guidance in relation to the problem which now faces us. No Court was dealing with any situation which required them to address the matter. What does emerge very clearly is that Courts, here and in England, have treated the words “subject to a condition” as allowing conditions to be either imposed or construed in a way which has no direct relationship to the consent. Martin-Smith v Smale is an explicit example. Earl of Morton is a clear Scottish example. The Court granted consent “subject to the condition that ….. landlord farm the subjects ….. from the date the Notice takes effect”. It may be observed that the cases listed in Gill 18.43 at footnote 11 provide various examples to the same effect.

In these circumstances, we are not persuaded by the respondent’s contention to the effect that the use of the word “condition” necessarily meant that the consent itself was to be conditional. In short, we accept that the Act can be read in the way contended for by the appellant. This approach is quite consistent with the scheme of the Act. Plainly the Court cannot make consent conditional on the landlord taking active steps to bring about an amalgamation because this would, in practice, require occupation. He cannot get occupation until the consent is effective and the tenant has left. But, the aim of the Act is to deal effectively with the stage after the tenant has left. It is to try to control events at that stage. At that point, the control mechanism is necessarily outwith the scope of the tenancy. The Act provides control by means of section 27.

It is convenient at this point to say that we are satisfied that proper construction of the Act does not depend on the perceived weight of the provisions of section 27 or its predecessors. It is enough that the legislature has provided what it considers to be appropriate machinery for enforcement. It might be added that where the sanction provided is truly penal it can be taken to emphasise the weight Parliament attached to compliance and the likelihood that Parliament would not have intended to abandon more direct means of enforcement. Equally, as Mr Devlin contended, if the sanction was not in itself perceived as penal, this might re-enforce the argument that it was intended that the more obvious sanction of conditional consent would remain available.

However, while accepting that the Act can readily be read in the way contended for by the appellant, there is little doubt that a condition such as was imposed in the present case, could best be given effect by making the consent conditional. The word “condition” in its primary sense, would plainly cover such an approach. In essence, the question is whether the natural meaning of “condition” is open to us or whether the scheme of the Act precludes such an approach.

In Martin-Smith v Smale, the Tribunal gave consent which was expressly “subject to a condition” that the landlord appointed a proper manager before taking possession. Mr Devlin sought to distinguish the case on the basis that this was a condition which could only be implemented after the tenancy had terminated. Although it might be thought that the concept of the landlord “taking possession” was to be seen as equivalent to putting an end to the tenant’s possession, Lord Denning plainly drew a distinction. He envisaged a situation where the tenant would, or should, have left before any question of the landlord taking possession arose. The case can, accordingly, be distinguished on its facts. It did not require to consider whether a condition precedent to consent to the operation of the notice to quit might have been imposed. As we have indicated, we think that the real significance of the decision is that it is authority for the proposition that the words “subject to the condition” are not, in this context, necessarily to be read as qualifying the preceding provision. Clearly the Court did not accept that it was the consent which was subject to the condition. It treated the condition as no more than a provision of the Order. In that case, the only thing that might properly to be described as “conditional” was the Ministers’ right to exercise powers under the equivalent of the modern section 27. Plainly the Court simply treated the condition as a separate part of the Order which gave consent. That was a construction open in the circumstances of that case. On the facts the condition could only apply after the consent. The Court did not require to address the question of a condition which could be performed before the tenant was required to leave.

We consider it unnecessary to examine the detail of the Scottish cases. Plainly the present issue was not in point in any. There is nothing about the nature of the arguments, or the underlying circumstances, in any of the cases cited to suggest that the dicta bearing on the conditions imposed were intended to express any wider principle. It may be added that the question of conditions has tended to be addressed by the Court after the main issues on the merits have been resolved and without benefit of full submission: indeed, often without benefit of any submission. The dicta provide no sound guidance.

For completeness, however, we comment further on two cases. We raised at the hearing the point that the Court might achieve the same result as conditional consent by a different route. If the Court had been in doubt as to the landlord’s intentions it could, properly, have continued the case until the relevant agreements had been lodged. That would be consistent with the course followed in EdinburghUniversity v Craik 1954 SC 190. However, had such a course been followed, the landlord would have had an opportunity to argue, if he saw fit, that consent should be given even if he would, or could, not implement the condition. A similar opportunity is afforded by section 24(4). No such opportunity is given in relation to conditions imposed under section 25.

Mr Kermack relied on dicta in Arbroath Town Council where the Court, after granting consent to the operation of the Notice to Quit said: “There the duty of the Court ends”. However, that plainly would not meet the circumstances of the present case. The Court has an obligation to consider conditions in terms of section 25(4). In the Arbroath case, the Court did go on to consider the equivalent provision of the 1949 Act and the nature of the conditions proposed. It had no need to consider the issue raised in the present case. It simply had to consider whether it was open to it to make a condition allowing the tenant to continue to use part of the holding. Plainly that had no bearing on the type of condition envisaged by the provision in question and the Court had little difficulty in finding that it should not impose such a condition.

When we look at the statutory provisions we see that the statutory power, or obligation, to impose a condition relating to implement of the landlord’s declared intention arises only at a stage where the Court has had to decide that it is satisfied that the circumstances fall within the appropriate Case; in the present application, Case 2. The Court has to be satisfied that the landlord intends to use the holding for the purpose of effecting an amalgamation. The Court has no jurisdiction to refuse consent simply because it considers it impossible to impose conditions which will ensure that such amalgamation takes place or indeed because it considers that there is a risk of something happening which might frustrate the landlord’s intention.

In short, we accept Mr Kermack’s submission that before the stage of imposing conditions under section 25 (4), the Court requires to have reached a decision that the circumstances for consent have been satisfied. The Act makes no provision for the Court to impose its own conditions for consent. We think that the substantive effect of the respondent’s construction would be to change the nature of the task facing the landlord because it would change the ground for consent. We are satisfied we have no power to do this.

It follows that consent cannot be made conditional.

Decision

For these reasons, we are satisfied that the Order of 23 April 2002, cannot be read as making the operation of the notice to quit dependent on implement of the condition. The effect of the Orders of the Court was that the tenant was obliged to leave the holding at 28 November 2003.

As the substantive justification for declining to allow the landlord to lodge the lease and agreement referred to in the Order of 23 April 2002, was based on the concession which we accept to have been made in error, the Order of the Divisional Court of 18 May 2006 must be recalled. The Court explained that it was satisfied that the failure to lodge was an excusable oversight and that the delay in seeking to be allowed to lodge late was explicable. There is accordingly no reason to refuse to accept the requisite documents. They have been tendered and we can grant permission for them to be lodged with immediate effect. For the reasons set out above, this will have no bearing on the landlord’s right to require the respondent to remove.

For landlord applicant: Mr L Kermack, Solicitor, Edinburgh

For tenant respondent: Mr A W Devlin, Advocate; Messrs R & R Urquhart, Solicitors, Inverness