DIVISIONAL COURT

(Lord McGhie)

JOHN FISH & ANOTHER v CHURCH OF SCOTLAND GENERAL TRUSTEES

(Application SLC 12/13 – Order of 3 September 2013)

AGRICULTURAL HOLDINGS – TENANT’S RIGHT TO BUY – TRIGGERING OF RIGHT TO BUY – PROPOSES TO TRANSFER – ACTION WITH A VIEW TO THE TRANSFER – NOTICE OF PROPOSED TRANSFER – TENANT’S PRE-EMPTION – POWER OF RESUMPTION – IMPLIED RESTRICTION ON SCOPE OF WIDE POWER OF RESUMPTION – FRAUD ON LEASE – PURPOSE OF RESUMPTION – CIRCUMVENTION OF RIGHT TO BUY – LAND TO PROVIDE ACCESS TO CHURCH BUILDING – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 2003 SEC 26, 27, 28.

The applicants were agricultural tenants of a field lying between their home and the former Eckford Parish Church. Their home had been the manse. When they bought the manse they also bought the bulk of the glebe. They leased the field with a view to running it along with the rest of the glebe. The landlords reserved rights to use the field for temporary parking in connection with functions at the church. When the church ceased to be used for worship the landlords wished to sell it for development. They decided that it would be advantageous to resume a strip of the field adjacent to the church to provide parking and sewage facilities for the church building. There was no dispute about their intention to sell the church. It would not be marketable without sewage and parking facilities. The landlords entered correspondence with the tenant making clear their aim to sell the strip with the church. The tenants registered their interest in purchase of the holding. The landlords then gave notice of an intention to resume the strip. The tenants contended that the giving of such notice or in any event the respondents’ actings in relation to the strip triggered the tenants’ right to buy in terms of the Agricultural Holdings (Scotland) Act 2003. The initial notice of resumption was defective in form and an application to the Court in respect of it was abandoned. Another notice was served but was also thought to be defective. However, a third notice was served and in their answers the respondents sought declarator that it was valid. The tenants contended that the proposed resumption was a fraud on the lease as it would reduce the size of the field by some 20 % and would remove a necessary access. They also argued that the resumption was simply an attempt to circumvent their right to buy under the 2003 Act. The landlords accepted that their right to resume depended on there having been no valid exercise of a right to buy before the final notice and on the tenants having failed to establish any fraud on the lease.

HELD (1) The expression “fraud on the lease” was no more than a shorthand way of saying that the language of the lease required to be read in a way consistent with the deemed intention of the parties. The extent of the land to be taken could not be described as outwith the contemplation of the parties whether the field was viewed on its own or treated as part of the original glebe. Although use of the access would be important in relation to any cattle farming activity on the glebe lands, the sheep rearing enterprise on the glebe could continue perfectly well without it. But in any event resumption of the strip was consistent with continued access at that point. The issue of fraud on the lease did not require an anticipation of a landlord’s purpose. It was the potential impact of the resumption on the tenant’s business which raised the question of good faith. It was not necessary that the particular land-take should have been contemplated. The purpose of the resumption could not properly be described as “circumvention of the legislation” as the landlords plainly wished to develop the strip to enhance the value of their building, not simply to prevent the tenant buying it. (2) No right to buy had been triggered because two conditions required to be satisfied where the landlords had not given notice. The first was that the landlords had to have taken action with a view to the sale of the strip within the definition of that expression contained in sec 28 (3) of the 2003 Act. That definition was a comprehensive definition. Whatever might be the case in relation to the church building, nothing done by the landlords in relation to the strip came within the definition.

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

[1] The applicants are tenants of a field lying between their home at Eckford House, near Kelso, and Eckford Parish Church. The respondents, the Church of Scotland General Trustees, own the field. They wish to resume part of it (the “strip”) adjacent to the church to provide parking and sewage facilities for the church building which is no longer used as a church. Their intention is to sell the church for development. It is thought that it would not be marketable without sewage and parking facilities. Put shortly, it is contended that the respondents’ actings in relation to the strip have triggered the applicants’ right to buy in terms of the Agricultural Holdings (Scotland) Act 2003 and that the proposed resumption is invalid as being a fraud on the lease.

[2] At the hearing on 8 August 2013 the applicants appeared on their own behalf and Ms Gail Joughin, advocate, appeared on behalf of the landlords.

Cases

Broadland Properties v Mann 2006 SLCR (1) 1
Cawdor Trustees v Mackay 2005 SLCR 76
Fothringham v Fotheringham 1986 SLCR 82
Glencruitten Trustees v Love 1966 SLT (Land Ct) 5
North Berwick Trust v Miller & Co 2007 SLCR 40
North Berwick Trust v Miller & Co 2009 SC 305
Salvesen v Riddell 2012 SC 633
Thomson v Murray 1989 SLCR 14

Text book authority

Gill The Law of Agricultural Holdings in Scotland 3rd Ed

Relevant statutory provisions

Section 26 of the Agricultural Holdings (Scotland) Act 2003 provides:

(1) Where the owner of land in respect of which a tenant’s interest in acquiring land is registered under section 25 or a creditor in a standard security with a right to sell the land proposes to transfer the land or any part of it to another person, the owner or, as the case may be, the creditor must, subject to section 27–

(a) give notice in writing of that fact to the tenant; and

(b) send a copy of the notice to the Keeper.

Section 28 provides:

(1) Where a tenant’s interest in acquiring land is for the time being registered under section 25 and–

(a) the owner of the land or a creditor in a standard security with a right to sell the land, gives notice to the tenant under section 26 of a proposal to transfer the land or any part of it; or

(b) the owner or the creditor takes any action with a view to the transfer of the land or any part of it and–

(i) the transfer is a transfer in respect of which notice to the tenant is required under section 26; and

(ii) such notice has not been given,

the tenant has the right to buy the land to which the transfer relates (including any interest or rights comprised in the land) from the owner or, as the case may be, the creditor.

(2) …

(3) For the purposes of subsection (1)(b), action is taken with a view to a transfer of land when–

(a) the land is, by or with the authority of the owner of the land or a creditor in a standard security with a right to sell the land, advertised or otherwise exposed for sale;

(b) the owner or the creditor, or a person acting on behalf of the owner or the creditor, enters into negotiations with another person with a view to the transfer of the land; or

(c) the owner or the creditor, or a person acting on behalf of the owner or the creditor, proceeds further with any proposed transfer of the land which was initiated prior to the date on which the notice of interest was registered.

Resumption clause in Lease

[3] The lease of the field includes reservation to the landlords of a right to resume in the following terms: “(Secundo) power to resume at any time on not less than two months’ previous written notice any part of parts of the subjects of let for any purpose or purposes (except agricultural purposes) the Tenant being entitled to a proportionate abatement of rent for all land resumed and to payment for any crop, seed, manure or labour in such resumed land and the Landlords being bound at their own expense to enclose all lands so resumed; but in the event of any resumed land being restored to the subjects of let the Tenant shall be bound to accept the same and to pay such additional rent therefor as shall failing agreement be determined by arbitration.”

Witnesses

[4] Parties were agreed that the written material could be accepted as being what it purported to be and this is covered much of the ground. There was little dispute about the facts. We give details of the witnesses for reference. We have relied on their evidence in the findings which follow. The respondents led Mr Fish as their first witness. He had lived in the former manse since 1989 and had been farming the former glebe since then. He was led to comment on much of the written material and explain photographs and plans. He spoke to the practical aspects of the resumption. William Hall, 62, a farmer in Lauderdale was one of the trustees responsible for glebes. In the latter capacity he had visited the subjects about twice a year over the last few years. Roger Dodd, FRICS, 69, was a trustee and chairman of the respondents’ Fabric Committee. He had been in practice as a surveyor in the Borders for many years. He had produced plans showing the resumption area. He had discussed development proposals with the relevant local authority officials.

Background facts

[5] Most of the background was clear from the terms of the agreed productions. We accepted the witnesses as credible and reliable. We make the following findings.

[6] Eckford Church sits in a churchyard on the west side of the A698 some 6 miles south of Kelso. The building is no longer used as a church. The former manse lies to the south of the churchyard. It is now known as Eckford House. When it was bought by the applicants in 1989 a condition of its purchase was that the term “manse” would no longer be used in relation to it. However, that is a convenient term for present purposes. The former glebe lay between the manse and the churchyard. It also stretched for some distance to the west of the manse running down to the River Teviot. The total area of the glebe was in excess of 7 acres. When the applicants bought the manse they also bought the west section of the glebe. However, the respondents retained title to the field of about 2 acres lying between the churchyard and the manse.

[7] At the time of the purchase there was discussion of a lease of the field to the applicants. Mr Fish said that he had an understanding, at that time, that he would be given an agricultural lease of the field. He said that he knew he would need to rely on it for the occasional access to the purchased land. He did not go so far as to suggest that he would not have bought the manse and the glebe land without use of the field and the correspondence of the time would not support such a suggestion. However, we accept that the applicants were confident that they would obtain use of the field and such a lease was duly entered. The correspondence makes it clear that the respondents were anxious to reserve their right to be able to use the field for parking in connection with the church. It was also clear that the applicants’ expressed intention was to use the field for sheep along with the land they had bought. The lease was an agricultural lease, in other words, one now subject to the provisions of the Agricultural Holdings (Scotland) Act 1991 as amended. The lease adopted the respondents’ standard conditions which included the resumption provision set out above. The lease itself contained the following provision: “In addition to the Reservations set out on pages 1 and 2 of said Standard Conditions of Agricultural Let there is reserved to the Landlords and those authorised by them the right to park vehicles on the subjects of let in connection with services and other events in the adjoining Church and Churchyard, it being stipulated that when this right is exercised the Tenant shall be bound to keep back all stock on the subjects of let from the area which is being used for parking”

[8] In 2006 the church building ceased to be used for religious purposes and the trustees required to consider what to do with it. It was recognised that it would have to be sold to ensure that it would be put to practical use and properly maintained. The building is in a reasonable state of repair at present. The applicants made no attempt to support the various assertions in their pleadings that it was derelict.

[9] It may be noted, for completeness, that there was some evidence of discussion of use of the building as a possible crematorium. That was before the tenants had registered their interest in purchase of the holding. There was no evidence of the role of the trustees in any such discussion. We think it unlikely that the proposal reached the stage of serious consideration by them although it appears to have been based on a suggestion by the local Presbytery. The church building would, no doubt, have been capable of use as a funeral chapel but there is nothing to suggest that there was any realistic prospect of its being capable of conversion to a crematorium. In their pleadings, the applicants assert that the main reason the proposal did not go ahead was parking difficulties. There was no evidence about this. But, in any event, there was no evidence of any proposal by the trustees relating to use of either the field or the strip.

[10] The most likely use for the building would be residential but it could be used for other purposes such as a studio or exhibition centre. The trustees recognised that if the building was to be sold for any practical use it would be likely to require parking and sewage facilities. We are satisfied that, in practical terms, any future use would require, or be greatly facilitated by, availability of such facilities. Mr Dodd made an assessment as to how these could be provided. There would have to be a route for sewage pipes through the graveyard and means of disposal outside the graveyard area by way of septic tank and run off. There would have to be space for vehicles to park with access from the road to the parking area and proper access from the parking area through the churchyard to the church. He identified the strip as meeting these needs. It extends across the whole width of the field, a distance of about 90 m, and is itself about 20 m wide. The total area is about 0.44 acres. That is of the order of 20% of the area of the field and much less than 10% of the whole original glebe. There is type of gate known as a “flake” at north end of the roadside fence of the field. It lies within the strip. Such a gate is not hinged. It is effectively a hurdle tied to the adjacent fence with string or wire. We refer to it as the flake gate.

[11] In the most recent resumption notice a narrow triangular area has been added to allow an adequate sight line to the south. But this lies outside the fence line and it is unlikely that it is part of subjects leased to the applicants. It was not suggested that there was any other possible way of meeting the parking and sewage needs. It was not suggested that a smaller area would have been sufficient. There was some challenge to the likelihood of any development going ahead. However, we accept the evidence of Mr Dodd that development was feasible; that if the building was to be developed for housing or, for other use such as a studio, the strip would be needed to provide the necessary facilities; and that this arrangement would be likely to be accepted by the relevant authorities. We are satisfied that the local authority would wish to see the building put to a useful purpose and there is no reason to think that they would not co-operate in helping find a use for it. It was recognised that any use would need to be compatible with the surrounding graveyard. The graveyard is owned by the local authority. It is still in use.

[12] Mr Fish suggested that there would be difficulty in taking access from the busy main road. However, we again refer the evidence of Mr Dodd. He had discussed the matter with traffic officials. There could be adequate sight-lines. We observe that there would be no need for a gate and, accordingly, no question of vehicles blocking the road while a gate or flake was being opened by the driver. We are not experts in traffic matters but it does not appear that the road access would be more hazardous than many farm driveways or the entry to the manse itself.

[13] Much of the discussion of difficulties appeared to relate to the question of pedestrian access from the proposed parking area to the church. It appeared to be asserted on behalf of the respondents that there was an existing right of access. However we do not think this important to the present issues. We are satisfied that there is available a route through the churchyard between gravestones which could be used for pedestrian access and, if necessary, for sewage piping. This route follows the line of a track shown on old plans as the path from the manse to the church. It was not suggested that there would be any reason for the local authority to oppose a new access on the old line.

[14] Although we think it unnecessary to decide whether the church has any positive right of access through the graveyard over that route, it can be said that it may well have. The path shown on the plan runs from the side of the manse through the field to a point in the wall where there used to be a gate. From there it is shown running up to the church. That part of the churchyard is now grassed over but free of headstones. It could easily be used by pedestrians. We recognise that any earlier rights might have been lost by prescription. The gate itself had apparently disappeared many years ago. The gate posts or fixings fell into disrepair and the gateway came to resemble a gap in the wall. But that gap was only filled a year or two ago when the local authority closed it by building a new section of wall to match the original and the gateway would have provided an obvious means of access to the church when the field was used for parking. This was not explored in any detail and it is clear that the gap would have had to be blocked, in some way, when the field was used for livestock. Access from the field to the church could have been taken through the flake gate opening – which would have had to be open for the vehicles – and then by an adjacent gate in the roadside wall of the churchyard although there was no clear route from that gate to the church itself. However, as we have said, we think it unnecessary to consider the matter in terms of right.

[15] The applicants use the field for their farming activities along with the other parts of the former glebe. They currently keep four Highland cattle in the field although these are for show rather than commercial purposes. Their main business is sheep farming and from time to time they have sheep in the field with the cattle. The west side of the field is fenced off with handling pens for sheep. They currently have use of other grazings in the vicinity and have about 400 sheep in total. The former glebe is their main base. They regularly move sheep on and off the glebe land by way of the driveway to the former manse and a track to the south and west of it. They can use trailers for this purpose. They do not use the flake gate on more than a few occasions each year, if that. They use it to bring in a delivery of winter feed. They would require it if bringing cattle on or off their holding or if dead cattle had to be removed. It would be possible to operate their sheep farming business without use of the flake gate but the vehicles typically used for cattle are too big to use the track through the manse grounds. It could not easily be widened because of the positions of mature trees. If they lost use of the strip they might have to reduce the sheep stock kept on the glebe land by up to 10%.

[16] The applicants registered their interest in the right to buy their holding pursuant to sec 25 of the 2003 Act on 9 February 2009.

[17] At some time a local businessman expressed an interest in buying the church. It was not clearly established whether this was before or after 9 February 2009. There was no evidence that he had expressed interest in any land other than the church. It was not established that the trustees had been involved in discussions with him.

[18] By letter of 12 October 2009 the landlords’ solicitor, an employee in their Law Department, wrote to the tenants in the following terms: “I have been instructed to act on behalf of the General Trustees in the sale of Eckford Church. The trustees own only the footprint of the building with the surrounding graveyard being in the ownership of the local authority. The trustees have been advised that the inclusion of a portion of the glebe land in the sale would be advantageous, as it would enable a purchaser to install services to the church and allow for parking. … As tenants of the Glebe, you have registered your interest in the glebe under the provisions of the Agricultural Holdings (Scotland) Act 2003. This means, as you know, that if any part of the Glebe is offered for sale you would have a right to buy it”. The letter went on to ask if the tenants were interested in purchasing the ground or would agree to discharging their interest in it. At that time the respondents had not considered the implications of their right to resume. We are satisfied that they simply proceeded on the view that there would, at some point, inevitably be a stage which triggered the tenants’ right to buy. We are satisfied that the reference to the tenants’ interest in purchasing was not an offer to sell but an enquiry hoping for a negative answer.

[19] The tenants responded to say that they wished to buy their holding. The Law Department responded by asking whether the tenants would agree to releasing their interest in the strip of ground adjacent to the graveyard to allow it to be included in the sale of the church, if the trustees were minded to sell the remainder of the glebe to them. They repeated this offer in a letter dated 27 October 2009 which went on: “If you are not interested in some such arrangement, then Eckford Church will simply be sold “as is” without any additional land. The strip of ground adjacent to the graveyard is not for sale separately from the church, and I am sorry if my earlier letters did not make this clear”.

[20] By letter of 18 February 2010 the respondents wrote to the tenants explaining that they considered it competent to resume the land from the tenancy. The letter enclosed a formal notice of resumption and they offered to fence off the land from the remaining area of the field and to update the rent proportionately. They also offered whatever compensation might be due in terms of the resumption provisions in the lease. The formal resumption notice referred to the lease and described the land as shown on a plan. This was substantially the same land as covered in the more recent notice, in other words, the strip. The letter added: “This resumption is being effected for the purpose of enabling the trustees to include the said area of land to be thus resumed as ancillary/amenity ground to benefit the adjacent former Eckford Church”. The tenants’ agent wrote to the landlords on 12 March 2010 advising that the tenants considered that the resumption notice triggered the tenants’ right to buy and enclosing a formal letter intimating the tenants’ intention to acquire the relevant part in terms of sec 29(2) of the 2003 Act.

[21] In response, the landlords made an application to the Court seeking to enforce the resumption notice. After considerable correspondence the landlords were persuaded that the notice was invalid and they abandoned their action in May 2012. A further resumption notice dated 16 January 2013 was served on the tenants but it inadvertently made reference to the date of resumption as 2012 instead of 2013. A subsequent notice dated 28 March 2013 was served on the applicants. This gave notice of resumption on 14 June 2013 and was the basis of the landlords claim in their Answers to the present application. The applicants made no adjustment in response to the Answers and nothing was made of the second notice.

Submissions for applicant

[22] Mr Fish addressed us on behalf of the applicants. He summarised the factual background. He submitted that it was clear from the productions that the respondents wished to sell the church and the resumed ground with it. He suggested that Mr Dodd’s evidence showed that there had been discussions with Teviot Water Gardens about this. He had registered his interest under the 2003 Act in 2009. The respondents had then made three attempts to resume but had withdrawn the first two as their notices had been inept. The resumption was a fraud on the lease. The land was essential for his agricultural purposes. It amounted to 20% of the holding. It was essential for access. In any event, there were road traffic problems. It was, he asserted, very unlikely that the respondents would get planning permission for parking. The graveyard was in use and it would be difficult to find a use for the church which was compatible with it. It may be added that, in their pleadings, the applicants also asserted that the resumption was a fraud as it was not for the benefit of Eckford Church which ceased to be used as a church in 2006.

[23] The right to buy had been triggered by the respondents’ obvious wish to sell the land along with the church. Resumption was just an attempt to circumvent the statutory provisions. The legislation was, he said, “clear, well written and unambiguous”. He did not attempt to take us to any of the detail of it.

[24] When Mr Fish made it clear that he did not intend to rely on any specific provision of the Act we simply confirmed that we would have to study the detailed terms of the Act. However, we asked whether he wished to cite any authority in relation to his assertion of a fraud on the lease. In response to this, Mr Fish amplified his submission that taking the resumption subjects would make the remainder unusable for agriculture. He submitted that the purpose of resumption was intended to be only for the landlords’ own use. It was fraud because the idea of selling the church for housing was unachievable. He suggested that the respondent’s real aim might be to use the resumption subjects as a separate building site. We simply note that this had not been suggested in evidence.

Submissions for landlords

[25] Ms Joughin summarised the factual background. Mr and Mrs Fish were asking for declarator that in the circumstances narrated in their Statement of Facts ‘the transfer is a transfer in terms of which notice requires to be given to the Tenant under Section 26’. This contention had to be seen as crucial to their case. It was clear from sec 28 that any right to buy would only come into existence where a notice under sec 26 either had been given or should have been given. It was accepted that no such notice had been given by the landlords and the question was whether it should have been given. Ms Joughin submitted that although there was no dispute about the long term intention of the landlords to sell the resumption subjects with the church, there had been no event requiring notice to be given to the tenants under sec 26. In short, the owners of the subjects of let had not proposed ‘to transfer the land or any part of it to another person’ in terms of this section.

[26] She said it was not clear from the application what subjects the craves related to. There was a reference to a resumption notice which was only in respect of part of the holding and also to continuing discussions with third parties in relation to sale of the holding or part of it. But whether the application related to a part of the holding or the whole, the fact remained that the respondents had not (a) advertised or otherwise exposed either a part or the whole of holding for sale; they had not (b) entered into negotiations with another person with a view to the transfer of the subjects or part of it; and they had not (c) proceeded further with any proposed transfer of the land which was initiated prior to the date on which the notice of interest was registered. This being the position, the respondents could not be said to have taken action with a view to a transfer of the land in terms of the Act and in particular in terms of sec 28(1)(b) and (3).

[27] Ms Joughin explored this further by reference to the detailed averments. She said it was clear that the application showed that the notice to buy was based on service of the first resumption notice. But it was clear that service of a resumption notice as such did not fall under the statutory provisions and letters from the tenants’ agents had not explained the basis of their reliance on the resumption. Even if a wider view had to be taken, the tenants had not shown any actings falling within the statute. The tenants’ own attempts to discuss purchase were irrelevant and it did not appear that the tenant was attempting to rely on them. The tenants’ solicitors had also asserted that: “all your previous actions indicate your intention to sell the area. In particular, given your previously stated intention, it is difficult to come to any other conclusion than that the resumption notice constitutes the landlord taking … ’any action with a view to the transfer of the land’ under sec 28(1)(b) …”. However, the word ‘and’ at the end of (b) was important. It was not ‘any action with a view to the transfer’ that triggered the right to buy but any such action where the transfer required a Notice under sec 26. A Notice under sec 26 was only required where the owner/landlord proposed to transfer the land or any part of it to another person.

[28] The fact that the landlords had indicated that they wished the resumption area as amenity ground for the church and that they had indicated in correspondence to the tenants that it was their intention ultimately to sell the church with this ground, did not amount to their having ‘proposed to transfer the land or any part of it to another person’. That letter to the tenant expressly said ‘if any part of the Glebe is offered for sale you have would a right to buy it.’ Clearly they had not got to the stage of offering it for sale let alone proposing to transfer it to another person.

[29] Mr Fish had suggested that there had been discussions with Teviot Water Gardens or some similarly named subjects. But there was no evidence of the trustees having been involved in such discussions. Mr Dodd knew the owner of the Water Gardens. All he could say was that he knew that the owner had expressed interest in the building but did not know whether the respondents had been involved in any discussion. That was before the tenants had registered interest.

[30] Section 28(3) set out to define the actions which were to be treated as actions with a view to the transfer to land. Indicating an intention to sell the area was not one of them. That was not a proposal to transfer the subjects to another person. The trustees had never advertised the subjects. They had taken no action giving the tenants a right to buy any part of the subjects in terms of the 2003 Act. Their application for decree in terms of the five craves should be refused.

[31] Counsel went on to deal with aspects of specification in the craves. She suggested that there were various matters to be kept in mind if we found in favour of the applicants. It is unnecessary to repeat the detail of this. She drew attention to the provisions of sec 29 and submitted that there was a lacuna in this section because it failed to deal with the situation where a notice should have been given but was not. That would give the tenants a right to buy but he would not have received a notice. So it would not be possible to serve a notice under sec 29 within 28 days of receipt of the notice under sec 26. The applicants were asking the Court to declare that they could give notice in terms of sec 29(2). While one could see why the applicants would wish a declarator, the Court would not be entitled to pronounce such a declarator. It would not be possible for the applicants to serve a notice within 28 days of receiving a notice under sec 26 if no such notice had been received. But in any event the tenants had purported to serve a Notice under sec 29(2). So they should be asking for a declarator that this notice was validly given rather than declarator that they can now give such a notice. The applicants also sought declarator that they were ‘entitled to proceed in accordance with Section 32’. Section 32 relates to the procedure which is to be used in the event of the tenant wishing to make an actual offer to buy. But the tenants were only entitled to proceed in terms of sec 32 if they have served a notice in terms of sec 29. This was not possible.

[32] Ms Joughin suggested that there might be a question of whether any right to buy had been extinguished by unreasonable delay but she advanced no further submission in support. She said that if the tenants were successful in establishing that they acquired a right to buy as a result of the landlords intimating to them that they would like to recover vacant possession of a strip of the subjects so that they might market the church with that ground and then serving a resumption notice, there was a question as to whether the Notice and Offer they did serve in response in 2010 were valid in terms of the 2003 Act. There is no contention that the two subsequent resumption notices gave rise of new to a right to buy. So any declarator should relate to the initial resumption notice and the correspondence in 2010.

[33] Craves 4 and 5 were simply premature. Crave 4 asked the Court to appoint a valuer in terms of sec 33(4). But until such a time as an offer was made by the tenants which was held to be valid, it could not be known whether a price could be agreed. Until that time it would not be appropriate to appoint a valuer in terms of sec 33(4). There would be a right of appeal from any price fixed by a valuer and any declarator ordaining the landlords to sell the land to tenants at the price determined by the valuer could not be pronounced at this time.

[34] Counsel observed that in their pleadings the applicants challenged the resumption notice as ‘yet another attempt to circumvent the ‘right to buy’ legislation to gain possession of the land so that it can be sold to another party either in conjunction with the sale of the derelict former church building or without.’ There was no evidence that the Trustees would intend to sell the ground without the church. Plainly their intention was to sell the ground with the church. That was their purpose in the resumption rather than to ‘circumvent’ the tenants’ right to buy. It was accepted that if the resumption was effective it would take that area out of the area to which the tenants would have a right to buy. But the landlords were entitled to take that action whether or not it has that result: North Berwick Trust v Miller & Co: Lord Gill at para [4]; Cawdor Trustees v Mackay p 104.

[35] Counsel submitted that the question was whether there was anything in the provisions of the 2003 Act that could restrict the landlords’ right to exercise their contractual right to resume. She accepted that there were restrictions at common law but there was nothing in the Act which could have that effect. Further it could be noted that in terms of sec 25(13) a Notice could be given to the Keeper in relation to a reduction in the land comprised in a tenancy. This supported the submission that the land let by a lease could validly be reduced even where the tenant had registered interest in a right to buy. The reduction in this case would be effected by means of resumption.

[36] The proposed resumption fell squarely within the resumption clause in the lease. There was no question of the proposed resumption being for agricultural purposes. The common law restriction had come to be known as “fraud on the lease”. Principles relating to fraud on the lease were set out in Fothringham v Fotheringham from p 89. The present circumstances did not meet any of the tests of fraud on the lease. A proper construction of the contract and its implied terms indicated that resumption was anticipated. The taking of this strip would not prevent the tenant making a profitable use of the remainder of the leased subjects for the purpose for which it was let. The correspondence prior to the lease being entered into indicated that the tenants were asked about their intention for the use of the subjects and that they indicated it was to use it in conjunction with the other part of the glebe being purchased by them for sheep. The size of the resumption area was insignificant in that context. The area in question did not form so material a part of the subjects let that it could not be reasonably regarded as within the contemplation of the parties to the lease or be against the good faith of the bargain embodied in the lease for the landlords to resume it. The proposed resumption might affect the tenants’ operation to some extent but that could be said of most resumptions: Cawdor Trustees v Mackay p 103

[37] Further, in the present case, there was an express reservation in the lease to the effect that the whole of the subjects of let might from time to time be used for car parking and therefore not always available. While the permanent removal of part of the subjects was clearly different in nature from intermittent use by the landlords it still gave some warning that the area might be needed for use in conjunction with the church and that the tenants would have to adapt their usage to cope with that. The tenants argued that the resumption was against the good faith of the lease in that it deprived them of the access from the subjects onto the main road. She submitted that it was clear that they have always used the subjects of let in conjunction with their other subjects and that access was normally taken from their other subjects to and from the subjects of let. She did not attempt to dispute the evidence of Mr Fish that intermittent use was made of the flake gate but this was almost insignificant.

[38] It had also been suggested that the resumption was a fraud on the lease as it was not for the benefit of Eckford Church which ceased to be used as a Church in 2006. But the relevant resumption was for the purposes of providing amenity ground for Eckford Church as a building. It was irrelevant that the building was no longer used for worship. That did not mean that it was inaccurate to describe the purpose of as being for amenity ground for the church. It would serve as amenity ground to be sold for use with that building.

[39] Counsel asked for decree in terms of Landlords’ craves 2, 3 and 4. She moved the court to sanction the cause as suitable for junior counsel and asked that expenses be reserved.

Discussion

Resumption

[40] The respondents contend that they have validly taken the strip out of the tenancy with effect from 14 June 2013. They accept, implicitly, that if the tenants had validly exercised a right to buy before that date, the resumption could not receive effect. Their right to resume depends on there having been no valid exercise of a right to buy before 28 March 2013. It also depends on the applicants having failed to establish their contentions as to fraud on the lease. It is convenient to deal first with this latter point.

[41] Mr Fish did not attempt to define what was meant by the idea of a fraud on a lease. He simply set out his various objections to the resumption of the strip. We think it important to keep in mind that the power to resume was expressed in wide terms and agreed by the parties as part of their bargain. We recognise that even a wide power might have to be read in a restrictive sense if it, in substance, conflicted with the security given to tenants under the Agricultural Holdings legislation. But it is not suggested that any such issue arises in the present case and, in any event, we are satisfied that the common law has developed in a way which has taken account of a tenant’s essential security of tenure. If a proposed resumption is likely to have a serious impact on the tenancy it is likely that it will fall into the category of fraud on the lease and the courts have not thought it necessary to develop a separate ground of challenge based on inconsistency with the legislation: see generally Fothringham v Fotheringham p 89.

[42] The expression “fraud on the lease” is no more than a shorthand way of saying that the language of any lease requires to be read in a way consistent with the deemed intention of the parties. Even where a contract gives a wide express power, the scope of the power may restricted by the implication that the parties cannot have intended it to cover certain things. In relation to a wide power of resumption it is established that there is an implied limitation in every case that the parties cannot have intended to allow the land to be taken from one agricultural tenant to give it to another. Here that limitation is set out expressly. Other implied limitations have evolved. It is assumed that parties would not have intended to allow a resumption which would lead to the holding ceasing to be economically viable for agricultural purposes or leading to a change in the essential character of the holding: Fothringham v Fotheringham. More difficult questions arise where some lesser effect is perceived. Where the part sought to be resumed can, in itself, be said to play an important part in the management of the holding it may be possible to infer that the parties could not have intended to agree that such a part could be resumed: Glencruitten Trustees v Love.

[43] In the present case, we are satisfied that the extent of the land to be taken cannot be described as outwith the contemplation of the parties. The field could not have been thought to be a viable holding on its own. It had to be seen as being worked along with some other unit. The field itself was an addition to the glebe and whether it was two acres or two and a half would have been of no significance. There was no evidence to support any contention that, viewed on its own, a field of about two and a half acres would have been viable but one of two acres would not. It may be added that we accept that the unit to be taken into account in the present context is, in effect, the original glebe. There is no suggestion that, at the outset of the lease, the parties had in mind that the tenant’s operations would spread to include other grazing lets.

[44] We accept that access to the field and over the field for the benefit of the glebe as a unit is of value to the tenants. It appeared that the respondents had persuaded themselves that no use was ever made of the flake gate. Their photographs appeared to support such a conclusion and their witnesses had never seen it being used. Accordingly, they had not attempted to investigate the nature of the alternative access available to the applicants. They could not challenge Mr Fish’s assertion that the track through the old manse grounds was too restricted for a cattle truck or normal delivery of winter feed stuff or the removal of fallen stock. We see no reason to doubt his evidence. There was no attempt by the respondents to suggest that a similar flake gate arrangement could be created at any other part of the roadside fence. We accept that the use of the flake gate would be important in relation to any cattle farming activity on the glebe lands. However, we are satisfied that the sheep rearing enterprise on the glebe could continue perfectly well without it.

[45] In considering the question of access as showing a fraud on the lease, we think it appropriate to have regard to the circumstances as they would have been envisaged in 1989. Discussion of fraud on the lease in terms of the contemplation of the parties can be misleading if it is thought to require any positive anticipation of the landlord’s purpose. It only operates the other way. It is the potential impact of the resumption on the tenant’s business which raises the question of good faith. “The accepted test requires the resumption to be assessed by reference to the subject matter of the lease and the likelihood that the farm can continue to be tenanted as an agricultural subject.” Gill 13.03. A power of resumption can be understood as intended to allow for unexpected changes. The landlord may come to have a use for a particular part of the holding which he did not have in mind at the outset. In some cases, it may be reasonably clear that if he had foreseen the particular purpose, he would not have included the land in the lease in the first place. Indeed, the present case may be an example of that. But it is not necessary that the particular land-take should have been foreseen or contemplated. As it happens, in the present case, it is clear the applicants knew that the landlords were concerned to have use of the field for parking. If any part of the field was likely to be resumed it would be the part nearest the church. It is impossible to say that resumption of part of the field at the east end was outwith the contemplation of the parties. But, as we have said, it would not matter whether the specific area could be said to have been in the contemplation of parties. In all the circumstances, bearing in mind the applicants’ main sheep rearing business we would not have considered the loss of the access gate to be of sufficient significance as to be outwith the scope of the resumption power. Fortunately, it is clear that the use of the strip for access to the church can readily be combined with use for access to the remaining part of the field.

[46] We are not persuaded that doubts about the prospects for future use of the church have any bearing on the question of resumption. There is no doubt that availability of parking will be of benefit to the church as a building whatever use it may come to have. Even routine inspection and maintenance would be facilitated by the availability of safe parking and any future use of the building would be facilitated by availability of proper toilet and washroom facilities. But we accept the evidence of Mr Dodds that it is likely that some useful development of the building will be possible and that the resumed subjects will be able to be put to their proposed use for parking and sewage for the benefit of the building. We are entirely satisfied that there is no hidden purpose such as an intention to use the strip for a new housing development.

[47] We are satisfied that it is nothing to the point that the trustees have no long term intention to make use of the resumed land by keeping it in their ownership. Resumption of land in order to sell it for building purposes would not, in our view, be outwith the scope of a widely expressed resumption clause. As we have said, the concept of fraud on the lease does not mean that parties are positively restricted to purposes which they had in contemplation at the time of the lease. It is a negative restriction. Parties would normally be bound by the unrestricted language of the lease. But the law is prepared to imply a restriction that the scope of the resumption is limited by the extent of its impact on the holding as a whole. We are not aware of any authority that it is to be taken to be implicitly restricted by the nature of the landlords’ purposes.

[48] It was suggested that the intention of the resumption was to circumvent the right to buy legislation. It may be that such an argument was intended simply as a factor bearing on the proper construction of the legislation. Insofar as it was intended as an argument bearing on the issue of fraud on the lease, we are satisfied that there is no substance in it. The purpose of the resumption cannot properly be described as circumvention of the legislation. The landlords plainly wish to develop the strip to enhance the value of their building. They do not want to resume the strip simply to prevent the tenant buying it. Of course, the effect of the resumption may well be that the legislation does not apply but that is not a valid criticism of the landlords actings. It may be observed that in the case of Salvesen v Riddell Lord Gill had to consider the concept of “purpose” in the context of a notice which was served deliberately at a time which would be likely to defeat statutory changes. This was not conclusive as to the proper purpose. That had to be ascertained by consideration of the ultimate purpose of the landlord in recovering possession: paras [64] and [65]. Although the facts of the present case are quite different it is plain that the fundamental purpose is not simply to prevent the tenant buying the land. The purpose of the trustees can be described in various different ways but there is no doubt that the essence of the matter is that the land is seen to be needed to allow proper use to be made of their building. That is an entirely proper purpose. In exercising their right to resume the landlords were exercising a positive right of their own in terms of the lease.

[49] That a landlord’s exercise of his own rights may lead to a situation where his tenant no longer has some specific right is nothing to the point. In particular if a landlord exercises rights which mean that the tenant loses some potential right under the 2003 Act, the tenant will need to look to the terms of that Act for protection. There can be no implication that the potential rights under the 2003 Act outweigh existing rights. As Lord Gill said in North Berwick Trust v Miller & Co, “Part 2 of the 2003 Act applies only during the subsistence of the tenancy. It does not restrict any right that the landlord may have to terminate the tenancy on any ground available to him and thereafter sell the land with vacant possession.”: p 307 para [4].

[50] In short, we are satisfied that the resumption of the strip is within the scope of the right reserved to the landlords by the resumption clause in this case. We turn to the question of whether that right was defeated by the tenants’ attempts to exercise a right to buy.

The right to buy

[51] As the tenant’s arguments were advanced in very broad terms it may be worth saying, at the outset, that we see no reason to assume that the broad policy, or purpose, of the Act was to allow a tenant to buy in circumstances like the present. The obvious policy was to allow tenants to buy their farms. As we have seen, the effect of the concept of a fraud on the lease is to limit resumption to cases where it does not have an important impact on the operation of the farm as a whole. Accordingly, a tenant’s right to buy his or her holding will not be radically affected by giving effect to a resumption clause. We consider that this approach is consistent with the dicta of Lord Gill in the North Berwick case, cited above. It is also consistent with the provisions of sec 25(13) requiring notice to the Keeper if the tenancy is terminated or there is a reduction in the land comprised in the tenancy.

[52] We do not suggest that much turns on this. Our primary concern is with the terms in which the legislation has been enacted, not with the policy behind it. But it does mean that concepts such as circumventing the right to buy are of no assistance. We must approach this case in the normal way, considering the detail of the statutory provisions, determining how they should be construed and then deciding what effect they have in the particular circumstances of the case. It was not surprising that Mr Fish, as a party litigant, took a broader approach but this meant that we heard no submissions on behalf of the applicants as to the detail of the Act or which provisions they relied on. We do not find it easy to agree with his submission that the relevant legislation is clear, well written and unambiguous. If he had some specific provision in mind, he did not direct us to it. We discussed some of the difficulties in the North Berwick case at pp 43-47. We need not repeat that material. However, consideration of statutory provisions against a background of particular facts and circumstances often throws fresh light on questions of construction and we look again at the Act with the present situation in mind.

[53] One underlying difficulty is that if a landlord is minded to sell all or part of the holding he, or she, will not normally be committed to go ahead with the sale until quite a late stage in the process. Tacit expectations as to price might be disappointed. There might be no market at all for the land the landlords had in mind. Problems of access or drainage might thwart their plans. They would not be thinking in terms of transferring the land at that stage. However, even at quite an early stage they might readily agree that they proposed to sell it. Anyone who proposes to sell necessarily contemplates transfer of the land to another person. The question we were considering in in the North Berwick case was whether sec 26 compelled notice at that early stage.

[54] Section 26 section gives no explicit guidance as to when, on the journey from first deciding to think about selling to the stage of execution of a disposition, the landlords can be said to “propose to transfer the land”. For present purposes it is enough to say that in normal usage, a reference to transfer of land to another person would tend to point to quite a late stage in the process. This conclusion is supported not only by the terms of sec 27 (1) (g) (v) which we mentioned in the North Berwick case, but by the whole detail of that section. The section appears to deal with actual transfers. For example, if the decision to sell was taken in the context of a separation or divorce, the landlord might ultimately decide to transfer the land to his or her spouse. Notice under sec 26 would not then be required: sec 27(1)(c). On the view we take of sec 28 it might be thought that doubt as to the proper construction of sec 26 would not be of practical significance. The tenant’s right is given by sec 28 which does provide a clear definition of the first condition to be satisfied before that right arises. But sec 26 does impose a duty on the landlord. If a landlord was advised to treat his initial decision to sell as giving rise to an obligation to give notice, his tenant might have acquired a right to buy even if, at the end of the day, it was clear that no notifiable transfer was to take place. We did not hear submissions on any of these issues but we have set them out to give some indication to the applicants as to why we do not accept their submission that the Act is clear and unambiguous.

[55] Ms Joughin did treat sec 26 as straightforward in application. She submitted simply that the Trustees had never proposed to transfer the strip to anyone. She did not explicitly attempt to identify or define the distinction between an intention to sell and a proposal to transfer but she stressed that they had not got to the stage of offering the land for sale let alone proposing to transfer. This implies a submission that the question of transfer comes after the stage of missives. As discussed in the North Berwick case, we thought that might reflect the intention of sec 26 taken on its own. We had more difficulty in reading it along with sec 28. However, we have come to the view that in the present case the critical provision is, indeed, the first part of sec 28 (1) (b) and that it is unnecessary to form a concluded view of the implications of sec 26.

[56] It is sec 28 which gives the tenant the right to buy. It sets out the circumstances in which that right arises. Subsection (1)(a) applies where the landlords have given notice and that is not here in issue. Where there has been no notice, the provisions of subsection (1)(b) clearly impose two conditions. The owner must have taken some action with a view to the transfer of the land, within the meaning of the section, and the circumstances must be such that notice was required under sec 26. Although Ms Joughin’s argument tended to stress the importance of sec 26 this was based on the fundamental point that both conditions had to be complied with.

[57] Where an Act provides two separate conditions, it can be assumed that Parliament had in mind two distinct factual situations. However, the distinction in the present case is not easily explained. In normal usage, taking action with a view to the transfer of the land is a stage before actually proposing to transfer the land to another person. That is consistent with our view that, read on its own, sec 26 contemplates quite a late stage in the normal sale process. However, it can be said that sec 28 may contemplate a stage where notice should have been given. On any view the conditions specified both relate to points on the same continuum. If the stage of proposing to transfer was a late stage in the selling process it would fall to be contrasted with the stage of merely exposing the subjects for sale and therefore would hardly ever be expected to have arisen at the stage of simply advertising. On the other hand, if it was intended to identify an early stage in the sense that once a landlord had decided to sell he was necessarily proposing to transfer the land, the very fact of advertising or entering negotiations would demonstrate a proposal to transfer.

[58] On further consideration we think it possible that subsection (1)(b)(i) may have been intended to be a shorthand reference to the provisions of sec 27 rather than to direct attention to a particular stage in a proposed sale. Notice is not required under sec 26 where the transfer is covered by sec 27.

[59] However, on any view of the matter, the first part of sec 28 (1) (b) must be satisfied. That is plainly one of the conditions upon which the tenants’ right is based. But it is also plain that the meaning of that condition is not to be found in the language of subsec (1) alone. The language of subsec (1) is subject to the definition provided by subsec (3). The stage of taking action with a view to the transfer of land is defined by the provisions of subsec (3). We are satisfied this provides a comprehensive definition. In other words, the meaning given by the definition supersedes any consideration of what the meaning of the phrase might be in normal English usage. For the purposes of sub (1)(b) action is taken with a view to transfer of the land in clearly defined circumstances. If the circumstances do not fall within the heads of subsec (3) the landlords cannot be held to have taken action for the purposes of subsec (1)(b). It is of no significance that, in a different context, or for different purposes, a person might be said to have taken action with a view to transfer of the land, say, by seeking to resume it or by making arrangements for parking or a drainage system. We are concerned only with the purposes of this subsection.

[60] In the present case, there is no suggestion, let alone evidence, that the strip has been advertised or exposed for sale by the landlords so as to come under the definition in (3)(a); there is no evidence to suggest that the trustees have entered negotiations with a view to its transfer so as to come within subsec (3)(b); and it is plain that the provisions of subsection (3)(c) have no application. There is no doubt that the trustees intend to sell the strip but that is to be along with the church. In other words, they will only seek to sell the strip if they are in a position to make it available to the purchaser for use along with the building. We think they are clearly aware that they will not be in a position to do this unless and until the Court confirms their right to resume. Even at that stage they would probably have to consider whether to take steps to improve the marketability of the church building by obtaining the necessary planning consents and other agreements or simply leave all these matters to a potential purchaser. Only after giving some thought to the practicalities would they expect to try to sell. Advertisement might be expected to precede negotiations. It might be added for completeness that, even if there might have been a stage where the Trustees had made public their intentions in relation to the church in a way which might be regarded as exposing it for sale within the meaning of sec 28(3) such exposure would not be the same as exposure of the strip.

[61] In short, the tenants have not established the first condition in sec 28 necessary for their right to buy to come into effect. We think it unnecessary to express a concluded view as to when the stage is reached where a landlord can be said to have proposed to transfer the land. Even if it was reached in the present case the question is superseded by failure of the first condition.

[62] It is not necessary to express any view as to the proper operation of sec 29. We discussed some aspects of this in the North Berwick case at p 47. We need not add to this. In the appeal in that case Lord Gill pointed to the dangers of a court expressing views on matters of such importance in the absence of full debate: para [27]. We had heard full debate in that case but the Inner House had not. But we take his comment as a warning against dicta going beyond the immediate needs of a particular case. Although Ms Joughin made no attempt to challenge them, the views we expressed at the foot of p 46 might have to be reconsidered if the proper meaning of sec 26 on its own arose for determination in any future case and we recognise that our observation, at p 43, that the right to buy was triggered at a very early stage should be seen as limited to the facts of that case where the landlords had admittedly been in negotiations with developers and accepted that this had triggered the tenant’s right.

Decision

[63] For the reasons discussed above, we have not been persuaded that the respondents’ actings or intentions in relation to the tenanted land reached the stage of triggering any right to buy in the applicants in terms of sec 28. Their craves must, accordingly, be refused. We need not consider the detail of them. We are satisfied that the notice of resumption was valid and that decree can be pronounced in favour of the respondents in terms of their second, third and fourth craves.

[64] As noted above, we are of the view that such an order would have been appropriate even without provision for access over the resumption area. However, our decision is based on an understanding that access is agreed. We shall defer grant of a final order for six weeks to allow time for the detail of access to be agreed. If necessary we shall be prepared to hear further submissions. This also allows a convenient time for any minor issues arising from the resumption to be resolved. It was convenient, if not indeed essential, in the circumstances of this case, to consider the resumption along with the purchase application but we accept that dealing with positive craves as part of a respondent’s Answers may sometimes leave issues unaddressed. The applicants did not adjust in response to the Answers and did not expressly seek any compensation in respect of the resumption. However, it may be that some adjustment of rent is required and we note the respondents’ earlier offer, at para [20] above to leave open any questions of compensation. We would not expect these matters to give rise to any difficulty and hope they can be resolved within the six weeks we have allowed. We do not expect there to be any need for formal orders in terms of the respondents’ second and third craves but this matter can also be considered if no agreement is reached.

[65] We are satisfied that the case was appropriate for use of junior counsel. We reserve the question of expenses to be dealt with by way of written submissions.