THE COURT

(Sheriff MacLeod, Mr D J Houston)

CARTER & MACIVER v KENNETH MACIVER and PHILIP MACIVER

(Application RN SLC/159/09 – Order of 29 January, 2010)

AGRICULTURAL HOLDINGS – DELECTUS PERSONAE – LEASE TO PARTNERSHIP – PARTNERSHIP AGREEMENT AMENDED TO PROVIDE PARTNERSHIP WOULD CONTINUE DESPITE DEATH OF A PARTNER – WHETHER NONETHELESS THE LEASE TERMINATED ON DEATH OF A PARTNER

In 1995 the applicants, as landlords, entered into an unwritten lease of a holding known as Mid and Wester Blairfoid, Avoch, Ross-shire, under which the tenant was a partnership known as “MacIver Partners”. The lease was one to which the Agricultural Holdings (Scotland) Act 1991 applied and it was to run from year to year. MacIver Partners comprised three partners; Mrs Marie MacIver, Mr Kenneth MacIver and Mr Philip MacIver. By an amendment to the partnership agreement made in 2006 the partnership agreement was varied to the effect that the partnership would not come to an end on the death, resignation or expulsion of any partner. Mrs Marie MacIver died on 4 February 2009. The remaining partners continued the partnership and remained in possession of the holding. The applicants applied to the Court seeking an Order for (1) declarator that the lease had come to an end with the death of Mrs MacIver and (2) removal of Kenneth and Philip MacIver from the holding.

HELD;- that: (1) there was a strong element of delectus personae in leases of agricultural holdings; (2) where the tenant was a partnership, unless the lease was to “the house”, that extended to the identity of the individual partners; (3) where the tenant was a partnership, absent a lease to the house or some such agreement to which the landlord was party, the death of a partner terminated the tenancy; (4) a change to a partnership agreement to which the landlord was not a party could not affect the duration of the lease; (5) the agreement made between the partners in this case in 2009 did not, therefore, have the effect of the lease enduring beyond the death of any of the partners; and (6) the lease had therefore expired on the death of Mrs MacIver on 4 February 2009; however, at the respondents’ request, the application was continued to afford them the opportunity of considering the possibility of amendment of their pleadings to state a relevant case. Dicta in Inland Revenue v Graham’s Trs 1971 S.C. (H.L.) 1 (per Lord Fraser at page 12), Jardine-Paterson v Fraser & Ors 1974 S.L.T. 93(per Lord Maxwell at page 97), and Moray Estates Ltd v Butler 1999 S.L.T. 1338 (per Lord Hamilton at page 1344E-G) applied.

Note appended to the order:

Introduction

[1] The applicants are heritable proprietors of subjects known as Mid and Wester Blairfoid (hereinafter referred to as “the subjects”) in the parish of Avoch and county of Ross and Cromarty.

[2] In or around 1995 they entered into an unwritten lease of the subjects to a partnership known as “MacIver Partners” which then comprised three partners, Mrs Marie Newall MacIver, Mr Philip James MacIver and Mr Kenneth George MacIver.

[3] That lease was a lease of an agricultural holding within the meaning of the Agricultural Holdings (Scotland) Act 1991. It was a lease from year to year.

[4] The firm of MacIver Partners was constituted by a partnership agreement dated 12 July 1995 which records that, notwithstanding its date, the partnership was to be held to have come into existence as at 6 April of that year.

[5] By a deed dated 27 February and 1 March 2006 (which for convenience we will refer to as a deed of variation, although its title is “Amendment to Partnership Agreement”) said partnership agreement was varied to the effect, inter alia, that the partnership would not come to an end on the death, resignation or expulsion of any partner.

[6] Said Mrs Marie MacIver (whose first name is rendered variously as “Mary”, “Mhairi” and “Maria” as well as “Marie” in the documentation before us) died on 4 February 2009.

[7] Following the death of Mrs MacIver the applicants gave notice to Kenneth MacIver and Philip MacIver that the lease had been terminated by her death and that they had no continuing right to occupy the subjects. The applicants were, however, agreeable to the former partners remaining in occupation of the holding in order to wind up the affairs of the partnership until 28 November 2009.

[8] Notwithstanding said notice, Kenneth and Philip MacIver have remained in possession of the subjects, contending that they are entitled to do so as the surviving partners of the MacIver Partnership.

[9] In this application the applicants seek (1) declarator that the lease came to an end with the death of Marie MacIver and that the respondents have no continuing right to occupy the holding, and (2) decree of removal. The respondents to the application are Kenneth and Philip MacIver and the partnership of which they are now partners.

[10] The applicants having taken a plea to the relevancy of the defences, we heard debate at Edinburgh on 13 January 2010 when the applicants were represented by Sir Crispin Agnew of Lochnaw Q.C. and the respondents by Ms Gail Joughin, advocate.

Authorities

Gray v Boyd 1996 S.L.T. 60
Inland Revenue v Graham’s Trustees 1971 SC (HL) 1
Jardine-Paterson v Fraser and Others 1974 S.L.T. 93
Knapdale (Nominees) Limited v Donald 2001 S.L.T. 617
Moray Estates Development Company v Butler 1999 S.L.T. 1338

Texts

Hon Lord Gill, The Law of Agricultural Holdings in Scotland, 3rd ed.
Rankine, Law of Leases in Scotland, 3rd ed.

Submissions for applicants

[11] Sir Crispin took as his starting point the fact that the applicants, in Statement of Fact 2, had put in issue that said lease had not been a lease to “the house” of MacIver Partners. In the respondents’ averments in answer (Answer 4) it was averred that the lease continued because of said deed of variation. The position was, therefore, that in order to keep the lease alive the respondents were relying on a deed of variation of the partnership agreement which post-dated the start of the lease. The respondents’ pleadings contained no answer to the applicants’ averment that the lease was not a lease to “the house”. So, not withstanding their general denial, the respondents must be taken to be accepting that this was not a lease to “the house”. The only case on record was that the lease was continued because, and only because, of the deed of variation. In any event there were no averments that the lease was one to a continuing partnership. Accordingly, the partnership with which the lease was entered into was a partnership which could not continue following the death of a partner.

[12] It had to be remembered that, subject to sec 10A of the Agricultural Holdings (Scotland) Act 1991, an agricultural lease was non-assignable without express agreement. At common law, leases in Scotland involved delectus personae; Rankine, page 172.

[13] Beyond that, the relevant law was set out in Inland Revenue v Graham’s Trustees, Jardine-Paterson v Fraser & Ors, Moray Estates Development Company v Butler and Knapdale (Nominees) Limited v Donald.

[14] In Inland Revenue v Graham the House of Lords had decided that there could be such a thing as a lease to a “house” but it had to be clear from all the facts and circumstances of the case that that is what the parties had agreed. Particular reference was made to passages from the judgements of Lord Hunter (pages 5-6) and Lord Fraser (page 11) in the Lands Valuation Appeal Court and from the speeches of Lord Reid (pages 19-20) and Lord Guest (pages 23-24) in the House of Lords.

[15] What emerged fromthat case was that the normal rule was termination of a lease involving a partnership as tenant on the death of a partner. For that rule to be displaced there had to be strong contra-indicators. Sir Crispin relied particularly on Lord Fraser’s reference (at page 11) to the indications to be derived from the surrounding circumstances in that case being “by no means strong enough to overcome the normal rule that a lease to a partnership firm will be terminated by the dissolution of the partnership on the death or the bankruptcy of a partner”, the Lands Valuation Appeal Court’s decision on this aspect of the case having been upheld by the House of Lords.

[16] In the present case it was accepted by the respondents that sec 33(1) of the Partnership Act 1890 applied until the deed of variation had been entered into, with the consequence that up until that time the partnership would have terminated on the death of any of the partners. The fact that the partners may have agreed amongst themselves that the partnership would continue notwithstanding the death of a partner did not affect the application of the general rulein a question with the landlord. That was because there was a strong element of delectus personae in the leases of agricultural holdings and such leases were not assignable in the absence of an express power to assign (Lord Guest supra). In the absence of express provision, the intention of the parties was to be gathered from the surrounding circumstances but to displace the normal rule that a lease to a partnership terminated on the death of one of the partners the circumstances had to include strong indicators to that effect. All that was said in the present case was that the lease was to the partnership and that by itself was not enough to displace the rule.

[17] The case of Jardine-Paterson v Fraser & Ors was much more strongly in favour of the applicants’ position. It dealt with the effect of changes to a partnership made after a lease with the partnership had been entered into. It made clear that a landlord is not bound by such changes. Even if a partnership agreement provided for the partnership to continue on the death of a partner, that did not apply to the lease unless the agreement between the landlord and tenant provided for such a continuation. Reference was made to extensive passages from the judgement of Lord Maxwell and in particular to his conclusions and observations on the following matters; (i) that it was not appropriate to construe the assignation of the lease in favour of a partnership, to which the landlords were parties, by reference to the partnership agreement, to which they were not parties (page 96); (ii) that whether or not the partnership terminated on the death of a partner, the lease did (pages 96-97); (iii) that the character of the tenant, as affecting the duration of the lease, could not be altered unilaterally by the partners changing the terms of the partnership agreement (page 97); and (iv) that an agricultural lease excluding assignees has a strong element of delectus personae and that it was “scarcely conceivable” that a landlord who had excluded assignees would have intended to assign to any person who might become a partner in a continuing partnership (page 98). All of the foregoing produced the result that the mere fact that a lease may be to a firm did not make it a lease to a “house”.

[18] Moray Estates Development Company v Butlerwas to the same effect; changes to a partnership agreement could not affect the terms of the agreement between the landlord and tenant which constituted the lease. Although the description of the tenant in the lease in that case contained a strong indication that it might be a lease to a “house”, the Lord Ordinary (at page 1343) had not found that sufficiently compelling to conclude that the lease was not in favour of the partnership as originally constituted exclusively but to a house. Lord Hamilton, as he then was, had also recognised the importance of delectus personae in agricultural leases excluding assignees and had said that an agricultural lease was not a very obvious candidate for a contract with a house (page 1344).

[19] In Knapdale (Nominees) Ltd v Donald Lord Kingarth, albeit obiter, had rejected an argument that a lease to a partnership, where the landlord had made no enquiry as to who the partners were, was a lease to a house (paragraphs [44] and [46]).

[20] The case of William Gordon & Co Ltd v Mrs Mary Thomson Partnership, on which Sir Crispin understood the respondents to be relying, had been described as “out of line with the other authorities” by counsel for the pursuers in Knapdale (Nominees) Ltd v Donald. It should not be followed in the present case either. For reasons it was possible only to speculate about, no issue had been raised in that case as to what effect termination of the partnership might have on the lease. Instead the whole focus had been on whether or not the partnership had come to an end. It therefore did not deal with the issue which had been before the court in Jardine- Paterson and was of no assistance in the present case. Gill at paragraph 14.13 confirmed that, for that reason, the case could not be held to have changed “the basic principle that in a question between the landlord and a partnership tenant the private arrangements of the partners inter se cannot maintain in existence a lease that has been granted to the partnership as constituted at the time”. The case had also been referred to but not followed in Moray Estates Ltd v Butler.

[21] Turning to the facts of the present case, Sir Crispin submitted that there was nothing in those to suggest that it was the intention of the parties at the outset that this should be a lease to a house or to the partnership as it might be constituted from time to time. Indeed the indications were the other way. This was an unwritten lease which ran from year to year. It was unlikely that in any unwritten lease the parties would agree to a lease to a house. Delectus personae applied and the lease was non-assignable (Moray Estates Ltd v Butlerat page 1344). It was, in the words of Lord Maxwell in Jardine-Paterson v Fraser (at page 98) scarcely conceivable” that a landlord who had excluded assignees would intend to assign to anyone who happened to become a partner in the partnership. There would need to be strong indications arising from the surrounding circumstances pointing “compellingly” (per Lord Hamilton in Moray Estates Ltd v Butler at page 1343) to the lease having been to be to the house.

[22] The onus was not on the applicants to set up circumstances at the outset of the lease to show that it was not a lease to the house. All they had to do was aver that it was not. Having done that the matter was in issue in the pleadings and it was for the respondents to set out the circumstances in which they said – if indeed they were saying – that the lease had been to the house.

[23] The authorities suggested that for there to be a lease to a house there had to be express agreement to that effect at the outset. It was not enough to say that the lease was to the partnership. The only defence pled here was that the deed of variation which provided for the partnership to continue had the effect of allowing the lease to continue also, but that was contrary to Jardine-Paterson v Fraser & Ors and Moray Estates Ltd v Butler.

[24] In all the circumstances, therefore, no relevant case had been pled by the respondents and we should grant decree de plano. As to expenses, we should certify the cause as suitable for the employment of senior counsel in light of the importance of its subject matter and because it involved difficult questions of law and otherwise reserve expenses for written motions and submissions in the usual way.

Submissions for respondents

[25] Ms Joughin’s submission was that the case should go to a hearing on evidence before being decided and that decree should not be granted without enquiry.

[26] In summary, the respondents’ case was that the tenant was the partnership of MacIver Partners and because the deed of variation had kept the partnership alive the lease also continued: the lease had been to MacIver Partners and MacIver Partners still existed.

[27] Ms Joughin accepted that but for the deed of variation the lease would have been terminated on the death of Mrs MacIver and the consequent dissolution of the partnership.

[28] The question which had to be determined was whether, the partnership still being extant, there were circumstances in which the lease had nevertheless been terminated by the death of Mrs MacIver. Termination of the lease had been the outcome in the cases relied upon by Sir Crispin but that was only because, as a matter of construction of each lease, it had been held that it had been granted only to the partnership as constituted at the time. One therefore had to interpret the lease to find out what the intention of the parties had been.

[29] Sir Crispin’s submission had, on the other hand, been based to a large extent on the existence of a “normal rule” that where an agricultural lease is to a partnership the lease is only to the partnership as constituted at the time of the lease. Although that had been the outcome of certain cases, there was no such “normal rule” and the exercise the court always had to carry out was to find out what the intention of the parties had been when the lease was entered into. One had to interpret the contract of lease to see to whom the lease had been granted.

[30] Ms Joughin was reluctant to accept that there was, as a matter of law, generally a strong element of delectus personae in agricultural leases. One could not generalise in that way: the exercise was always to look at the facts of the particular case.

[31] As to onus of proof, Sir Crispin had attached importance to the fact that the applicants had averred that this was not a lease to a house. But the concept of a lease to a house was a legal concept so it was not necessary to have factual averments relating to it. It was sufficient for the respondents to aver simply that the applicants had let the holding to MacIver Partners. That taken together with their general denial (which covered the applicants’ averment that this was not a lease to a house) made their position clear. The respondents’ position was that this was a lease to a house.

[32] Analysing the matter in greater detail, the position was this. Firstly, the partnership of MacIver Partners was the tenant. Secondly, in terms of sec 33(1) of the Partnership Act 1890, a partnership terminated on the death of a tenant unless there was something to the contrary in the partnership agreement. Thirdly, in the present case, the partnership had not terminated on Mrs MacIver’s death because the partnership agreement had been amended by the deed of variation with the consequence that the partnership survived the death, resignation or expulsion of any partner.

[33] From the outset this had been a lease to the house of MacIver Partners. The death of one of the partners, therefore, had no effect on the lease. The existence of delectus personae depended on the agreement reached when the lease was entered into. In the cases which had been cited there had been written leases and it was easier to determine what had been agreed in that situation. But here, in the absence of a written lease, what had been agreed at the outset of the lease could be proved in other ways and the respondents were offering to prove that the applicants had agreed to let to the firm of MacIver Partners. That was all they had to aver. It was for the applicants to prove that they placed any importance or reliance on the three particular partners then constituting the firm.

[34] Pressed by the Court as to how any claim by the respondents that this was a lease to a house squared with their averment (at Statement of Fact 4) that the lease continued because of the effect of the deed of variation, we have Ms Joughin noted (as set out at paragraph [27] above) as accepting that but for the variation of the partnership agreement the effect of Mrs MacIver’s death would have been that the partnership would have been dissolved and the lease would have been terminated. We had difficulty in reconciling that view of the matter with a claim that this was a lease to a house, in which case the death of a partner would have no bearing on its continuation. But Ms Joughin’s fundamental submission was that this was a lease to the partnership of MacIver Partners and that since that partnership continued in existence so too did the lease.

[35] If it was not possible to conclude on the pleadings what the agreement of parties had been it was appropriate to have a hearing as to what the contract consisted of and with whom, as tenant, it had been contracted.

[36] Ms Joughin then commented on the cases. Inland Revenue v Graham was really about whether a partnership had come to an end whereas the present case was about whether the lease had survived the death of a partner in a situation in which the partnership itself had survived the death of that partner. The casewas, therefore, of little relevance.

[37] Jardine-Paterson v Fraser was, however, of considerable relevance. The facts were similar to those in the present case and the question had been whether the lease had survived the death of a partner. In a passage following on from one strongly relied upon by Sir Crispin, Lord Maxwell (at page 97) had said “…I am of the opinion that, in relation to contracts with third parties, the effect of a change in constitution of the partnership by death depends upon whether, as [a] matter of construction of the contract with the third party, it was intended to be a contract with the partnership as constituted at the time of the contract or a contract with the “house”.” Consistently with that, in the present case the question whether the lease had been granted to the partnership only as constituted by the three then partners could only be determined by construction of the terms of the contract and that required proof.

[38] In Moray Estates Ltd v Butleralso the Lord Ordinary had carried out the exercise of determining the intentions of the parties at the time the lease was entered into. So the “normal rule” which emerged from these cases was not that one had to start with the assumption that there was a strong element of delectus personae but that one simply had to ascertain the intention of the parties from the facts of each particular case.

[39] We should not rely on what had been said obiter by the Lord Ordinary in Knapdale (Nominees) Ltd v Donald in the passages referred to by Sir Crispin. As well as being obiter the matter had not been very fully argued or treated.

[40] On a different aspect of the case, the fact that the present lease was one from year to year should not be taken as an indicator that it was only to the original parties. Such an argument was not convincing in the context of a lease subject to the Agricultural Holdings (Scotland) Acts. It was well known that such leases, although nominally from year to year, were in fact of long duration.

[41] The case of William S. Gordon & Co v Mrs Mary Thomson Partnership was on all fours with the present case but it had to be accepted that, in terms of law, it had dealt only with whether the partnership had been dissolved. In the present case it was not now being argued that the partnership had been dissolved, something which had become clear to Ms Joughin only when she received the applicants’ Note of Argument. So the case was not as relevant as it might otherwise have been and, indeed, was of no assistance in dealing with the argument which was in fact being advanced for the applicants.

[42] In summary, the lease here had been with MacIver Partners and MacIver Partners still existed, so the lease too existed. It was for the applicants to say that they had contracted only with the three original partners and that, one of them now being dead, the lease was at an end. If a contract was with a particular legal persona called MacIver Partners it was a qualification to that to say that it was only with the three original partners. It was therefore for the applicants to aver such a qualification. The fact that a result similar to that which the applicants wanted in this case had been arrived at in some other cases did not make that outcome the general rule and each case had to be looked at on its own facts.

[43] It should not be assumed that an unwritten lease was unlikely to be with a house. Indeed one could argue the opposite and say that a concern about delectus personae might cause one to insist on a written lease. Although it was accepted that we were dealing with a non-assignable lease there was no rule that delectus personae applied.

[44] Ms Joughin concluded by moving us to fix a proof. The issues had now been adequately focused in the Notes of Argument lodged for this debate. The proof would be as to whether the applicants had indeed contracted to lease the holding only to the partnership as constituted by the three then partners or to the partnership without any element of delectus personae. Ms Joughin accepted that there were scant averments on which to go to proof but we had to determine the intentions of the parties and that could only be done at proof. Her primary position was that we could and should have a proof on the pleadings as they stood but if we were against her on the matter of onus she sought leave to amend. There was a good factual basis for saying that at the outset of the lease there was no intention to confine the lease to only these three members of the MacIver family.

[45] As to expenses, we should certify the application as being suitable for the employment of only junior counsel. It was not of such complexity as to require the employment of seniors. Otherwise expenses could be reserved for written submissions as had been suggested.

Response

[46] In response Sir Crispin made a number of points.

[47] Firstly, per Rankine at page 172, the existence of delectus personae in agricultural leases was a matter of law. That had been accepted in Inland Revenue v Graham, Jardine-Paterson v Fraser & Ors and Moray Estates Ltd v Butler. Such leases were non-assignable at common law and where assignees had been excluded it was “scarcely conceivable” (per Lord Maxwell in Jardine-Paterson supra) that landlords would have intended to assign to any person who might become a partner in a continuing partnership.

[48] As to whether a proof was needed, one had to ask what was in issue on the present pleadings. It was admitted by the respondents that the firm of MacIver Partners was the tenant. The only entity which could have been tenants at the outset of the lease was that firm as constituted by the three then partners. It was admitted in the respondents’ pleadings that, but for the deed of variation, the partnership would have terminated on the death of any of the partners. There was nothing in the respondents’ pleadings to say that there was any other agreement. Ms Joughin had offered to amend but that, if it were allowed, would have consequences in expenses. The respondents’ pleadings really amounted to an admission that this was not a lease to a house, notwithstanding the general denial contained in Answer 2.

[49] Under reference to passages from the opinion of Lord Justice Clerk Ross in Gray v Boyd at pages 62, 63 and 64 Sir Crispin submitted that the respondents’ bare denial of the applicants’ averment that this was not a lease to a house should not be given effect to. That was because it was inconsistent with admissions made by the respondents to the effect that (i) the lease was to a partnership comprising Marie MacIver, Philip MacIver and Kenneth MacIver and (ii) that, but for the deed of variation, said lease would have terminated on the death of Marie MacIver. The Court was therefore entitled to infer that no case was being set up to the effect that this was a lease to a house from the outset. It was also difficult to understand how it could have been a lease to the house from the outset when the partnership agreement, which had been incorporated into the respondents’ pleadings brevitatis causa,itself said, in effect, that the partnership would end on death of one of the partners. The respondents’ position was going beyond saying that this was at the outset a lease to a partnership which could go on for ever: it was saying that what had been agreed at the outset was that the partners could change the partnership agreement any way they liked and the applicants would have to accept it. That was, to repeat Lord Maxwell’s phrase, “scarcely conceivable”.

[50] If the respondents were in fact trying to set up a case that this was a lease to a house at the outset that needed positive averment. The landlords showing no interest in who the partners of a tenant partnership are was of no consequence (Knapdale (Nominees) Ltd v Donald at paragraphs [44] and [46]) because a landlord was entitled to assume that the partnership would end on the death of a partner unless there was provision otherwise in the partnership agreement. The matter may have been dealt with briefly in Knapdale (Nominees) Ltd v Donald but what was said there was consistent with what had been said in Jardine-Paterson v Fraser & Ors and Moray Estates Ltd v Butler. It could not be the law that a tenant was entitled unilaterally to alter the duration and terms of a lease.

[51] Ms Joughin had taken issue with his reliance on a “normal rule” in this area of law but that is how Lord Fraser had put it in Inland Revenue v Graham’s Trustees (at page 11).

[52] The duration of the lease was a relevant issue; Lord Guest in Inland Revenue v Graham’s Trustees (at page 24) and Lord Hamilton in Moray Estates Ltd v Butler (at page 1344), where his Lordship had taken the view that 20 years’ duration was not enough to show that the lease was to a partnership howsoever constituted.

[53] The present case could be dealt with as a matter of relevancy and no relevant defence had been stated.

Discussion and decision

[54] We are concerned with an attack on the relevancy of the respondents’ pleadings. Since these pleadings have been adjusted and subsequently amended it is convenient to set them out, in so far as necessary, in the form in which they went to debate. We need not set out Answer 1 which is purely formal. But the rest of the respondents’ Answers are as follows:-

Answer 2

Admitted that the firm of MacIver Partners was tenant of the holding known as Mid and Wester Blairfoid in terms of an unwritten lease under explanation that the firm continues to be the tenant of said holding. Believed to be true that the Applicants, as heritable proprietors of the holding, are in right of the landlord’s part of the lease. Admitted that Mrs Marie MacIver died on 4 February 2009. Quoad ultra denied save in so far as coinciding herewith. Explained and averred that Marie MacIver, Philip Maciver and Kenneth MacIver entered into a partnership in 1995 by virtue of a written partnership agreement dated 12 July 1995. It was agreed in paragraph one of said agreement that the partnership would be known as MacIver Partners. Said Partnership Agreement is produced herewith and referred to for its terms which are held as incorporated herein brevitatis causa. The applicants agreed to let the holding known as Mid and Wester Blairfoid to the firm of MacIver Partners. By written amendment dated 27 February and 1 March 2006 the said partners agreed to amend their partnership agreement inter alia by providing that the partnership should not come to an end on the death, resignation or expulsion of any partner. The said partnership of MacIver Partners did not come to an end on the death of Marie MacIver. It continued with Philip MacIver and Kenneth MacIver as remaining partners. The firm of MacIver Partners of which they are partners is not a ‘new’ firm as the pursuers aver. It is the tenant of the said holding known as Mid and Wester Blairfoid in terms of the said unwritten lease.

Answer 3

Admitted that Mhairi MacIver died on 4th February, 2009. Explained and averred that the Defenders advised the Pursuer that the partnership had been varied and that the tenancy was not coming to an end at the death of Mhairi MacIver. Quoad ultra denied save insofar as coinciding herewith.

Answer 4

Admitted that the lease continued because of a Deed of Variation to the Partnership Agreement. Said Partnership and Deed of Variation are produced within the proceedings and referred to for their terms. Quoad ultra denied. Explained and averred that there was no requirement to intimate said amendment to said partnership agreement to the pursuers in order for it to be effective in regulating the terms of the partnership.

[55] Boiled down to their essentials, these pleadings amount to a contention that, absent an agreement to the contrary, a lease of an agricultural holding to a partnership continues in existence while the partnership itself continues in existence. On the facts of this case as pled what is being said is simply that this was a lease to the firm of Maciver Partners and that since the firm of MacIver Partners still exists so too does the lease.

[56] If that is a correct statement of the law there is no need for proof, since none of the facts upon which it relies is disputed, and the respondents must succeed. If it is not, however, there is nothing upon which to go to proof because the respondents have not averred a relevant defence.

[57] One of the grounds upon which the respondents’ defence is said to be irrelevant is that it ignores the strong element of delectus personae which is said to exist in agricultural leases in Scotland. In that regard we are of the opinion that Sir Crispin’s submission was well founded: we consider that, as a matter of law, there is a strong element of delectus personae in such leases. Looking to the cases which were cited to us, perhaps the position is most conveniently vouched by Lord Hamilton in Moray Estates Ltd v Butler. In that case counsel for the defenders (Sir Crispin, as it happens) had argued (at page 1342C-D) that in respect of delectus personae agricultural leases were no different from the majority of other leases and that the doctrine of delectus personae had survived only for limited purposes. More specifically he submitted that Lord Maxwell’s statement in Jardine-Paterson v Fraser & Ors (at page 98) that there was “a strong element of delectus personae” in agricultural leases was not supported by other authority. In response to these submissions Lord Hamilton (at page 1344E-G) said this:-

“While the expression “delectus personae” may be used (accurately or otherwise) in more than one sense (see Inland Revenue v Graham’s Trs,, per Lord Reid at p21 (p 48)), a landlord who lets agricultural subjects to a partnership is (or at least in 1964 would have been) closely concerned with the individual partners (Inland Revenue v Graham’s Trs, per Lord Fraser at p 12 (1970 SLT, p 158). I also accept as accurate, notwithstanding counsel for the defenders’ criticisms of it, Lord Maxwell’s statement in Jardine-Paterson v Fraser at p 98: “An agricultural lease excluding assignees obviously has a strong element of delectus personae”. The fact that statutory provisions concerning agricultural holdings have in certain circumstances restricted the capacity of landlords to prevent transmission of leases to others than the original tenant does not, in my view, diminish the accuracy of those statements. In relation to the assumption of one or more new partners in the firm comprising the other party, a landlord of agricultural subjects is likely to have a more immediate concern than, say, a client of a large firm of solicitors engaged in an ongoing conveyancing transaction or a customer of a commercial partnership with which he has a contract for the sale or for the purchase of goods. Each case requires to be considered in its own circumstances; but an agricultural lease is not, as subject matter, a very obvious candidate for a contract with a house.”

We respectfully agree. Accordingly we consider that in the case of a lease of agricultural subjects to a partnership and in the absence of contrary averment a strong element of delectus personae in the identity of the individual partners falls to be presumed.

[58] The notion that partners in a partnership which is tenant of an agricultural holding can, in the absence of an agreed power to do so, unilaterally change the constitution of the partnership without prejudicing the lease is clearly at odds with that presumption. It was with just such a proposition thatLord Maxwell was dealing in Jardine-Paterson v Fraser & Ors. at page 97 where his Lordship summarises an argument which is precisely the same as that of the respondents in the present case:-

“[The defenders] say that (assuming the assignation was in favour of the partnership alone), it was in favour of one legal person; that if the partnership was not dissolved by the death, there was one continuing legal person which survived the death and therefore remained entitled to the rights conferred upon it by the assignation; that this result could have been avoided by a condition that the lease should terminate on a change in the constitution of the firm, but that, in the absence of such condition, whatever the parties may have contemplated, in law the lease continues.”

His Lordship then goes on:-

“The implications of the argument are that the character of the tenant as affecting the duration of the lease depends upon the precise words of the partnership agreement to which the landlord is not a party and the effect of those words in relation to the somewhat obscure distinction between continuance without dissolution and dissolution followed by reconstitution. Moreover, as this case demonstrates, if the defenders’ argument is correct, the character of the tenant as affecting the duration of the lease can be altered after the lease is entered into by the partners changing the precise words of the partnership agreement in a deed which may never come to the notice of the landlord. I do not believe that is the law.”

Again we respectfully agree.

[59] What was said by Lord Hamilton in Moray Estates Ltd v Butler in the passage quoted reflects what had been said by Lord Guest in Inland Revenue v Graham’s Trs (at page 23) to the effect that Scottish leases involve delectus personae and (under reference to Rankine at page 172) are non-assignable unless there is an express power to assign. In the absence of averment of such a power the lease in the present case must be taken to be non-assignableand that invites repetition of Lord Maxwell’s observation in Jardine-Paterson v Fraser (at page 98) that it is “scarcely conceivable that the landlord, having excluded assignees, would have intended to assign to any persons who might be enabled to become partners in a continuing partnership by some adjustment of the partnership deed, as it were, behind the landlord’s back.” Lord Maxwell’s dictum in the passage quoted in the previous paragraph, although not derived from earlier or higher authority, seems respectfully to us to accord with normal principles of the law of contract and with good sense. We accept it as a correct in law.

[60] In the context of the present case, the conclusions we have come to on these matters, mean that the onus to make additional averments as to the terms and conditions of this contract lies on the respondents as the party seeking to take the case out of the ordinary. We consider that there is no onus on the applicants to aver that there was delectus personae in the person of the three original partners to the partnership agreement and that the lease was only to a partnership so constituted. Absent any speciality of the case, the legal position on these matters was already in their favour.

[61] Just as the applicants were entitled to rely on the existence of delectus personae,so they were entitled to rely on the provisions of sec 33(1) of the Partnership Act 1890 to the effect that in the absence of any agreement between the partners to the contrary every partnership is dissolved by the death of any partner. The applicants were therefore entitled, at the time at which they entered the lease, to expect that result on the death of any of the partners with whom they had contracted. The result of that would have been to end not only the partnership but, because there was no longer a tenant, the tenancy; Inland Revenue v Graham’s Trs. Since, on the authority of Jardine-Paterson v Fraser & Ors,no unilateral action by the original partners could have the effect of preventing that result the position must be that the tenancy came to an end on the death of Mrs MacIver.

[62] For these reasons we have come to the conclusion that the respondent’s answers are irrelevant. In the absence of any motion to do otherwise we would proceed to repel the answers and grant decree de plano.However, Ms Joughin invited us, in the event that we were against her on the question of onus, to give the respondents an opportunity to amend. Rule 38 of the Land Court Rules empowers the Court to allow a party to “amend any error, omission or defect in the Application or any pleadings or proceeding therein” at any time before a Final Order has been pronounced. Entirely without prejudice to the applicants’ right to argue the contrary in due course, we are prepared to proceed for the time being on the basis that that power is wide enough - in appropriate circumstances - to cover even omission to state a relevant case. Proceeding on that basis, and being anxious as always to give a party claiming to have a genuine case to state the opportunity of doing so where that can be done competently and consistently with the requirement to act fairly to all parties, we have allowed the respondents 21 days within which to lodge a Minute of Amendment. We will thereafter invite submissions, either by way of written submissions or a By Order hearing, as to whether amendment in terms thereof should be allowed and, if so, on what conditions.

Expenses

[63] We have reserved all questions of expenses meantime, including the question of certification of counsel.

For Applicants: Sir Crispin Agnew of Lochnaw QC
Messrs R & R Urquhart, Solicitors, Inverness

For Respondents: Ms Gail Joughin, Advocate
Messrs Innes & Mackay, Solicitors, Inverness