(Lord MacDonald, D J Houston, A Macdonald)
(Application RN SLC/170/06 – Order of 24 January 2008)
AGRICULTURAL HOLDINGS – LANDLORD AND TENANT – INFORMAL AGREEMENT – NO DEFINED ISH – MINIMUM PERIOD STIPULATED – CONTINUED POSSESSION – TACIT RELOCATION – SIGNIFICANCE OF SILENCE –OTHER POSSIBLE AGREEMENT – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 1991, SEC 3
The owner of a Farm, and his son, then occupier of part of the farm, entered an agreement for the lease of the farm to the respondent. A document embodying that agreement was drafted by the respondent and two copies of it were signed by the parties; the owner retaining one and the respondent the other. Although parties were in dispute as to the significance of various of the provisions, the critical issue for the purpose of the present report related to the following provision: “PERIOD OF LET. MINIMUM 10 YEARS.” The start date was not disputed and it was agreed that the respondent had occupied the relevant part of the farm on the strength of that document ever since. The Divisional Court held that this was an agreement running on tacit relocation. That decision was appealed to the Full Court.
HELD that the decision should be upheld. The agreement was binding for the stipulated period of ten years but had no legal effect thereafter. The continued possession fell to be attributed to tacit relocation.
Douglas v Cassillis & Culzean Estates 1944 SC 355.
Morrison-Low v Paterson 1985 SC 49
Oag v Sharp’s Trustees 1912 SLCR 28
Smith v Grayton Estates Ltd 1961 SLT 38
The report in so far as relating to tacit relocation included the following material:
“Mr Kermack contended that the agreement created an obligation as between the original parties which was binding on them in perpetuity. As a purely personal contract, it would, of course, come to an end on the death of either party, or on the sale of the farm. Otherwise it continued to bind the parties. In any event, it was clear, he said, that occupation of the farm after expiry of the 10 year period was attributable to the parties’ express agreement. It was not attributable to tacit relocation. The arrangement was accordingly outwith the scope of section 3 of the Act.”
The Court’s note of the submission for the tenant included the following: “In relation to the proper analysis of the status conferred by the continued occupation of the subjects after the 10 years had elapsed Sir Crispin, in response to the Court set out three possible analyses of the underlying legal concepts. The nature of these will be apparent from the discussion below.
The discussion dealt with the main contention in the following terms: “ We consider that the Divisional Court accurately identified the error in the applicants approach, in that it failed to distinguish parties’ expectations, as set out in an agreement, from the contractual effects of the document. Clearly, the parties expected that the agreement would continue after 10 years. But the legal effect seems, to us, equally clear. They expected it to continue but they only agreed to be bound for a period of 10 years.
…
We are satisfied that after the fixed minimum of ten years both parties were free from any obligation to continue the agreement. In short, the agreement was a legally effective document committing the parties to a lease for 10 years. There was no effective agreement for any period thereafter.
The Court then discussed tacit relocation as follows: “We are satisfied that, in the circumstances of this case, occupation after the effective term was properly to be attributed to tacit relocation. Accordingly in terms of section 3, the lease continued from year to year. It appears that this was the view of the Divisional Court although the point is dealt with very briefly in paragraph [51] of the Note and does not appear to have been explored in any depth before that Court.
It is clear from the observations of Lord Justice Clerk Cooper in Douglas v Cassillis & Culzean Estates at page 361 that there may be differing views as to the precise theory underlying the principle of tacit relocation. Reference may also be made to what Rankine, in a footnote at page 628, refers to as a “learned discussion” of tacit relocation in Oag v Sharp’s Trustees. However, we accept Douglas as authority for the view that tacit relocation does not create a new agreement. It gives continuing effect to a prior agreement which was no longer enforceable in its own terms because its stipulated term had expired. The Lord Justice Clerk pointed out that in certain types of contract, including lease, “there is from the first inherent in the bargain an implied agreement that, whatever may be the stipulated period of endurance, that period may be extended by tacit agreement by the parties”.
In using the term “tacit relocation” the Act plainly did not intend to create a new concept and we do not see any essential dichotomy between the statutory provision and the common law. The effect is that where a binding letting agreement ceases to be enforceable but nothing is done by parties to give effect to a termination, the common law doctrine of tacit relocation will operate to create a binding relationship between the parties for an appropriate further period. In the case of an agricultural lease that is one year. This is reflected in the statutory provision in section 3.
No authority was cited for any limitation of the concept of “tacit” relocation to situations where the parties have been literally silent in the sense of having said nothing at any time about their intentions once the contractual period comes to an end. We find no justification in principle for any distinction between the understanding which Lord Cooper took to be “inherent” and an understanding to the same effect based on some discussion, but falling short of binding agreement. Where parties have discussed new terms without explicit agreement, difficult questions may arise as to whether the continued occupation is attributable to a new agreement or to tacit relocation but nothing of that nature arises here. Lord Young in McFarlane v Mitchell, at 904, plainly envisages that tacit relocation could operate even where there had been “meetings and conversations and even letters” between parties. The question in such cases is whether a new agreement has been reached displacing the tacit relocation.
The relevant “silence” or the concept of “taciturnitate” on which tacit relocation is based, relates to absence of any warning or intimation that the tenancy is to be terminated at the end of the agreed period. The essence of the concept is that where no steps have been taken to terminate possession at the end of the existing agreement, the absence of such steps leads to an inference that the lease is to continue. Stair says: “Tacit relocation is that which is presumed to be the mind of both parties after expiring of a tack, when neither the setter warneth, nor the tacksman renounceth; for other significations of the alteration of their minds will not suffice, these being the habile ways of avoiding tacks”.
Sir Crispin suggested that the matter might, alternatively, be seen as one of an implied provision in the lease that, on the expiry of the 10 years minimum, it would continue from year to year until stopped. That, he suggested, would be the obvious understanding of parties to an agricultural lease. They could not have intended to be bound for ever and the obvious inference was that if they did nothing any continuation would have to be from year to year. Accordingly, the effect was that the continued occupation showed simply that parties were effectively in a consensual lease from year to year.
We are not satisfied that this analysis can be separated from continuation by tacit relocation. The supposed understanding of parties that an agricultural lease is to be taken to run from year to year is very similar to the assumption underlying the doctrine of tacit relocation. We are not persuaded that there is any justification for attempting to draw a distinction. However, in the present case nothing turns on the choice between these analyses and we need say no more. If we are correct to hold that the agreement was a binding one for 10 years and did not have elements sufficient to create a binding obligation as between parties thereafter, either of these analyses would leave matters falling within the definition of a lease in terms of section 85 of the Act.
Another possible approach was based on the dicta in Morrison-Low. The Divisional Court accepted that this case had no bearing in the present circumstances and we agree with that view. As we understand it, the critical issue in Morrison-Low was that the supposed tenants had never had any right or title under the original lease. There was a statutory procedure by which they could have obtained title but they did not exercise the right to do so. Accordingly, the continuing possession could not, in law, be ascribed to the former lease. Tacit relocation could not operate in that situation. We are satisfied that where, as in the present case, the parties to the continuing occupation were the parties to the original agreement, there is no need to go beyond tacit relocation as the explanation of the continuing enforceable rights.”
For landlord applicant: Mr L Kermack, Solicitor, Edinburgh
For respondent: Sir Crispin Agnew, QC, Messrs Anderson Strathern, Solicitors, Edinbugh