DIVISIONAL COURT

(Lord McGhie, J A Smith)

THE ISLE OF GIGHA HERITAGE TRUST v HEARD

(Application RN SLC/176/06 – Order of 11 May 2007)

ARGICULTURAL HOLDINGS – LIMITED PARTNERSHIP TENANCY – GENERAL PARTNER GIVING NOTICE OF INTENTION TO BECOME TENANT – NOTICE GIVEN BEFORE TERMINATION – WHETHER GIVEN WITHIN 28 DAYS – AGRICULTURAL HOLDINGS (SCOTLAND) ACT, 2003, SECTION 72 – THE AGRICULTURAL HOLDINGS (RELEVANT DATE AND RELEVANT PERIOD) (SCOTLAND) ORDER 2003

A farm was subject of a lease to a limited partnership, running on tacit relocation after 28 November 2003, with a nominal ish on 28 November, annually. On 22 November 2004 the limited partner, who was the landlord, gave notice to terminate the partnership as at 28 November 2005. On 9 December 2004 the general partner, the respondent, served a notice on the landlord stating that he intended to become tenant in his own right. The notice purported to be given under section 72(6) of the Agricultural Holdings (Scotland) Act 2003.

HELD (1) although the word “within” when applied to a period of time can normally be taken to mean “before the end off”, it did not necessarily have that meaning, it might have its usual English meaning of a period bounded at start and finish, depending on context; (2) section could only apply when there had been a purported termination and a notice given under that subsection had the immediate effect of continuing the tenancy; (3) a notice given before the termination could admittedly have no such effect and there was no justification for giving it a suspended effect of some sort; (4) accordingly the notice was ineffective.

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

The applicants are heritable proprietors of Kinnererach Farm, Gigha. The farm was subject of a lease to a limited partnership, running on tacit relocation after 28 November 2003. On 22 November 2004 the limited partner, who was the landlord, gave notice to terminate the partnership “as at 28 November 2005”. For the purposes of the present report it may be noted that nothing turns on the precise date of such termination. On 9 December 2004 the general partner, the respondent, served a notice on the landlord stating that he intended to become tenant in his own right. The notice purported to be given under section 72(6) of the Agricultural Holdings (Scotland) Act 2003. The sole issue at debate was whether the notice of 9 December 2004 was effective, having regard to the fact that it was given before the date of termination of the existing tenancy.

At the hearing the owners were represented by Mr Gordon Reid, QC, and the general partner by Sir Crispin Agnew, QC.

Authorities

Earl of Morton’s Trustees v MacDougall 1944 SC 410
Williams v Burgess & Another 1840 5 QB 10

Statutory material

Agricultural Holdings (Scotland) Act 1991
Agricultural Holdings (Scotland) Act 2003 (hereinafter “the Act”)
The Agricultural Holdings (Relevant Date and Relevant Period) (Scotland) Order 2003 (hereinafter “S.S.I. 2003 No.294”)

Relevant statutory provisions

Section 72 of the Act is in the following terms:

“Section 72 Rights of certain persons where tenant is a limited partnership

(1) Subsections (2) and (3) apply to a 1991 Act tenancy where the lease constituting the tenancy is entered into before the coming into force of this section and —

(a) the tenant is a limited partnership; and

(b) any limited partner is —

(i) the landlord or an associate of the landlord; or

(ii) a partnership or a company in which the landlord has a relevant interest.

(2) Where this subsection applies, any general partner may exercise or enforce any right of a tenant conferred by virtue of Part 2 of this Act as if the partner were the tenant in the partner’s own right unless the conditions mentioned in subsection (5) are met.

(3) Where this subsection applies and the tenancy purports to be terminated as a consequence of —

(a) the dissolution of the partnership by notice served on or after 16th September 2002 by a limited partner mentioned in subsection (1)(b);

(b) the renunciation of the tenancy on or after that date by such a partner; or

(c) a breach of the tenancy on or after that date by such a partner, subsection (6) applies subject to subsection (4).

(4) Subsection (6) does not apply if —

(a) the conditions mentioned in subsection (5) are met; or

(b) the Land Court makes an order under subsection (8).

(5) For the purposes of subsections (2) and (4)(a), the conditions are —

(a) that —

(i) a (or the) notice of dissolution of the partnership has been (or was) served before 4th February 2003 by a limited partner mentioned in subsection (1)(b); and

(ii) the partnership has been dissolved in accordance with the notice; and

(b) that the land comprised in the lease —

(i) has been transferred or let;

(ii) under missives concluded before 7th March 2003, is to be transferred; or

(ii) under a lease entered into before that date, is to be let, to any person.

(6) Where this subsection applies, notwithstanding the purported termination of the tenancy —

(a) the tenancy continues to have effect; and

(b) any general partner becomes the tenant (or a joint tenant) under the tenancy in the partner’s own right, if the general partner gives notice to the landlord within 28 days of the purported termination of the tenancy or within 28 days of the coming into force of this section (whichever is the later) stating that the partner intends to become the tenant (or a joint tenant) under the tenancy in the partner’s own right.

(7) Where —

(a) a tenancy continues to have effect by virtue of subsection (6); and

(b) the —

(i) notice mentioned in paragraph (a) of subsection (3) was served before the relevant date; or

(ii) thing mentioned in paragraph (b) or (c) of that subsection occurred before that date, the landlord may, within the relevant period, apply to the Land Court for an order under subsection (8).

(8) An order under this subsection —

(a) is an order that subsection (6) does not apply; and

(b) has effect as if that subsection never applied.

(9) The Land Court is to make such an order if (but only if) it is satisfied that —

(a) the —

(i) notice mentioned in paragraph (a) of subsection (3) was served otherwise than for the purposes of depriving any general partner of any right deriving from this section; or

(ii) thing mentioned in paragraph (b) or (c) of that subsection occurred otherwise than for that purpose; and

(b) it is reasonable to make the order.

(10) Where —

(a) a tenancy continues to have effect by virtue of subsection (6); and

(b) the —

(i) notice mentioned in paragraph (a) of subsection (3) was served on or after the relevant date; or

(ii) thing mentioned in paragraph (b) or (c) of that subsection occurred on or after that date, section 73 applies.

(11) For the purposes of —

(a) subsections (7) and (10), the relevant date is such date as the Scottish Ministers may by order specify; and

(b) subsection (7), the relevant period is the period from the relevant date to such date as they may so specify.

(12) In this section, the expressions, “limited partnership”, “limited partner” and “general partner” are to be construed in accordance with the Limited Partnerships Act 1907 (c.24).”

Submissions for respondent

For the general partner it was argued that the validity of the notice was simply a matter of construction of the time limits in the section. Notice had to be given within 28 days of termination. The period of 28 days gave the general partner up to about 26 December 2005. The notice served on 9 December 2004 was, accordingly, well within that period. The only relevant date was the end date: Earl of Morton’s Trustees v MacDougall. There was nothing to delimit the start date beyond the fact that the landlord had initiated the statutory procedure by giving notice in his role as limited partner. That triggered operation of the statutory provisions. No more was needed. It was stressed that section 72(6) looked to a future event, the intention of the general partner. The “purported termination” similarly could look to the future and reflect the intention of the landlord.

We need not repeat the detail of the respondent’s exposition of the statutory provisions which we look at in our discussion below. It may be noted that in response to the landlord’s submission, Sir Crispin contended, in relation to section 72(7), that there was nothing in that subsection which precluded the landlord from making an application to the Court within 28 days of 9 December 2004. There was no reason why the Court should not reach a decision on such application before 28 November 2005. Subsection (8) could have a retrospective effect. Even if a general partner purported to take over a tenancy from a limited partnership, it would be open to the Court to say, retrospectively, that he had no right to do so.

Submission for applicant

For the landlord, it was submitted that the scheme of the section demonstrated that a valid notice could not be given before the date of termination because there was no provision enabling such a notice before that date. On a proper construction of the whole relevant provisions, it was clear that the right to give notice only arose at that point. The various inter-related provisions could not operate according to their plain terms if notice could be given before termination. Notice given early would be ineffective for its main statutory purpose. It could not have been intended that the tenancy should transfer to the general partner until the limited partnership had come to an end.

Mr Reid made a careful analysis of the Act in support of that contention. We shall cover the essentials of this in our discussion below and it is unnecessary to repeat the detail. It is sufficient to note that he made the point that we had to have regard not just to the circumstances of the present case but to other possible situations. The Act had to be able to apply consistently. He gave examples of problems which might have arisen during the transitional period had the respondents’ argument been accepted.

He also submitted that the statutory provisions could be seen to have effect as a retrospective statutory assignation from the limited partnership to the general partner. The gap between the termination of the limited partnership tenancy and the date of notice under section 72(6), would be filled by retrospective operation of the statutory assignation. The tenancy did not actually terminate. It just purported to do so but was revived by the notice. Notice must follow termination or there would never be any “purported termination”. It was plainly wrong to contend that the starting point was simply the limited partner’s initiation of the whole process by notice of dissolution. In any event, the starting point of subsection (7) was the tenancy continuing to have effect because of subsection (6) and that could only apply after termination.

Mr Reid advanced a secondary separate submission that, in any event, on a proper interpretation of the phrase “within 28 days of the purported termination of the tenancy”, the starting point for the running of the period was the date of the purported termination of the tenancy. The period ended 28 days thereafter. A notice could not competently be given either before the period began to run or after it had ended. By reference to examples in the Act itself, he showed many contexts where the word “within” plainly meant a period with both start and end date and showed that provisions expressed in terms of a period “of” a certain date were equivalent to provisions using the word “after”. In the 1993 Act the word “after” was the one which tended to be used. There would be no reason to assume any intention to make a change of substance.

He contended that the decision in the Earl of Morton’s Trustees was not a binding authority as it related to a different statutory provision and that it could not determine the present issues. It was accepted that regard should be had to its terms but he contended that it was distinguishable, first, by reference to the “texture” of the section in question and, second, because it was plain in that case that the relevant notice had to be given after a first notice had been given. There was a start date. He suggested that regard should be had to the old English case of Williams v Burgess & Another and also to the doubts expressed by the dissenting judge, Lord Mackay.

Discussion

The decision in the Earl of Morton’s Trustees is clear authority for the proposition that that unless there is some good reason for a construction which gives “within” a bounding intention, the word, when applied to a period of time, simply means “before the end of.” However, it is plain that the Court did not intend to suggest that this approach precluded consideration of the particular wording of the statute. The Lord Justice Clerk referred to the distinction between the words “within one month” and “within the month”. This recognised that fine distinctions might have to be made.

Where the date of a particular event cannot be predicted, it will almost inevitably appear that the effect of a provision expressed in terms of something to be done “within” so many days “of”, “after” or “from” of that event, is that it must be done inside a period which in fact has an identified start date and a statutory end date. Accordingly, it is easy to find examples within the Act when Parliament used the word “within” in a context which would, in practice, only apply to a period with identified start and end dates. However, that practical effect is insufficient to show that Parliament must have intended the right to be limited by reference to any particular start date. We do not accept Mr Reid’s secondary submission as capable of standing on its own. Use of the word “within” does not necessitate a start date.

In the Earl of Morton’s Trustees, Lord Jamieson said that if there was any ambiguity in the construction of the section he would have preferred the interpretation which would have given effect to the purpose underlying the provisions. That might seem an important consideration in the present case where, as noted below, the underlying purpose is very clear. However, we have not found it of assistance in relation to the procedural provisions with which we are concerned. Sir Crispin suggested that the purpose of the relevant provision was simply to give notice of something to the landlord. However, it plainly has a wider purpose. On any view it is not just an intimation, it is a step in a sequence of events. The purpose might be described as being to determine what is to happen to the tenancy when the limited partnership ends.

Mr Reid described the purpose of the section in a different way. It was to give the general partner a bonus. To get that bonus it was clearly necessary that the general partner should operate the provisions correctly.

The aim of the expanded style of drafting used in modern legislation is to allow the various provisions to be worked through in simple stages to try to avoid ambiguity. There is, accordingly, a danger in trying to take them short. But, the scheme, so far as relevant to the present dispute, starts at subsection (3) when the tenancy “purports to be terminated”. At debate, we raised the possibility of there being ambiguity in that the expression on the view that it might relate in some way to the actings of the landlords. However, we have come to have no doubt that it was intended to mean the point at which the lease would have ended, but for the statutory provisions. Sir Crispin did suggest that it was a provision which could be read as “looking to the future”. It could refer to a future event. But it was clear that his main submission treated the similar phrase in subsection (6) as meaning the date when the tenancy would be terminated if the statutory provisions were not applied. In other words, he proceeded on the basis of an implicit acceptance that the 28 days ran from the end of the partnership. The same construction must apply in subsection (3).

When the conventional tenancy ends, subsection (6) applies. Because of the careful layout of the subsections, we can find no basis for holding that subsection (6) could apply in any other situation. There is no ambiguity. It only applies where the tenancy purports to be terminated. In that situation it provides that if the general partner gives a notice in appropriate terms, the tenancy continues to have effect with the general partner becoming the tenant. It may be observed for completeness that a notice by the landlord in his capacity as limited partner would not normally “purport” to do anything in relation to the tenancy. It would purport to deal only with the partnership.

The “notwithstanding” provision of subsection (6) does not appear to us to add anything of substance to the effect of subsection (3). However, it may be said to add emphasis; in the sense that it would not be necessary if the reference to purported termination had been intended to relate, in some way, to the actings of the landlord. It clearly refers to a situation where the lease would otherwise have ended. In that situation, following from subsection (3), the effective provision in subsection (6) is that where a notice is given, the general partner “becomes” tenant in his or her own right. The notice is an effective functional step in the scheme.

Against that background we consider that the issues raised can properly be analysed in the following way.

Section 72 applies where parties have agreed a lease to a limited partnership in terms which effectively allow the landlord to recover possession of his farm after an agreed period. The dominant purpose of the various provisions of the section is to allow the general partner, in that situation, to supersede the agreement and remain in possession.

Parliament chose to give effect to that purpose by providing a specific machinery of inter-related subsections. We are satisfied that our task is to construe the relevant provisions in light of the dominant purpose, but not to allow that purpose to over-ride the language used.

Although Sir Crispin referred to the provisions as allowing the notice to be served any time after the notice of dissolution of the partnership, it seems to us that the logic of his position is that there is no necessary start date. In light of the decision in the Earl of Morton’s Trustees, the effect of the time limit in subsection (6) is that the general partner has up to 28 days from the termination of the lease to give a valid notice of his intent to take over. But, a notice does not become valid merely by being in time.

The notice of 9 December 2004 was not effective for the purpose intended by the Act. It did not operate to transfer the tenancy to the general partner as provided by subsection (6). If it was not effective for its statutory purpose, is there any sense in which it can properly be described as a valid notice?

No attempt was made to advance the argument, apparently relied upon by the Land Court in the Earl of Morton case, that a notice could be treated as continuously acting. Lord MacKay expressly rejected that as a “peculiar theory”. None of the other judges thought it worth comment. We accordingly proceed on the basis that a notice which is ineffective when given is not to be treated as revived on a date when it might validly have been given. The validity must be determined at the date of the notice. On this analysis, the question comes to be: Does the statute authorise, by implication, the service of a notice to be treated as an intimation?

The use of the word “intends” in subsection (6) may be thought to give support to the idea of the general partner’s notice as being notice by way of intimation. But, we are satisfied that it was not intended by Parliament that it should operate in that way. The express provision empowered service of a notice to be given in a set of circumstances where it would have an immediate functional effect. We do not accept that the word “intends” provides sufficient authority for service of a notice when these circumstances were absent and when the notice would, accordingly, require either to be held in abeyance or treated as an intimation of some sort. In short, we consider that the notice was not a valid one for the purposes of subsection (6). That is sufficient to determine the matter before us.

We have reached that conclusion by following the scheme of the provisions of subsections (3) and (6) as set out above. These are the provisions which apply in the circumstances of the present case where, if the notice had been effective, the result would have been to give the new tenant the protection of subsection (10). Mr Reid sought support for this construction of subsection (6) by considering the consequences of the respondent’s argument had the case involved other circumstances also dependent on that subsection. Had the circumstances been such that the landlord might have wished to invoke the protection of subsection (7), the construction given to subsection (6) would have to provide a workable result in that case too. The construction could not depend upon which of the ancillary provisions was in fact invoked.

Consideration of what may be called the “transitional provisions” of the Act supports the view that an effective notice could not be given in advance of termination of the lease. In terms of subsection (3)(a) these provisions applied where a limited partner had given notice of dissolution at any time after 16 September 2002. The effect of subsection (7) was that they applied to notices given before the relevant day. This was defined as 1 July 2003 by S.S.I. 2003 No.294. In relation to notices served within that period, subsection (7) gave the landlord a right – albeit in very restricted circumstances - to apply to the Court to prevent the general partner taking over the tenancy. It appears to us that the construction contended for by the respondent might have prevented exercise of that right in some cases. For example, had notice of dissolution been given on 28 November 2002 with the effect of terminating the tenancy on 28 November 2003, the tenant, if entitled to give notice before the termination, might have chosen to do so at any time after the Act came into force on 22 May 2003. Let us assume that this was done on 1 October 2003. The landlord’s rights to apply to the Court were to be exercised “within the relevant period” which was defined by the same S.S.I. as the later of 29 July 2003 or 28 days after the notice given by the general partner. In other words the landlord would be obliged to apply under subsection (7) within 28 days of 1 October. But the right to apply under that section did not start until the tenancy continued to have effect under subsection (6). That would not be until 28 November 2003 because the tenancy which had effect up to that date was the one running under the contract with the partnership. In short, the statutory time allowed for the landlord to give notice would have expired before the date when he was first entitled to give it.

It was argued for the respondent that there was nothing in the Act to prevent the landlord serving notice immediately after the general partner’s notice. Indeed, it was suggested that the Court would be free to reach a decision before the tenancy ended and thus avoid any uncertainty at that time. However, we think this would only have been possible if the words of subsection (7) (a) could be read as being wide enough to cover the situation where the tenancy continued by virtue of a contractual agreement as well as where it continued by virtue of subsection (6). We have not been persuaded that such a construction is open.

Although the risk of such transitional problems may now be past and we would not wish to give undue weight to consistency of construction involving transitional provisions, we cannot ignore the fact that the construction we prefer would have allowed the Act, as a whole, to be read from the outset in a way which would have avoided this problem. A construction which would permit a consistent approach to all the provisions of an Act should, if possible, be preferred. The approach we favour can be applied consistently.

We have not found this an entirely easy decision because the broad intention of the Act is clear. Where the landlord had control of the limited partnership, the agreements of the parties were to be set aside and the general partner was to be given the benefit of a tenancy. It might seem appropriate for a Court simply to give effect to that intention. However, Parliament set down the procedures by which their intention was to receive effect. Our focus must be on the language used to describe the procedures. We have not found it ambiguous or absurd. It seems to us that there are no overwhelming considerations of fairness or justice bearing on construction. The procedural scheme is straightforward. Even if it can be assumed that Parliament would have been content to have a wider scheme, it is enough to say that we are concerned only with the scheme provided.

Decision

It was not disputed that the lease terminated on or about 28 November 2005 if the general partner did not obtain the protection of the 2003 Act. For the reasons set out above, we consider that he failed to bring himself within that protection. As agreed by parties we continue the case for consideration of the detail of timing of the order to quit although we assume that will be capable of agreement by parties.

For landlord applicants: Mr J G Reid, QC, Messrs Blackadders, Solicitors, Forfar

For respondent: Sir Crispin Agnew, QC, Messrs Brodies, Solicitors, Edinburgh