THE COURT

(Lord McGhie, Mr D J Houston)

TELFER v THE BUCCLEUCH ESTATES LMITED

(Application RN SLC 225/07 – Order of 3 November 2010)

AGRICULTURAL HOLDINGS – FIXED EQUIPMENT – POST LEASE AGREEMENTS – TENANT TAKING OVER LANDLORD’S RESPONSIBILITIES – MAINTENANCE – RENEWAL – REPLACEMENT – LIMITATION OF EVIDENCE – CONTRACTUAL ACCEPTANCE – ACCEPTANCE OF CONDITION OF EQUIPMENT – ACCEPTANCE AS IN SUFFICIENT TENANTABLE AND HABITABLE CONDITION – WORK DONE SINCE AGREEMENT MADE – WORK DONE BY LANDLORDS – EXTENT OF OBLIGATIONS AFTER NULLIFICATION DATE – WORK OUTSTANDING AT DATE OF NULLIFICATION – NATURE OF CONTINUING OBLIGATIONS – OBLIGATIONS IN RESPECT OF WORK OUTSTANDING – INDIVIDUAL ITEMS OF EQUIPMENT – WHETHER “FIXED EQUIPMENT” REQUIRED REFERENCE TO THE EQUIPMENT AS A WHOLE – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 1993 SEC 5, SUBSECS (4A), (4B) AND (4C).

A tenant gave notice of intention to have a post lease agreement (PLA) nullified with effect from 22 October 2007. At that date, various items of equipment were worn out and in need of attention. Under the PLA, it was for the landlords to carry out such work and for the tenant to pay part of the cost. Doubts arose as to the proper construction of the provisions of sec 5 of the 1991 Act as amended by sec 60 of the 2003 Act. Four questions were discussed: (1) Whether the provisions of section 5(4B)(b)(ii) applied where work had been done on the equipment in question since the commencement of the lease; (2) Whether it was competent to lead evidence to contradict the provisions of the probative lease in terms of which the tenant had accepted that the fixed equipment at the outset was in sufficient, tenantable and habitable condition and adequate for the purposes for which the farm was let and, if so, what kind of evidence; (3) Whether an obligation to make payment in respect of work which was outstanding at the date of nullification of any PLA ceased to be enforceable thereafter and, in particular, whether it ceased to be enforceable where it had been the subject of legal proceedings prior to that date; and (4) Whether, in considering the state of repair of fixed equipment, it was appropriate to have regard to the fixed equipment covered by the agreement as a whole or by reference to each individual item? References to (i) and (ii) are to provisions of section 5(4B)(b).

HELD (1) that the nature of work done on fixed equipment between the date of the agreement and the date in the tenant’s notice was irrelevant to the question of a tenant’s entitlement to nullify or set aside a PLA agreement but that if an item of equipment, present at the date of nullification, was not present at the date when the agreement was made, (ii) would have no application. If an item of equipment, present at the date when the agreement was made, had been substantially renewed before the date of nullification it would, nevertheless, normally fall to be regarded as the same equipment for the purposes of (ii) but if an item of equipment, present at the date when the agreement was made, had been wholly replaced, it would not be available for comparison for the purposes of (ii); (2) that the tenant was not constrained by the terms of the lease in relation to the evidence he could lead to show the state of equipment at the time of the PLA; (3) that the question of obligations in relation to work outstanding at the date of nullification depended on the terms of the agreement in question. Where a tenant had an obligation which might have been enforced immediately before nullification, that obligation would continue to be enforceable but there was nothing in the Act which would allow the agreement to remain effective after nullification. The mere fact of litigation over aspects of the parties’ obligations did not, of itself, create an obligation: and (4) that in considering the state of repair of buildings and fixed equipment it was necessary to have regard to each individual item but, in broad terms, if an original item had been replaced by a radically different piece of equipment, (ii) would not come into play in relation to that particular equipment.

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

This Note should be read with the Notes attached to our Orders of 6 May 2009 and 3 September 2010. References in this Note to the “earlier Note” are to that of 6 May. As appears at [25] of the Note of 3 September, Sir Crispin had drawn attention to certain outstanding issues of law. We attempted to identify these at [32] and [33] of that Note. We framed these as questions but said they were simply indicative of the issues raised. We invited parties to make suggestions as to other points which might be addressed. In the event, at the hearing on 13 September 2010, the parties treated our proposed questions as adequately covering the issues and we heard submissions on each. Mr Telfer appeared on his own behalf and Sir Crispin Agnew, QC appeared for the landlords.

Statutory Material

Agricultural Holdings (Scotland) Act 1949
Agricultural Holdings (Scotland) Act 1991
Agricultural Holdings (Scotland) Act 2003

The issues debated turned, essentially, on the provisions of sec 5 of the 1991 Act as amended by sec 60 of the 2003 Act. For convenience, we refer to these as the “new provisions” and, in particular, to the provisions of section 5(4B)(b)(i), simply as “(i)” and the provisions of section 5(4B)(b)(ii) as “(ii)”. References to (4A), (4B), or (4C) are to the new subsections of sec 5.

Authorities

Bell Bros. v Aitken 1939 SC 577
Davidson v Logan 1908 SC 350
East Coast Amusement Co Limited v BTB [1965] AC 58
Lawson v Murray (1825) 3S 536
Telfer v Buccleuch Estates 2005 SLCR 51
Wight v Newton 1911 SC 762

Text Books

Lord Gill The Law of Agricultural Holdings in Scotland – Third Edition
Rankine Law of Leases – Third Edition
Gloag The Law of Contract – Second Edition
Connell Agricultural Holdings (Scotland) Acts – Sixth Edition
Stair Memorial Encyclopaedia: Laws of ScotlandVol 12
Concise Oxford English Dictionary

Preliminary point

[1] Sir Crispin raised a preliminary point. He sought clarification of Mr Telfer’s position in relation to the observations at [152] and [153] of our earlier Note. This related to our tentative conclusion to the effect that certain fences and field drains were admittedly not in a reasonable state of repair at 22 October 2007 and that the extent of the work required meant that, even if a view had to be taken of equipment as a whole, as suggested at [117] of that Note, the agreed facts showed that the provisions of (i) were not complied with at that date. We had left it open to Mr Telfer to consider whether he was to argue the contrary. Sir Crispin sought clarification of the tenant’s position. If it was agreed that the fixed equipment was not in a reasonable state of repair at that time, the dispute between the parties would turn on (ii).

[2] As will be seen in our discussion of Question 4, we have concluded that the so-called “robust” approach to the provisions of (4B) is inappropriate and that these provisions require all items of fixed equipment to be in a reasonable state of repair. The preliminary issue has been superseded and we need do no more than record it briefly.

[3] We asked Mr Telfer whether he accepted that the state of the fences on 22 October 2007 meant that, even taking the equipment as a whole, it was not in a reasonable state of repair on that date. It was clear that he was unwilling to accept this and we were unable to clarify the position further. In his pleadings as adjusted at 6 Sept 2009, he seems to reserve the right to make a substantive case that the fixed equipment could be said to be in a reasonable state of repair despite the condition of certain items. At p 25, under reference to [153] of our earlier Note, he avers,: “Mr Telfer is making the case that in considering the question of reasonableness of repair, the state of the fences and ditches (in fact drains) are outweighed by the condition of the rest of the fixed equipment has to make the case (with regard these items) because the Court has raised this in their Order – clearly the tenant is claiming these items are in the same condition as in 1970/71 under head (ii) or not part of the fixed equipment – redundant i.e. and obligation to renew or replace from 1970/71”. He does not advance any explicit contention that the state of the fixed equipment as a whole (insofar as covered by the PLA) excused the condition of the defective fences. But we think this is implicit. We recognise that little purpose would be served by requiring a tenant to list all the items in good condition. He has referred to the landlords’ own list as showing most items in good order. In short, had we reached a different conclusion as to the proper approach to construction discussed under reference to Question 4, below, we would have had to allow this issue to go to proof before answer.

[4] Our answer to Question 4 has a bearing on aspects of the other Questions. However, we deal with them individually in the order in which they were addressed at debate.

Question 1. Whether the provisions of section 5(4B)(b)(ii) applied where work had been done on the equipment in question since the commencement of the lease?

[5] For the landlord it was argued that (ii) did not apply to items that had been replaced since the agreement was made. Sir Crispin suggested that the relevant fences had been replaced at least once since 1970 and that at least some of the dykes had been renovated with grant aid since that time. In course of debate he accepted that his argument applied whether the equipment had been completely replaced or simply renewed. He did not attempt to found on any distinction between these concepts. However, we noted that his substantive submissions tended to be expressed in terms of equipment which had been “replaced”.

[6] He submitted that it was clear that the provision was dealing with the buildings or fixed equipment that existed at the time the agreement was made. The use of “the”, “they” and “them” made this clear. He referred to dictionary definitions of these words.

[7] He contended that this was logical where the tenant had the renewal or replacement obligation. Under (i) he had to hand over the buildings and fixed equipment that he was responsible for in a “reasonable state of repair” and under (ii) to hand back the original buildings and fixed equipment in no worse state of repair. It was, he said, illogical to construe the provision to the effect that if the fixed equipment had been replaced by a new item of fixed equipment, the tenant should be allowed to let it fall into the same state of disrepair as the former items of fixed equipment had been at the outset of the lease. The sensible approach was that, if something new had been interposed, it was reasonable to have regard to it. That, he said, applied even if the new equipment had been provided by the tenant. The old equipment should be regarded as having been superseded as redundant. It was no longer part of the fixed equipment. On any view, the original equipment, as it was at the outset, was no longer there. There was nothing to compare for the purposes of (ii). Accordingly, the tenant could only rely on (i).

[8] Counsel accepted that this meant that, if a tenant had managed to get by, doing minimum repairs, he would be able to rely on (ii). But, if he had actually renewed existing equipment, he could only rely on (i), as the old equipment would not be there for comparison. This was justified because the tenant should be seen to have done any renewal “on the landlord’s behalf”. It did not matter who had actually done the work. It was a landlord’s obligation which had been taken over by the tenant.

[9] In response Mr Telfer contended that it was irrelevant to consider work done. The Act simply said that if items were not in a worse state than they were when the agreement was made, the condition (ii) was complied with. We understood him to contend that if Sir Crispin’s argument was correct, equipment would simply disappear when it was renewed. If all the equipment had been renewed there would be nothing to look at under (ii). He posed the question that if there was nothing there, how could it be said that its condition was worse. He argued that the section could not logically work if there was nothing with which to compare the present state of equipment. He stressed that the Act did not differentiate between equipment present at the end and equipment at the beginning. The word “they” was a collective term referring to equipment on the farm when the agreement was to be nullified.

[10] Mr Telfer stressed that it was not possible to construe (ii) to include a different definition of what the fixed equipment was. It had to mean the same as (i) and sec 85. He made reference to our observations at [150]. The word “they” in (ii) referred to all the fixed equipment which was not found to be in a reasonable state of repair. He suggested an example of an arable farm with a steading. If the tenant replaced an old steading as a tenant’s improvement but kept the original buildings, the new building, he said, would now be part of the fixed equipment. The old might continue to be of some use. But if Sir Crispin’s submission was correct this would have to cease to be part of the fixed equipment. When looking at this matter broadly, it was important to consider materials and expected life time. A tenant could not keep equipment in the same state as the original for any significant time. This would simply be impossible.

Discussion of question 1

[11] When considering questions of statutory construction it is appropriate to have in mind not only the present PLA but also other types of PLA. It is common knowledge that a wide variety of agreements have been entered into in reliance on the provisions of the original sec 5(3). In many cases, the tenant accepted all the equipment as being in good order and accepted responsibility to keep it in good order, renewing or replacing it where necessary. In other words, post lease agreements often cover all the fixed equipment and involve the tenant taking over all or most of the landlord’s responsibilities in respect of fixed equipment.

[12] Subsection (4A) does not cover every agreement relating to equipment. It adopts the wording of the second part of subsec (2)(a) in describing the type of agreement which can be nullified. It covers agreements which purport “to provide for the tenant to execute on behalf of the landlord … any work effecting such replacement or renewal of the building or other fixed equipment on the holding as is rendered necessary by natural decay or by fair wear and tear”. The choice of these words and exclusion of reference to the landlord’s obligation “to put the equipment into a thorough state of repair” at the outset of the tenancy or to provide necessary buildings or other fixed equipment can hardly have been accidental but we heard no submissions which founded on it. Although it is not clear what bearing it might have on the issues before us, discussion of the general intention of Parliament might possibly have been assisted by giving explicit consideration to its intentions in drawing such a distinction.

[13] Parliament has provided a simple tool to deal with a potentially complex problem. It must be assumed that the risk of some unevenness in effect was accepted as part of the price to pay to achieve the underlying policy aim. However, we are not concerned with policy as such, but with the task of determining the intention of Parliament from the language used, taken in its whole context. In terms of (i), the fundamental intention of Parliament seems plain. If the equipment is in a reasonable state, a fresh start to maintenance obligations can be made. As discussed at [131] to [138] of our earlier Note, the simple tool has not been tailored to fit all the situations which might have been expected to need special provision but that does not have any direct bearing on the construction of (i).

[14] However, (ii) seems to be based on a different policy. Like (i) it is, of course, directed at a situation where the tenant has entered a contractual agreement to take over work which, in absence of such agreement, would be the responsibility of the landlord. Although (4A) does not appear to cover the agreements where a tenant has taken over his landlord’s obligations as they stood immediately after the start of the lease, the effect of (ii) is to draw a distinction between a tenant’s obligations, as they stood immediately after the agreement, from his obligations at any later stage. The obligations, as accepted by a tenant at the beginning of any particular PLA, might or might not be the obligations which, in terms of sec 5(2)(a), were incumbent on the landlord at the start of the lease. In many cases the PLA would be entered immediately after the lease and it is not uncommon to find such agreements where the tenant has accepted responsibility for putting defective equipment into a proper state of repair, although the language used to achieve this may vary. But, agreements falling within the scope of (4A) might have been entered at any stage of the lease. Such agreements might be made at or about the time of a rent review. Sometimes they are limited to specific items or types of item. The effect of (ii) appears to be that if a tenant has contracted to take over a landlord’s obligations, he is to be free from his contract for the future provided he has not let the equipment get into a worse condition - even if he has undertaken to put it in a better condition. This provision does not appear to be based on any idea of an opportunity for a fresh start. No explicit provision is made to compensate a landlord who has agreed rent on the assumption that his tenant has accepted onerous obligations in relation to fixed equipment. (For completeness we might add that we are aware that Mr Telfer does not accept that rent is necessarily related to maintenance obligations. However, we have no doubt that, as a general proposition, a tenant’s obligations to carry out work, to pay for work, and to pay rent are all to be seen as part of a package.)

[15] The impact of this provision in any particular case depends on the terms of the individual PLA and on our answer to Question 3. Where the PLA obliges the tenant to carry out the work, the fact that he has not done it, may allow him to drop the PLA for the future if the circumstances fall under (ii). But, this will not, of itself, relieve him from any outstanding obligation to carry out the work. He will be free of future obligations if the original state of the equipment has, at least, been maintained. In the typical case falling under (4B) he will remain liable to bring the equipment up to a proper state of repair. But, in a case falling under (4C) there may be circumstances where, if our answer to Question 3 is correct, a tenant could find that he is not only free for the future but is free of any obligation in respect of the state of the equipment.

[16] At [131] to [138] of our earlier Note, we looked at the absence of any provision relating to the state of the equipment when, under the PLA, the landlord is the party directly responsible for carrying out any necessary work. We concluded that, in that situation, there would be cases where the tenant was simply unable to rely on (i). Unless the circumstance allowed him to proceed under (ii), such a tenant would have to continue under the agreed contractual arrangement. He would not be able to take advantage of the right to set agreements aside but would at least be no worse off. On the other hand, the apparent absence of provision to deal with works of replacement or renewal carried out by the landlord at the landlord’s expense after the start of the agreement may let a tenant nullify the PLA at a stage where fixed equipment is not in a reasonable state of repair and where the PLA would make him liable to pay for the necessary work. In some circumstances that might work quite harshly against the landlord. If the provision had that effect, it would mean that the landlord’s contractual rights were removed without any provision for compensation. We accept Sir Crispin’s submission that the new provisions should be construed in a way which would limit this effect if possible.

[17] The landlords clearly face the difficulty that the statutory provision, (ii), is unqualified. Some qualification might well have been thought appropriate. For example, the statutory provision is explicit in referring to the time when the agreement was made, not the date when it became effective. A PLA might have made express provision for the landlords to carry out work of renovation in the first instance with tenant’s obligations only to start once that had been done. It has been hinted that such an agreement was, if not expressly entered into, then at least acted on, in the present case although it is plain that the landlords’ part of any such bargain was not part of the written agreement. In any event, there could well be situations where equipment was in a poor state at the time of an agreement but was subsequently renovated by the landlords at their own expense. If a tenant with renewing obligations under a PLA then failed to maintain that equipment so that it ended up in a worse state than it had been after the landlord’s original refurbishment, it might seem inappropriate that such tenant was in a better position in relation to setting aside his agreement than one who had received equipment in a thorough state of repair at the outset. But, the Act makes no express provision to deal with these varied situations.

[18] The submissions did not attempt to suggest that any words of qualification could be implied. That, no doubt, reflects a recognition that there is nothing in the statutory wording which creates a relevant ambiguity of a kind which might have allowed an appropriate construction to meet the problem and no lacuna which a court might properly fill. There are situations where a court will be free to remedy an obvious omission where a provision, as enacted, has no sensible meaning. Morrison-Low v Paterson’s Executors 2005 SLCR 5 provides an example. But, in that case, we discussed the contrast with the situation where a court is faced with a provision which does make literal sense. There may be little scope for adding qualifying words or expressions in such a case.

[19] We do not think that Sir Crispin’s argument gets any real support from his close textual analysis of the words “the”, “they”, and “them”. These words do not appear to us to point one way or another. The intention was to refer to specific fixed equipment, namely the fixed equipment on the farm and subject to the agreement. A definite article was grammatically appropriate. The explicit reference to “buildings” required use of the plural. It is not clear what purpose was served by the express reference to “buildings”. It was not suggested that “buildings and other fixed equipment” had any connotation which would not have been covered by the simple expression “fixed equipment”. That term is defined in sec 85 to include any building. But, having used the extended expression “buildings and other fixed equipment” use of the plural would necessarily follow to make grammatical sense.

[20] The substantive submission for the landlords required close analysis of the concept of identity. It was an argument easy to understand when the example was given of an old stone byre being replaced by a new general purpose shed. The old building might simply cease to be regarded as part of the fixed equipment. If so, for the purposes of (4B) we could only look at the replacement building. There would be nothing else to look at. Sir Crispin suggested that (ii) could have no application in that situation. We have little difficulty in accepting that example. But, most cases will be more complex. Although, there was no attempt to invoke the ancient example of the Ship of Theseus, there is plainly scope for much philosophical discussion of the concept of continuing identity. Where an item has repeatedly been repaired, there may come a stage where nothing of the original is left. But, in a practical sense there may be little difficulty in seeing a continuation of identity even when that stage is reached. Essentially, the submission for the landlords required an assumption that Parliament had in mind that any apparent unfairness in the operation of provision (ii) would be avoided by close analysis of the identity of individual items. We are not persuaded of this.

[21] We are satisfied that a practical approach to the concept of identity is required in the present context. That appears to us to be consistent with the scheme of the new provisions. There will be situations where such an approach will show a plain change of identity. Where a replacement building has been erected and the old one allowed to decay, no practical purpose could be served by requiring assessment of the new building to have reference to the original. If the new building was properly to be viewed as an additional building, the problem would not arise. The new building would simply require to be assessed by reference to (i). If the original building continued to be regarded as part of the fixed equipment, separate regard to its condition would be required under both (i) and (ii), as appropriate. But if the new building replaced the old, there would be no obvious reason to assume that Parliament intended its condition to be assessed by reference to the state of a different building.

[22] We have noted that although Sir Crispin accepted that for the purposes of his argument no distinction fell to be drawn between “replacement” and “renewal”, he tended to use the term “replacement” throughout his exposition. By contrast, Mr Telfer tended to express his contrary argument by reference to a tenant “renewing” the equipment. We are satisfied that these natural usages do reflect a relevant distinction. Where equipment has been renewed, we accept Mr Telfer’s contention that Parliament cannot be taken to have intended that the original equipment had ceased to exist. On the other hand, where an item has been replaced, we see no basis for an inference that Parliament intended that the old one should notionally remain as a basis for comparison. We have had some difficulty in identifying the precise policy behind (ii) and it is sufficient to say that the language used does not disclose any clear intention to compare the state of an existing piece of equipment with some superseded equipment. A distinction between “renewal” and “replacement” can properly be drawn and would be well understood in practice, at least where the replacement was conducted as one operation and related to one identifiable item of equipment. At [76] of our earlier Note, we touched on one aspect of the problem of identification of “an item” of equipment. We are aware that it is an issue which is likely to give rise to many problems of assessment in practice but the existence of this difficulty does not appear to us to have a bearing on the present issue of construction.

[23] We think that it will be comparatively rare for the original equipment to fall out of the picture as having been wholly replaced by a new item. It is unlikely that that Parliament contemplated that a careful analysis of the history of maintenance of every item of equipment would be required to determine whether a stage had been reached when all parts had been replaced. Gradual replacement is a common part of the process of renewal and repair. We do not attempt to define the circumstances necessary to demonstrate the distinction beyond the need to use the term “replacement” in the limited practical sense of an operation involving the complete removal of old equipment and substitution of new equipment. We recognise that in practice the distinction may not always be easy to draw. The matter may go beyond a simple distinction between renewal and replacement. But, except where there has been an obvious replacement operation, if an item appears in substantially the same place and is serving substantially the same function as it always did, it will normally have be taken to have continued in existence as a piece of equipment even if there comes a stage where individual parts have been wholly replaced. If it is not in a reasonable state of repair at the date of the notice, the tenant is entitled to claim that it is no worse than it was at the beginning. There is nothing in the Act to allow a landlord to rely on there having been an intermediate stage when it was in much better order even if the landlord had brought that about at his own expense.

[24] The landlords’ reluctance to rely on a distinction between “renewing” and “replacing” may be explained by the fact that complete replacement is unlikely to be usual and the benefit derived from the distinction is not based on any identifiable balance of fairness or reasonableness. In the context of the present case, it may seem reasonable to argue that if the landlords have replaced a fence, the original one should be taken to fall out of the picture. For the purposes of (ii), to compare the old fence with the new would be comparing different items not comparing different states of the same fence. In that situation, if the present day fence is not in a reasonable state of repair, the tenant will fail under (i) and will not have (ii) to fall back on. That result may be thought to be a reasonable one because any replacement would almost inevitably have provided equipment in a better state of repair than the comparable item at the outset. However, the same could be said of most renewals. Similarly, the distinction between “replacement” and “renewal” does not distinguish between the parties who carried out the work. If it was the tenant who carried out, or paid for, the work there is no reason why he should be in a worse position so far as (ii) is concerned than a tenant who did little more than keep the old equipment in the state he found it. That does not depend on characterising the work as either replacement or renewal. The distinction is not based on an attempt to construe the relevant provision by assuming an intention of reasonableness or fairness. However, we think it a sound approach to the language of the statutory provisions. In a practical context, it can be assumed that a practical approach to the issue of identity was intended.

[25] Although we recognise the risks which arise in attempting to take this matter further without hearing submissions about specific circumstances, the need for a practical approach does gives some broad guidance. Even if substantial operations have been carried out to reinstate a piece of equipment, Parliament cannot have intended a distinction of identity to be drawn based on a careful analysis of how many old parts were used. Accordingly, we consider that where equipment has been reinstated by any process whereby any significant elements of the old item have been utilised in the new, the operation is likely to fall to be regarded as renewal of existing equipment. Thus, even a dyke rebuilt from its foundations will fall to be treated as the same as the original, if the old stones have been incorporated in the new. If a fence has been refurbished by replacement of most of its parts, the operation will still fall to be regarded as a renewal if any significant number of old posts remain in position or if existing wires or netting are still used. An example given at the hearing was of a fence based on metal, or oak, posts at critical parts. If such posts remain in position at such parts, we think that the fence would normally fall to be treated as having been “renewed” rather than “replaced”. We accept that this will involve questions of degree and there may be a stage at which the element of re-use simply falls to be ignored.

[26] But, if it is plain that the original has been wholly “replaced” there will be nothing for (ii) to bite on because the equipment under consideration under head (i) did not exist when the agreement was made. We find no justification, as a matter of construction of the language used, for any inference that a radical change of identity, such as that effected by a complete replacement, should simply be ignored for the purposes of (4B).

[27] Part of Mr Telfer’s argument was that if we accepted that renewal meant that there was nothing there to compare with, the statute “could not logically work”. But, of course, there might be several circumstances in which new equipment was added to a farm and covered by an existing PLA. Although (ii) plainly requires there to have been something there at the beginning of the agreement before it can apply, it does not follow that (ii) has an application in every case. There can be no essential requirement that an equivalent must be found under (ii) for each and every item falling under (i). If there is nothing with which to make a valid comparison, (ii) will simply not be operable in the particular situation.

Question 2. Whether it was competent to lead evidence to contradict the provisions of the probative lease in terms of which the tenant had accepted that the fixed equipment at the outset was in sufficient, tenantable and habitable condition and adequate for the purposes for which the farm was let and, if so, what kind of evidence?

[28] In terms of the lease, the tenant accepted the various items of fixed equipment “in the condition in which they now are, as evidenced by a Record to be made by the Proprietor in conjunction with the Tenant … as in sufficient tenantable and habitable condition, and adequate for the purposes for which the Farm is let”. It may be noted that we discussed the role of a record at [61] to [66] of the earlier Note and that Mr Telfer’s submissions about the absence of a record in relation to Question 3 are set out below.

[29] It was submitted, for the landlords, that the expression “sufficient tenantable and habitable condition” was effectively equivalent to being in “a reasonable state of repair” and that it was incompetent for the tenant to lead evidence to contradict his contractual agreement. This was said to be a straightforward matter of contract. Having agreed the state of the equipment, the tenant was bound by that agreement. It was noted that the agreement was probative. That tended to strengthen the argument but was not essential to it.

[30] Counsel supported the submission that “tenantable condition” at the outset of a tenancy was well understood as equivalent to “good order”. He accepted that it was not equivalent to equipment as being in “a thorough state of repair” but it did, at least, mean “a reasonable state of repair”. He referred to Gill 7.13; Rankine at p 249 and 250 and to Davidson v Loganat pp 365, 366 and 368. He referred to Wight v Newton at p 772.

[31] In support of the proposition that Mr Telfer could not lead evidence to contradict what had been contractually agreed, counsel referred to Gloagat pp 365 and 366 and to Lawson v Murray. He submitted that this decision was binding on the Court. He also referred to dicta in Bell Bros v Aitkenat pp 585, 588 and 590. Unless the lease was reduced, the tenant was fixed with his acceptance of the good order of the equipment at the outset.

[32] Mr Telfer’s main response was that, in terms of (ii) we were not concerned with the lease but with the PLA. He said that the lease itself might be evidence of some sort in relation to the state of the equipment at the start of the PLA. He did not attempt to adopt the argument touched on at [140] of our earlier Note. His main argument was that the PLA plainly came after the lease. In relation to the PLA, the tenant was not bound by the provisions of the lease. He also stressed that in the lease the tenant only accepted the equipment as being in a “sufficient” condition. “Sufficient” was a question of degree and it depended on circumstances. It was not evidence of reasonableness or otherwise. At the time, the tenant knew that work was to be done under the grant schemes. Equipment might have been sufficient to allow him to continue to farm without being in a reasonable state of repair.

[33] In response, Sir Crispin contended that it was necessary to read the lease and the PLA together. Both had been signed by the tenant on the same day. The opening provision of the PLA required the tenant to maintain the fixed equipment “in good order and condition and in a thorough and tenantable state of repair”. This justified the inference that the tenant accepted the equipment as being in good order and in a reasonable state of repair. That inference could be drawn looking at the PLA on its own. But, in any event, it was appropriate to read it along with the lease because it was a document which varied the terms of the lease.

[34] It may be noted, for completeness, that although the pleadings set out an argument based on personal bar in relation to the drains, this was not advanced at debate.

Discussion of question 2

[35] We think that it is clear that the intention of the legislation was to free tenants from what were perceived by Parliament to be unfair provisions in their contractual arrangements. We take the view that it would be inconsistent with the scheme of the new provisions to allow the means of proof of one of the statutory conditions to be restricted by the terms of the agreement in question. The reference to the state of repair when the agreement was made is unqualified and we are satisfied that the intention of Parliament was that the facts relating to the equipment at that time should be capable of being established by any available evidence.

[36] Put another way, it would be something of a circular argument to say that an agreement could be set aside if certain conditions existed but to infer an intention that proof of these conditions could be restricted by the terms of the agreement itself. We are satisfied that establishment of the statutory conditions is a matter which requires to be considered independent of the agreement which is under challenge.

[37] It follows that we do not accept that Sir Crispin’s position is advanced by the argument that the lease and PLA should be read together. If the acceptance provision had been expressly included in the PLA we would not have been persuaded that it could over-ride the straightforward provision relating to the state of the fixed equipment at the time of the agreement, as objectively assessed. We do not think the position would be any different if the provision was to be treated as included by implied incorporation.

[38] Similar considerations apply to the lease provision. The statutory terms are unqualified. The plain inference is that Parliament had in mind a state of fact to be determined objectively: see [118] to [122] of the earlier Note. In other words, the state of facts was expected to be determined by any relevant evidence. There is nothing in the Act to suggest that Parliament contemplated that the range of competent evidence would have to be limited in any way. We note the question raised in Gill 7.26 as to whether an agreement in the lease as to the state of fixed equipment can, in effect, over-ride the obligations imposed on the landlord by sec 5. We did not hear submissions on that specific point but, in any event, we are satisfied that the scope given to such an agreement should be as limited as possible.

[39] The submission for the landlords is implicitly based on the proposition the tenant had contracted not to attempt to assert the true state of the equipment in any context; accordingly, that the effect of the contract is to qualify the statutory provision by preventing the tenant leading evidence of the true state of affairs. We are not persuaded that this was the effect of the acceptance provision.

[40] As Mr Telfer pointed out, the word “sufficient” is important. It is a qualification which depends on circumstances. It inevitably raises the question: “sufficient for what?” We understood Mr Telfer to suggest that it meant “sufficient for the tenant to take occupation and make a living”. Whether that was realistic would depend on the farming methods he proposed to adopt at the time. For example, we have heard in this case that, where there are hefted flocks on adjacent farms, fencing may not be essential. A tenant might be prepared to take such a farm with fences in poor condition. The state of equipment would be reflected in the rent he was prepared to pay. If all that was meant by “sufficiency” was “sufficient to persuade the tenant to take the lease at the stipulated rent”, the tenant would not be precluded from saying, for other purposes, that there were no effective fences.

[41] We accept Mr Telfer’s argument as far as it goes. But we consider that underlying it is an acceptance of the equipment as sufficient to meet or discharge the landlords’ obligations at the time of the lease. That was essentially what the parties were intending the acceptance provision to cover. The parties would be aware that there were legal conditions - whether under the prevailing Act or at common law - which imposed some responsibilities on the landlord. Put broadly, we are satisfied that the purpose of an acceptance provision expressed in terms of “sufficiency” was to prevent the tenant contending that the landlord had failed in relation to his obligations as landlord. Where there is any ambiguity about such a provision it is properly to be read in the sense least advantageous to the party which drafted it.In the present case, it can be understood as limited to preventing the tenant from making any claim against the landlord based on deficiencies in the state of the equipment.

[42] The present context does not raise any challenge to the landlords’ compliance with his obligations. It is a context outwith the contemplation of the parties at the time of the lease. We are satisfied that the acceptance provision does not bind the tenant in relation to the wholly different context of the 2003 Act. That was not within the reasonable contemplation of the parties in 1971.

[43] In any event, we accept Mr Telfer’s submission that the statute is not concerned with the state of the equipment at the time of the lease but with the equipment at the time of the agreement. There is no doubt that they were very close in time but equally there is no doubt that they are not to be treated as contemporaneous. It was very clearly the parties’ intention that the agreement be a proper “post lease” agreement. Although the lease was concluded on 29 March 1971 and the PLA was executed by the tenant on that date, the PLA was not formally concluded until 3 April of that year.

[44] It appears to us that the two agreements must be treated as quite distinct. An agreement for the purposes of the lease would not necessarily bind the tenant for the purposes of a different agreement. We are satisfied, for example, that the tenant would not be prevented by the acceptance provision from proving that the equipment was defective at the later date by reason of something which happened after the lease.

That simply illustrates the important point that the contractual acceptance relates to the time and purposes of the lease. That was sufficient for the purposes of the landlord at the time and was accepted by the parties. There was no need for it to go further and, whatever its implications for the purposes of construction of the PLA itself, we find no justification for treating it as regulating the effect of the new statutory provisions.

[45] Mr Telfer agreed that the acceptance provision might be an important piece of evidence. The terms of the lease showed that the tenant accepted the equipment as in tenantable condition on 29 March. It would need compelling evidence to outweigh that and establish that it was not in tenantable condition on 3 April. But, that raised issues of comparative weight of evidence. The lease did not preclude competing evidence.

Question 3. Whether an obligation to make payment in respect of work which was outstanding at the date of nullification of any PLA ceased to be enforceable thereafter and, in particular, whether it ceased to be enforceable where it had been the subject of legal proceedings prior to that date?

[46] It is appropriate to take, as separate point under this head, Mr Telfer’s argument made by reference to the provisions of section 5 and 6 of the 1949 Act. He cited these provisions by reference to Connell at pages 108 and 109. He accepted that the relevant provision had been repealed and that the present law was found in sections 44 to 47 of the 1991 Act. He made some reference to the contrast between the two sets of provisions but stressed his submission that the significant factor was that from 1970 both landlord and tenant were aware that, in the absence of a record, there could be no claim against the tenant for dilapidations at the end of the lease. We understood him to say that the position at the end of a PLA was similar. He referred to the fact that the termination of a tenancy meant termination of the PLA. He appeared to contend that dropping the PLA had the same effect as the ending of the lease. In any event, we understood that the main proposition he derived from this reference to the statutory material was that the landlords were not entitled to claim for what were in effect dilapidations when there was no record.

[47] Sir Crispin’s response was that the reference was simply irrelevant. The provisions cited had to be understood against the background of the common law. During the currency of a lease the landlord, at common law, had a remedy of specific implement but, after termination, he was limited to the remedy of damages. The 1949 Act had changed the position at termination. However it did not affect the landlord’s remedies during the currency of the lease. Accordingly the provisions in relation to the claim at termination had no relevance to attempts to end a PLA while the lease remained in place.

[48] It is sufficient for us to say, in relation to this argument, that Mr Telfer was unable to explain to us what precise bearing the provisions on termination of a lease had on the questions before us. We accept the landlords’ response that the situation created by the new provisions was quite distinct. Remedies or restrictions at termination are not necessarily applicable to the rights and obligations of parties during the currency of the lease: Gill para 31.01.

[49] We return to the landlords’ submissions in relation to the substantive question. Sir Crispin started by observing that the response to this question was also affected to some extent by considerations arising in relation to Question 4. It was accepted that if all the fixed equipment was in a reasonable state of repair at the time of the notice to nullify the tenant would be entitled to nullify. He suggested that the potential difficulty would only arise if the Court was to construe the reference to equipment being in a reasonable state of repair on a broad basis so that the provision (i) was satisfied even if, for example, one or more items required attention. He submitted that the obligation under sec 5(2)(a) would become enforceable in law the moment that the fixed equipment in question was worn out by reason of natural decay or fair wear and tear. If that obligation on the landlord had been transferred to the tenant under a PLA then it became enforceable at the same time. The fact that it was enforceable at that point of time did not mean that the parties required to have taken steps to enforce it. It was enforceable in law. He submitted that it could not have been the intention of Parliament that a tenant should be able to write off a past obligation that had arisen prior to the service of the notice, merely by serving the notice. If the PLA could be nullified it could only be nullified for the future. Nullification could not affect obligations that had already arisen and become enforceable. That, he said, was so even if no demand had been made to enforce the obligation.

[50] Sir Crispin stressed that this was an important issue in the case. The landlords had made plain their position that if the tenant was prepared to pay for work outstanding at the 22 October 2007 they would agree that the PLA could be nullified from that date. We heard some discussion as to the implications of this offer. We think it plain that the landlords would be limited to work identified in the pleadings as outstanding at that date. The tenant would be able to challenge the adequacy of the work done and the reasonableness of the claims for payment. However the terms of any offer in settlement are, of course, a matter for the parties.

[51] Sir Crispin relied on two principles of construction. An Act that purported to take away vested rights should be strictly construed. The landlord had rights under the PLA. The Act intended that these should be removed at some point but if there was any doubt about the impact of the legislation, it fell to be construed restrictively: Stair para 1131; East Coast Amusement Co Limited v BTB at page 71E. Further, there was a presumption against an Act having retrospective effect; Stair para 1189 and 1190.

[52] He submitted that even if a tenant could nullify a PLA on a broad approach to the concept of fixed equipment, the landlord should still be able to get the tenant to contribute to the renewal or replacement of any item which was worn out at the date of nullification. He suggested that such right could only be lost by prescription.

[53] In any event, where a landlord had given notice that the tenant was required to fulfil an obligation or the tenant had given notice to the landlord that he required works to be carried out for which he was due to make payment to the landlord, nullification of the PLA should not act retrospectively to take away rights arising from these obligations. That was particularly where the landlord had raised court proceedings in relation to the obligations prior to the notice of nullification.

[54] He submitted that it could not have been the intention of Parliament that a tenant could avoid obligations by serving a notice nullifying the PLA. For example, if the Court held, on a broad view, that the fixed equipment was in a reasonable state of repair even though one particular item needed renewal, it could not be right that the obligation in respect of that item should fly off by a nullification where a demand to renew that item was outstanding. He gave as a specific example a situation where a landlord had carried out work under a PLA and had, accordingly, brought the equipment to a reasonable state of repair. If the tenant gave notice before the landlord claimed payment from him this could not have the effect of nullifying the obligation. Similarly, he argued that if the tenant had made a demand, as had happened in the present case, and the landlord agreed to the demand subject to confirmation that the tenant would pay and that litigation had followed in relation to the respective liabilities of the parties, it could not have been the intention of the legislature that the landlord would lose his rights in these circumstances.

[55] It was submitted that the demand made for action in relation to any particular piece of equipment should be seen to crystallise the obligation even if the extent of the obligation had to be determined thereafter by the Court.

[56] Counsel sought support for these submissions by reference to BRB v Strathclyde RC. Where court proceedings were required to break a time limit for prescription it was sufficient that bare proceedings had been raised even if they did not meet the test of relevance. This was similar to a demand to crystallise the obligation. In the present case, if a demand for action by the tenant was not enough, then the raising of the application SLC/101/07 had had the effect of crystallising the obligation. It could not thereafter be rendered unenforceable by a nullification of the PLA.

[57] In answer to the question of whether his submission covered the situation where the tenant had no immediate obligation to pay because his obligation was expressed in terms of a liability to contribute, counsel said that it was sufficient that there was an underlying contractual commitment in relation to the work in question. It was not necessary that there be an obligation then due and prestable.

[58] In response Mr Telfer again placed his faith on the provisions of the statute. The Act said that the agreement was to be nullified. That meant that it stopped having effect. The tenant did not have any liability in respect of the work to be done at the time of nullification. His liability only arose once the landlord had carried out work and he had a responsibility to contribute. Sir Crispin appeared to argue that the tenant required to take responsibility for the landlords’ obligations. That could not be right.

[59] Mr Telfer pointed out that it would be dangerous to attempt to change the date specified in the legislation. This would allow landlords to specify work which had to be done. Anything they thought required renewal could then be founded on. They would be able to look for anything they thought necessary in order to prevent the tenant dropping the PLA.

[60] We had difficulty in following parts of Mr Telfer’s submission. One example was his argument in relation to a proposition that there was a logical inconsistency in the contention that the tenant’s obligation arose whenever a need to renew equipment could be identified. He said that if this arose at the outset and nothing had changed, the tenant would expect to rely on (ii). If he was entitled rely on the fact that the equipment was no worse than it had been at the outset, it was inconsistent to say that he had an obligation in respect of such equipment. The propositions could not co-exist. He appeared to conclude that if the obligations were carried forward as contended for by Sir Crispin a tenant would never be able to rely on (ii). He did not attempt to address the distinction between nullification of the PLA for the future and the possibility of existing obligations remaining enforceable.

[61] He contended that there had been no relevant legal proceedings. The proceedings were not to enforce any obligation by the tenant. They were to determine what was to be done. The Court had found that these proceedings were not necessary. It was very important to identify the point at which the obligation arose. The tenant’s obligation was to pay for renewals once they had been carried out. He had not tried to enforce the landlords’ obligations. In his letter of 9 June 2005 he had simply informed the landlords about respects in which the equipment did not comply. He stressed that there was nothing in the Act which allowed the PLA to continue to be effective after the nullification. The obligation on the tenant was dependent on the PLA. If it was nullified there was nothing to enforce. He returned to the proposition that, if there was no record, there was no obligation on a tenant to pay for dilapidations. If the landlords were able to look at things that required to be done after they received notice this would, in effect, give rise to a liability on a tenant to pay for dilapidations. Any attempt to veer from the statutory date would be impinging on what the parties had been assuming: namely that there was no claim for dilapidations in absence of a record. He pointed out that if the Court was to agree that it was enough for a landlord to have an intention to do the work, that would effectively shift the date of when the agreement could be nullified.

[62] Mr Telfer pointed out that he did not accept the proposition that an obligation was triggered immediately fixed equipment was worn out. He submitted that the landlord’s obligation was there from the start. The equipment did not need to be completely worn out to require it to be renewed. There was an underlying obligation to provide equipment in a thorough state of repair and to replace or renew as necessary. There would be no point in a specific statutory date if the position was that the landlord could ask for things to be done because they were said to be outstanding at that date. Mr Telfer stressed that he had paid for everything which was due up to the 22 October 2007.

[63] There was some discussion of the tenant’s position if work was in progress. He accepted that he would probably have been prepared to pay for such work. That was because it could then be seen that the landlords positively intended to carry out the work. However Mr Telfer made clear his position that this was academic. There was no relevant work in progress at the date in question. It would not be uncommon for a landlord to agree that certain work was needed but, perhaps, to say that it would be done when economics allowed. This gave no guarantee that it would ever be done. Certainly such an understanding or promise did not reach the stage of any obligation by the tenant. Put shortly the tenant had no obligation as at 22 October 2007. If he was able to nullify the agreement under the provisions of (i) or (ii) that was sufficient.

Discussion of question 3

[64] Perhaps unsurprisingly, the submissions for the landlord did not attempt to answer the question either by reference to the language of the PLA in the present case, or by analysis of the language of the statute. Sir Crispin relied heavily on the proposition that it could not have been the intention of Parliament that a tenant be relieved of obligations outstanding under the PLA. But, of course, Mr Telfer did not suggest that dropping the PLA with effect from a particular date would have any effect on obligations which were already enforceable. The question related to work which required to be done but in respect of which he had no obligation to do anything until the landlords attended to the work. There was no attempt on behalf of the landlords to analyse the nature of any particular contingent obligation to demonstrate that it was to be treated as outstanding in any relevant sense. It was not suggested that there were any relevant obligations resting on the tenant and prestable at 22 October 2007. It should be said for completeness that there was, of course, a claim that certain work was required due to failure to repair but any such claim would not be affected by the present proceedings. Mr Telfer had been billed for other items in respect of which he had never disputed his liability. It was not suggested that any part of the new provisions could be construed in such a way as to extend the scope of contingent liabilities which might, in some circumstances, rest on the tenant.

[65] In approaching an Act of Parliament, a court is concerned, not with the intention of Parliament derived from assumptions as to public policy or reasonableness, but solely with the intention of Parliament as ascertained from the language used in the Act. In the present case, it is plain that the Act has no express over-riding provision dealing with the implications of a PLA being nullified and we have found no basis upon which any such provision might be inferred.

[66] It can be assumed that Parliament would not have seen fit to enact legislation without consideration of the practical issues liable to arise. As no attempt has been made to provide for the foreseeable variety of practical matters, it must be concluded that Parliament was satisfied that a very broad approach was appropriate. As discussed at [133] of our earlier Note, it may have thought it better to make some broad provision rather than ignore the perceived problem altogether. Parliament may have assumed that the provisions of (i) were adequate for the purpose and that if the equipment was in a reasonable state, there would normally be no significant outstanding liability.

[67] Indeed, Sir Crispin suggested that a significant problem would only arise under (i) if our answer to Q4 was that the state of equipment was to be viewed as a whole. If the PLA could not be dropped when work was required to put any piece of equipment into a reasonable state of repair, there would be no great difficulty in cutting off the tenant’s liabilities at the date of the Notice. But if the Court had to consider the fixed equipment as a whole, the fact that there was work to be done on only one item, such as renewal of a section of dyke at a cost of, say £5000, might not prevent the tenant from establishing that the fixed equipment as a whole was in a reasonable state of repair. If the tenant’s argument was correct, the landlord might be left to bear the cost of that work although he would have been able to recover it if the PLA had remained in force. It was suggested that this could not have been the intention of Parliament.

[68] For the reasons discussed in relation to Question 4, we have concluded that the references to fixed equipment in subsec (4B)(b) require consideration of all the individual items of fixed equipment covered by the agreement in question. This conclusion might resolve most of the problems potentially raised for the landlord in the context of (i). However, similar issues appear to arise in situations where a tenant is able to rely on (ii).

[69] As we have seen, Parliament has provided a simple tool to cover a variety of situations. The question of whether a tenant is entitled to nullify an agreement at a specific date is to be determined by an objective test dependant on the state of the equipment at two specified dates. If the circumstances fall within (i) or (ii), the agreement will fall to be treated as nullified from the date of the Notice. It has not provided for nullification to be dependant in any way on the terms of the agreement, on the extent to which the agreement has been implemented, or on any issue of fairness or reasonableness except in so far as relating to the actual state of the equipment.

[70] Although subsection (4A) provides simply that the specified type of agreement “shall be nullified”, the circumstances in which that may happen provide expressly for it to be nullified “as from a date specified”. It is clear from these provisions that the intention was that the agreement would remain in force to control the rights of parties as they stood until the date specified in the Notice but that it would have no effect thereafter. We heard no contrary submission. Accordingly, it appears to us that the question falls to be answered by reference to the specific provisions of the agreement in question and the nature of the obligations resting on the tenant at, or immediately before, the specified date.

[71] Sir Crispin did not attempt to address the matter by reference to the specific terms of the agreement but Mr Telfer made clear his contention that the circumstances were such that he had no outstanding liability. For example, in relation to fences, the duty was on the landlord to renew when they were worn out by natural decay and fair wear and tear. At that point there was no obligation resting on the tenant. His liability only arose once work was done by the landlord.

[72] Plainly the tenant had contingent liabilities under the agreement from its inception. Sir Crispin said that it was not necessary that the obligations be prestable. But, if the obligations could not have been enforced by action at the date of nullification and plainly are not enforceable under the PLA after it has been nullified, it was not established to our satisfaction that the contingent obligations under the PLA were of any relevance. We think the question must be answered by having regard to what action the landlords might have been able to raise against the tenant at 22 October 2007. We ignore, for the moment, the dispute as to whether the state of any of the items of equipment was due to lack of timeous repair. If the equipment fell to be renewed by the landlord, we are not yet persuaded that the landlord could have made any claim against the tenant.

[73] We think it sufficient, for present purposes, to answer this question by saying that it depends upon the terms of any particular provision in the agreement. For example, our clear view is that the tenant had no obligation on 22 October 2007 relating to a need to renew fencing worn out by natural decay or fair wear and tear. There was no enforceable obligation resting on the tenant at that time. It was for the landlords to carry out the work. At that stage, the tenant had an obligation to pay.

[74] Something was made of the fact that Mr Telfer seemed unable to provide a clear answer to the question of his liability if the landlords had actually started work on the fences. He seemed willing to concede that he might have had to pay but he could not explain why. However, that situation had not arisen and his personal views are of no significance in relation to the legal position. He may well have felt that as a matter of common sense or fairness that was a reasonable position. But Parliament has made no provision for such considerations and we cannot rewrite the Act.

[75] We have not been persuaded that the raising of court proceedings is, in itself, sufficient to have a bearing on the matter. The authorities cited in relation to the provisions of the Prescription and Limitation (Scotland) Act 1973 do not appear to us to take the argument further. That Act makes explicit provision for circumstances which interrupt the limitation period. The issue there is whether what was an enforceable obligation has ceased to be enforceable due to the passage of time. Dicta in that context are not a reliable guide to the question of when an obligation becomes enforceable. In the present case, the litigation relied on by the landlords was litigation to determine the nature and extent of their liabilities. No specific feature of it was relied on as showing that any enforceable obligation had arisen in relation to the tenant.

[76] We recognise, of course, that the landlords saw the litigation as a necessary preliminary to attempts to enforce any obligation against the tenant. But the same might be said of their carrying out the work. We accept Mr Telfer’s argument that until the work was done, he had no liability to do anything under the PLA. The litigation was simply a preliminary stage in the carrying out of the work. Sir Crispin did suggest that the litigation was necessary to establish the “extent” of the obligation. But that is a different issue from the existence of an obligation. As in SLC/212/04, a party to a lease might raise proceedings to determine the extent of potential liability under a provision in an agreement, when actual enforceable liability might never arise or not arise for many years.

[77] Mr Telfer made a point that it was inconsistent with the existence of (ii) to contend that the tenant was obliged to carry out work in relation to equipment which was no worse than it had been at the beginning. We understand the sense of his position. If Parliament thought that special provision was needed to free the tenant from his obligations where these were obligations which arose right from the start of the contractual agreement, it could hardly be imagined that they were to be taken to intend to imply that such obligations were to be specially enforceable. A distinction can of course be drawn between a tenant being free from the agreement in the future, and freedom from accrued obligations. It appears to us that the stipulated situation or condition relates only to the former. The Act simply does not deal with obligation in existence at the date of nullification. It is necessary to have regard to the particular terms of the PLA in question to determine what obligations were enforceable under it at that date.

Question 4. Whether, in considering the state of repair of fixed equipment, it was appropriate to have regard to the fixed equipment covered by the agreement as a whole or not and, in particular, whether it was appropriate to add to, or qualify in any way, the terms of paragraph [117]?

[78] Para [117] of our earlier Note was in the following terms: “Accordingly, it is only necessary to have regard to equipment covered by the provisions to be dropped. A robust approach would require us to look at all that equipment as a whole; to look at the whole equipment covered by the relevant agreements and decide whether it was in a “reasonable” condition. Just as a fence can be said to be in a reasonable state of repair even if some stobs need replacing and some staples are missing, so the whole relevant equipment might be said to be in a reasonable state of repair even if some items needed attention.”

[79] It was the landlords’ submission that both (i) and (ii) clearly required each item of fixed equipment to be in a reasonable state of repair. What was to be defined as an item would be a question of circumstances. Parts of a building might fall to be described as separate items. The use of the plural showed that it was not the intention of Parliament to view matters globally. A broad, or robust, approach to the reasonable state of the repair of each item was appropriate but this did not mean that it was necessary to look at the state of the equipment as a whole. For example, if most of the equipment was in good repair that might allow some equipment to be accepted even if it was in fairly poor repair. But if any item was positively worn out it could not be said that the equipment was in a reasonable state of repair within the meaning of the statutory provision. Sir Crispin stressed the context. It was reasonable to require the tenant to have fulfilled all his contractual obligations before being freed of obligation for the future. Parliament was changing obligations which the parties had agreed. If the intention was to make a fresh start, it was reasonable to think that Parliament would expect that all the equipment was, indeed, in a reasonable state of repair. He referred to [118] of the Note. If the tenant had an outstanding liability to carry out work or contribute to the cost of work, it would not be reasonable to have a fresh start.

[80] Although he could understand the difficulty of applying the provision where an agreement covered all the many items of fixed equipment on a farm and some would, inevitably, be more in need of repair than others, a proper construction of the Act required all items to be in a reasonable state of repair at the date given in the Notice. Such a construction would, he suggested, avoid most of the problems raised in course of the day’s debate.

[81] Mr Telfer said that he did not propose any change to the way matters had been expressed at [117] of the earlier Note. He did point out that he thought that it was not appropriate to consider only the fixed equipment covered by the agreement. The Act referred to fixed equipment without any such limitation. But, he understood that the Court took a different view. He said that a robust approach was clearly necessary. Otherwise, where could you draw the line? Every identifiable cost could be regarded as “significant” when money was tight.

[82] He objected to references to the tenant “escaping” from liability and we accepted that this might convey a misleading impression. Parliament has provided that the tenant is to be free of a liability which he would otherwise have had in terms of his contractual agreement provided certain conditions are satisfied. A tenant is entitled to take advantage of the new provisions to bring about that result.

[83] Mr Telfer stressed that a normal PLA would cover hundreds of pieces of equipment. It would cover thousands of metres of fencing. If the landlord could rely on only one item not being in a reasonable state of repair, no tenant would ever benefit from the new legislation. If the landlords were able to scrutinise every item when they received a notice – as had happened here – they would always be able to find something needing attention.

Discussion of question 4

[84] It may be said, at the outset, that the answer to this question may not be of critical importance in the present case. Whatever the state of the fixed equipment on 22 October 2007, Mr Telfer contends that it was no worse than in 1971. As the same expression is used in (i) and (ii), we are satisfied that the same approach to construction is required in each case. Accordingly, if Mr Telfer fails under (i) because some identifiable items were not in a reasonable state of repair on 22 October 2007, he will succeed under (ii) if he can show that these items were not in a worse state of repair than they were on 3 April 1971. However, this question is of fundamental importance to the working of the new provisions as a whole. As discussed above, in relation to Question 1, it is necessary to approach questions of construction by having regard to the whole range of agreements which might reasonably have been expected to be covered by the new provisions.

[85] In our earlier Note, at [117], we said that a “robust” approach would require us to look at the equipment as a whole. We did not express a concluded view as to whether such an approach was appropriate. At that stage we were addressing the question of which items of equipment were to be considered. We held that (4B) was only looking at the equipment covered by the particular PLA. In many cases, that would be all the equipment on the farm but that would not always be the case. Difficult practical questions may arise as to which equipment falls within the scope of the present agreement but it will be that equipment and not all the equipment on the farm which will have to be considered for the purposes of (i) and (ii) in the present case. We now have to consider whether the intention of the Act was to cover the relevant equipment as a whole or to require attention to each individual item. We accept that the new provisions are ambiguous on that point. The expression “buildings and other fixed equipment” would be open to the construction that every last piece of equipment required to be in reasonable state of repair or to the construction that the fixed equipment was to be considered as a whole.

[86] A construction which required attention to each piece of equipment would be consistent with the traditional understanding of reference to fixed equipment in the context of the Act. Although no express mention was made of it in the debate, parties would be aware of the terms of our decision in SLC/212/04, a previous dispute between them, reported at 2005 SLCR 51. At p 70 we discussed the landlords’ submission in that case that fixed equipment should be viewed as a totality and we found against the landlords. We said that we were not aware of “any concept of fixed equipment as a totality having been applied in any case in Scotland relating to repair obligations in an agricultural context”. We went on to say that “although not free from difficulty in its application, the practice has been to assess the repair obligation by reference to identifiable individual items of fixed equipment”. It may be added that we are satisfied that the provisions of sec 5(2) have always been understood in this sense. It is against that background that the new provisions must be construed. We would not expect Parliament to use an expression in one subsection with one meaning and in another with a different meaning unless the circumstances were such as to point clearly to an intention to use it in a changed sense.

[87] We are not persuaded that there is anything in the context of either (i) or (ii) to point clearly to an intention to refer to fixed equipment as a totality as opposed to a reference to all the items of fixed equipment. Although, we do not think that any great assistance is provided by close analysis of the statutory language, the separate, explicit reference to buildings as well as fixed equipment appears to us to give no support to the proposition that Parliament had in mind the concept of fixed equipment as a whole.

[88] The idea that all the items were, individually, to be in a reasonable state of repair would fit the idea of a fresh start. It is consistent with a straightforward linguistic approach. We well understand the force of Mr Telfer’s submission that in a practical sense it might be difficult to ensure that every last item was in a reasonable state of repair. In practical terms, a tenant would work on a maintenance cycle. In a normal farm with many items of fixed equipment it would not be easy to ensure that every last item was in good repair. Sir Crispin attempted to address that problem by accepting that a broad or robust approach would be appropriate. If some items were not in a very great state of repair, they might be overlooked. But he contended that if anything was positively worn out it could not be overlooked. In that situation the fixed equipment would not be in a reasonable state of repair.

[89] We fully accept the need for a practical approach. However, a desire to be practical cannot, of itself, govern the issue of construction. It might be that Parliament did not have a full awareness of the problems of keeping a big farm in repair. It is possible that it simply thought that a tenant would be able to put a special effort into getting equipment in good order before the date in the Notice. It has not provided for the difficulties which arise where the work was to be done by the landlords nor the risk of a diligent tenant being thwarted by adverse events, such as the effects of a storm.

[90] We accept that there was a fundamental intention to benefit tenants and that an approach which had regard to the practicalities of a repairing cycle might be thought to confer a greater benefit on tenants than a narrower approach. But, the context is not one of regulating the practical day to day working of the farm but of the setting aside of contractual arrangements negotiated by the parties to regulate their affairs.

[91] As we have seen, the simple approach taken by Parliament may have the effect that a tenant will be unable to have a PLA nullified in circumstances where it might have seemed reasonable that he should be able to do so: [131 to [138] of our earlier Note. As we observed in relation to Question 1, adverse consequences for a landlord may include the risk that he will lose the benefit of the contract even in relation to the tenant’s existing obligations. A tenant will have paid rent - perhaps for many years - fixed on the assumption that the tenant has onerous commitments and a landlord may find these have become unenforceable. A construction which required every piece of equipment to be in a reasonable state of repair would tend to minimise that particular risk. We think that this approach is consistent with a proper approach to construction when rights are removed retrospectively.

[92] When regard is had to the full implications of looking at the equipment as a whole, it becomes clear that it does not, in fact, provide a robust approach in the sense of being one which is capable of being easily applied in practice with tolerably consistent results. Looking at matters as a whole invites attention to fractions or percentages. The approach would require us to look at the proportion of equipment which was in a reasonable state of repair as opposed to that which was not. But this raises a number of questions. Is the percentage to be assessed by reference to the value of the whole fixed equipment in question or, perhaps, to the number of separate identifiable items making up that totality of equipment? In the context of maintenance obligations it might be more appropriate to have regard to the number of items which would be expected to need attention at any given time or to the cost of a typical annual maintenance programme. It would, on any view, require consideration initially to be given to the state of individual items. At any given time the bulk of the fixed equipment on the farm would be expected to be in a reasonable state of repair. The focus of attention would not be on the equipment as a whole but on items needing renewal. Parliament was dealing with a situation where the existing contractual obligation on the tenant was to effect necessary replacement or renewal of all the relevant items of equipment. In that context, it would be quite reasonable to require performance of current obligations to be up to date.

[93] Construing the reference to fixed equipment as a reference to the individual items of fixed equipment might seem unreasonable from the viewpoint of a tenant. There was some discussion of examples. If, say, 90% of the fixed equipment was in poor repair at the outset and the remaining 10% was in a reasonable state of repair, the items in poor repair might well be attended to first. There might come a time when they were in thoroughly good order but the other 10% had gradually slipped into disrepair. It was suggested that in such a situation it would be reasonable that the tenant should be able to rely on (ii) as it could not be said that the buildings and fixed equipment were in a worse state of repair than they were at the time the agreement was made. But, it is important not to lose sight of the context. The context is a provision which would allow the tenant to set aside a contract in terms of which he had accepted an obligation to maintain all the equipment covered by it. If the contract remained in place, there is no doubt that he would have an obligation measured by reference to each individual item. The landlord could compel performance in respect of the outstanding 10% and it would be no answer to say that he had complied with his contractual obligations in respect of the remainder of the equipment. Plainly Parliament wished to benefit the tenant for the future but there is no self evident reason why it should have intended to free him from his current obligations. As we have seen, in relation to Question 3, the extent of the current obligations will depend on the terms of any specific PLA, but that is a quite separate matter.

[94] It does appear that Parliament may have had in mind the idea of a fresh start. If a new rent has been fixed and if the fixed equipment is all in reasonable condition, there may be expected to be no great prejudice to either party if the repairing and renewing obligations revert to what was laid down in sec 5(2). However, Parliament did not express matters in terms of a fresh start or in terms of compliance with the tenant’s obligations under the PLA. The Parliamentary test is an independent one. It is an objective test. The test is whether the equipment in a reasonable state of repair.

[95] We are satisfied that the approach of looking at all the items of equipment individually comes closer to providing a fair fresh start than the alternative approach of looking at equipment as a whole. An approach which requires consideration of all the separate items may well give rise to some difficulties of assessment – see [22] above - but it is likely to be a clearer and more workable test than one which would require an overall assessment of the state of individual items to be weighed against the state of all the other items covered by the agreement.

[96] In short, we conclude that the state of the fixed equipment is to be assessed by looking at the individual items making up the relevant fixed equipment. We are satisfied that in the context of the range of the fixed equipment likely to be covered by any PLA it is appropriate to apply a very broad approach. We accept that Parliament must have been intending to address issues of substance. The expression “reasonable state of repair” can be considered broadly. Even if some parts of the fixed equipment are worn out, if they are minor parts, we accept that, in the context of this provision, they can be ignored. But, if there is any significant amount of work to be done to put any individual item into a reasonable state of repair, that will normally prevent the “buildings and fixed equipment” from being in a reasonable state of repair within the meaning of (i).

Implications for the present case

[97] Although the onus of establishing (i) rests with the landlords, they are entitled to rely on the tenant’s own averments and admissions. In the circumstances of the present case we are satisfied, on the basis of the admitted facts and our conclusion in relation to Question 4, that the fixed equipment was not in a reasonable state of repair at 22 October 2007. There is no dispute that a significant length of the fence at Duntercleuch was completely worn out. Its absence gave rise to considerable difficulty for the tenant. The tenant’s sheep were free to move onto, and establish themselves on, adjacent land. The cost of the outstanding work was claimed at £21,666.80. Mr Telfer challenges that figure but, if we understand his position correctly, he accepts a cost of £14,320 as being a reasonable figure for the work actually undertaken.

[98] It may be noted that in addition to this fence, the tenant, in the letter of 6 June 2005, had identified some 19 items as needing attention. We understand that his present position is that we should not look at that letter in the context of the present case as it has not been lodged as a production. In any event, he asserts that he was not actively seeking to compel the landlords to carry out these works. We encourage the view that in the complex inter-relationship of the various applications between the parties it should not be assumed that a production in one case will be available for consideration in another. But, we cannot push this too far. The terms of that particular letter are familiar to both parties and to the Court. It sets out items of fixed equipment which were said by the tenant to be beyond repair and to need renewal. However, we have not yet been persuaded that the more significant items on the list were covered by the relevant provisions of the PLA and we leave the letter out of account for present purposes. It is sufficient to say that we are satisfied that the admitted state of the fencing provides an adequate basis for us to determine that sufficient work was outstanding to mean that the relevant fixed equipment was not in a reasonable state of repair within the meaning of (i) as at 22 October 2007.

Decision

[99] It is appropriate to summarise our answers to the four questions in more formal findings or determinations

[100] We have concluded that the nature of work done on fixed equipment between the date of the agreement and the date in the tenant’s notice is irrelevant to the question of a tenant’s entitlement to nullify or set aside a PLA agreement. It does not matter who paid for the work. The test of entitlement depends on objective assessment of the state of particular items of equipment at the two dates.

[101] If an item of equipment, present at the date of nullification, was not present at the date when the agreement was made, (ii) will have no application.

[102] Even if an item of equipment, present at the date when the agreement was made, has been substantially renewed before the date of nullification it will normally fall to be regarded as the same equipment for the purposes of (ii).

[103] If an item of equipment, present at the date when the agreement was made, has been wholly replaced, it will not be available for comparison for the purposes of (ii).

[104] The tenant is not constrained by the terms of the lease in relation to the evidence he can lead to show the state of equipment at the time of the PLA.

[105] Whether, in relation to work outstanding at the date of nullification, the tenant had any obligation prestable after nullification is a question which depends on the terms of the agreement in question. Where a tenant has an obligation which might have been enforced immediately before nullification, that obligation will continue to be enforceable. But, there is nothing in the Act which would allow the agreement to remain effective after nullification and the mere fact of litigation over aspects of the parties’ obligations will not, of itself, create an obligation.

[106] In considering the state of repair of buildings and fixed equipment it is necessary to have regard to each individual item. Although a broad approach to the question may have been intended, that approach must have regard to individual items. Where any significant item is not in a reasonable state of repair, it cannot be said the the fixed equipment is in a reasonable state of repair for the purposes of subsec (4B) (b)(i).

[107] When considering (ii) it is necessary to carry out a direct comparison of individual items. In broad terms, if an original item has been replaced by a radically different piece of equipment, (ii) will not come into play in relation to that particular equipment. In other words if such a piece of equipment is not in a reasonable state of repair there will be nothing with which to compare it.

Procedure

[108] Although we are satisfied that the admitted state of the fencing prevents the tenant from coming under (i), that is not sufficient to deal with the whole question of (i). The alternative offered to a tenant under (ii) arises where the landlord has established that fixed equipment was not in a reasonable state of repair at the nominated date. Mr Telfer intends to establish that the items which did not meet the test of (i) are nevertheless in no worse a state of repair than they were at the start of the PLA. The landlords accept a need for a robust approach. It is necessary to have a clear understanding of what specific items of fixed equipment the landlords rely on as not being in a reasonable state of repair so that Mr Telfer knows precisely which items he needs to lead evidence about if he is to discharge the onus of proof in relation to (ii).

[109] We determined, in the application SLC/212/04, that clause FIRST of the PLA did not transfer any general obligation to the tenant to carry all work of replacement and renewal on behalf of the landlords. It is not all work which might have been required on the farm which will be relevant to (i). For example, it is not clear that claims about the Glenim Road or the Coach-house roof are of relevance to the present application and a number of other items fall into that category. It may be that the main emphasis will be on the obvious items - being parts of the fences, dykes and drains. But, the landlords also make reference to pre-painting repairs.

[110] The landlords have produced a “Review of fixed equipment” and a “Table of Works” and they make specific reference to certain pre-painting work. It is possible, by close study of the documents, to identify most of the items which might fall under relevant parts of the PLA but it is difficult to be confident that this produces a full picture of the landlords’ contentions. We recognise that production of any further table or tables will give rise to further expense but we consider this justified in the interests of clarity and simplicity.

[111] We think it appropriate to require the landlords now to lodge a Minute setting out the parts of the PLA which they accept as falling within the scope of 4A and setting out the items of equipment which they say were not in a reasonable state of repair at 22 October 2007. Without expressing any view as to onus, we think that it might normally make pleadings more straightforward if landlords were given an opportunity to advance an argument that a particular item did not exist when the agreement was made, as a defence or response to a tenant’s attempts to rely on (ii). However, the parties may have a good understanding of each others’ positions in the present case and the landlords have already set out detailed averments as to work done. Much of this is expressed in terms of “renewal” and may require to be reconsidered in light of our determinations above. The landlords should now set out explicitly any such items which they will assert are items which did not exist in April 1971.In respect of each item they should set out explicitly what they seek to identify as the relevant unit and why it is that they contend that it was not in a reasonable state of repair as at 22 October 2007. We hope that in light of the acceptance of a need for a robust approach to matters of detail, they will not find it necessary to include all items from the previous lists. However, that will be a matter for them.

[112] Once the landlords’ position has been clarified in this way, Mr Telfer will be asked to set out his response to each item and, where he asserts that it was in an equivalent or worse state at 3 April 1971, to give detail of the basis upon which this assertion is made. We think that his existing averments, for example, at p 25 provide the type of detail required but it would be preferable to have this material matched explicitly with the items to be set out by the landlords. It is to be hoped that there will be little need for formal adjustment. Once these matters have been further clarified, we shall determine future procedure in this case. However, the question of further procedure may require consideration of the other live applications and we welcome any proposals from parties, at any stage, which might allow progress on specific issues of fact or law.

Expenses

We certify the debate as suitable for the employment of senior counsel. The new provisions raise difficult and novel questions law. We continue the question of liability for expenses to be dealt with on paper, if this is agreed, or by way of further hearing.

For Applicant: Party

For Respondents: Sir Crispin Agnew of Lochnaw, QC

Messrs Anderson Strathern, Solicitors, Edinburgh