THE COURT

(Lord McGhie, D J Houston)

TELFER v BUCCLEUCH ESTATES LTD.

(Application RN SLC/225/07 – Order of 6 May 2009)

AGRICULTURAL HOLDINGS – FIXED EQUIPMENT – RESPONSIBILITY FOR PROVISION, REPAIR AND RENEWAL – RIGHT TO NULLIFY POST LEASE AGREEMENT – NULLIFICATION OF AGREEMENTS RELATING TO EQUIPMENT –SEVERABILITY – REASONABLE STATE OF REPAIR –LANDLORDS OBLIGATION TO CARRY OUT WORK – FRAUD ON LEASE – OBJECTIVE TEST – TENANT’S REPAIRING OBLIGATION – FAIR WEAR AND TEAR –ONUS – DIFFERENT ONUS FOR DIFFERENT PROVISIONS – RELEVANCE OF MAINTENANCE OBLIGATIONS TO RENT – DILAPIDATED EQUIPMENT – REDUNDANT EQUIPMENT – IMPROVEMENTS –EQUIPMENT INCLUDED –ABSENCE OF RECORD – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 1991, SECTION 5 (4A, 4B).

The tenant sought an order declaring that his notification that the PLA or any other agreement made in the duration of the lease be nullified as from 22 October 2007 was valid. The application was based on the new provisions added to section 5 of the Agricultural Holdings (Scotland) Act 1991 by section 60 of the Agricultural Holdings (Scotland) Act 2003. The relevant provisions of the agreement related to fencing and drains. Many were in poor condition at the specified date. The tenant contended that this was because the landlords had responsibility for putting in hand any necessary work. Under the agreement his responsibility was to contribute to the cost. He argued that he was entitled to drop the agreement and that his responsibility to pay would cease. He argued that, in any event, the landlords had not attempted to show that the equipment was in poorer condition than at the outset of the agreement. The landlords had made no record of the fixed equipment although provisions of lease obliged them to do so. In light of the conflicting contentions as to proper construction of the new provisions of section 5 the Court arranged to have these discussed at debate.

HELD that (1) the failure to make a record did not preclude the leading of evidence as to the condition of the fixed equipment at the date of the lease and did not preclude the landlords from relying on any other provisions of the lease; (2) a tenant has to carry out such maintenance as can be effected by way of repair of an item of fixed equipment even if the damage requiring repair is due to natural decay or fair wear and tear, the exception in section 5(2)(b) relating only to the stage where, due to natural decay or fair wear and tear, the item of equipment in question requires to be renewed or replaced ; (3) where particular provisions are readily severable it is appropriate to take a discriminating approach and nullify only provisions falling within 4A; (4) section 5(4B)(b) should be construed as implicitly limited to relevant buildings and other fixed equipment; in other words to items of equipment affected by the terms of the agreement to be nullified and not all equipment on the farm; (5) an item of equipment which has not been superseded as redundant, does not cease to be part of the “fixed equipment” for the purposes of section 5(4B) simply because it is worn out and requiring to be replaced; (6) the concept of a “reasonable state of repair” in section 5(4B)(b)(i) is an objective one, to be determined by looking at the state of the equipment without regard to the issue of which party is responsible for its condition; (7) it is not possible to construe section 5(4B) as if it included a further provision allowing a PLA to be nullified when the fixed equipment was not in a reasonable state of repair on the relevant date but the work necessary to put equipment into a reasonable state of repair was to be carried out by the landlords and, accordingly, where equipment is not in a reasonable state of repair the tenant will not be able to have the agreement nullified; (8) the onus is on the applicant to bring himself within the provisions of head (ii).

OBSERVED that although there might be an advantage in a procedure where individual issues could be dealt with and disposed of as the hearing proceeded, where issues were of any complexity the traditional judicial approach was appropriate.

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

Note

[1] In this application the tenant sought an order declaring that his notification that the Post Lease agreement (PLA) or any other agreement made in the duration of the lease be nullified as from 22 October 2007, was valid. He subsequently proposed an amendment seeking to include agreements before the lease. The application seeks to take advantage of the new provisions added to section 5 of the Agricultural Holdings (Scotland) Act 1991 by section 60 of the Agricultural Holdings (Scotland) Act 2003.

[2] The landlords resisted the nullification on the basis of an assertion that they did not accept that the equipment complied with section 5(4B)(b). For reasons set out in our Note of 28 October 2008, we considered it appropriate to invite parties submissions as to the proper construction of the new provisions.

[3] The subjects are held under a lease executed on 30 November 1970 and 29 March 1971. The terms of the lease were varied by the PLA executed on 29 March and 3 April 1971. It is convenient in the summary of submissions and in the discussion to refer to the PLA as if it covered all the agreements challenged. It will be obvious from the context where we are dealing simply with the said agreement of 1971. For avoidance of doubt, we should also add that, except where otherwise clear from its context, we treat the word “maintain” as apt to cover obligations to repair and also obligations to renew and replace.

Factual background

[4] The background to the debate was the existence of a wide range of disputed issues arising between the parties and brought before the Court in a series of applications. It is unnecessary to set out the detail but part of the relevant background related to issues raised in the application SLC/101/07 in relation to a list of items of fixed equipment. This included, for example, reference to various fences and ditches said by the tenant to be in urgent need of renewal. Such items were, on the face of it covered by the provisions of the PLA in terms of which the landlords had responsibility for carrying out the work. The tenant was obliged to pay specified shares of cost.

[5] In relation to certain items, extensive work was admittedly required as at 22 October 2007. For example, Mr Telfer accepted that several of such items could be described as “completely done”. The Duntercleuch fence was “done” and “was no use as a fence”. He said part of the Hopetoun fence had been renewed but part was “worn out and done”. It had been agreed that it needed to be renewed. The former watergate at Coshogle had simply disappeared. The drainage at fields 7 and 23 was useless and he said it had never been fit for the purpose.

Statutory material

Agricultural Holdings (Scotland) Act 1991, as amended by the Agricultural Holdings (Scotland) Act 2003.

The terms of the amended Act are readily available. They can be found on the web at:
http://www.opsi.gov.uk/legislation/Scotland/s-acts.htm

However it is convenient to set out the new provisions in their context in section 5.

5. — (1) When a lease of an agricultural holding to which this section applies is entered into, a record of the condition of the fixed equipment on the holding shall be made forthwith, and on being so made shall be deemed to form part of the lease; and section 8 of this Act shall apply to the making of such a record and to the cost thereof as it applies to a record made under that section.

(2) There shall be deemed to be incorporated in every lease of an agricultural holding to which this section applies —

(a) an undertaking by the landlord that, at the commencement of the tenancy or as soon as is reasonably practicable thereafter, he will put the fixed equipment on the holding into a thorough state of repair, and will provide such buildings and other fixed equipment as will enable an occupier reasonably skilled in husbandry to maintain efficient production as respects both —

the kind of produce specified in the lease, or (failing such specification) in use to be produced on the holding, and

the quality and quantity thereof,

and that he will during the tenancy effect such replacement or renewal of the buildings or other fixed equipment as may be rendered necessary by natural decay or by fair wear and tear; and

(b) a provision that the liability of the tenant in relation to the maintenance of fixed equipment shall extend only to a liability to maintain the fixed equipment on the holding in as good a state of repair (natural decay and fair wear and tear excepted) as it was in —

immediately after it was put in repair as aforesaid, or

in the case of equipment provided, improved, replaced or renewed during the tenancy, immediately after it was so provided, improved, replaced or renewed.

(3) Repealed

(4) Any provision in a lease to which this section applies requiring the tenant to pay the whole or any part of the premium due under a fire insurance policy over any fixed equipment on the holding shall be null and void.

(4A) Any agreement between the landlord and tenant made before the coming into force of this subsection which purports to provide for the tenant to execute on behalf of the landlord (whether wholly at his expense or wholly or partly at the expense 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 shall be nullified provided that subsection (4B) below is complied with.

(4B) This subsection is complied with if –

(a) following a determination (in accordance with section 13 of this Act) of the rent payable in respect of the holding, the tenant gives notice to the landlord that the agreement be nullified as from a date specified in the notice; and

(b) on that date –

(i) the buildings and other fixed equipment are in a reasonable state of repair; or

(ii) if the buildings and other fixed equipment were in an unreasonable state of repair when the agreement was made, they are not in a worse state of repair than they were then.

(4C) Any agreement between the landlord and tenant made before the coming into force of this subsection which purports to provide for the tenant to bear any expense of 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 shall be subject to subsections (4A) and (4B) above.

(4D) Any agreement between the landlord and tenant made on or after this subsection comes into force which purports to provide for the tenant to bear any expense of any work which the landlord is required to execute in order to fulfil his obligations under the lease shall be null and void.”.

(5) Repealed

(6) This section applies to any lease of an agricultural holding entered into on or after 1st November 1948.

[6] Nearly all the discussion related to subsections of Section 5 and, where the context is clear, we occasionally refer for convenience to the subsections simply by number. We refer to 4A, 4B, 4C, and 4D as the “new provisions”.

Authorities

Brew Bros v Snax (Ross) Ltd [1970] 1 QB 612
Buchanan v Buchanan 1983 S.L.T. (Land Ct.) 31
Carney v Harvey [1985] AC 301
Davidson v Logan 1908 SC 350
Day v Harland & Woolffe [1953] 1 WLR 906
Haggart and Brown (Joint Applicants) 1983 SLCR 19
Haskell v Marlow [1928] 2 KB 45
House of Fraser v Prudential Assurance Co Ltd 1994 SLT 416
Inglis v Buttery & Co (1878) 5 R (HL) 87
Johnson v Moreton [1980] A.C. 37
Kennedy v Brackenbury SLC 177/04
Lurcott v Wakeley & Wheeler [1911] 1 KB 905
McLure, Naismith Brodie and Macfarlane v Stewart 1887 15R (H.L.) 1
Mackie (Stewart’s JF) v Gallagher 1967 SC 59
Morcom v Campbell-Johnson [1956] 1 QB 106
Morgan v Liverpool Corporation [1927] 2 KB 131
Neilson v Stewart 1991 SC (HL) 22
Regis Property Co Ltd v Dudley 1958 3 All ER 491
Secretary of State for Scotland v Greig 1972 SLT (Land Ct) 3
Sharp v Thomson 1930 SLT 785
Simpson v Henderson 1944 S.C. 365
Taylor v Webb[1937] 2 KB 283
Telfer v Buccleuch 2006 1 SLCR 131 (SLC-107-05)
Telfer v Buccleuch 2005 SLCR 51 (SLC-212-04)

Textbooks etc

Lord Gill, The Law of Agricultural Holdings in Scotland 3rd edition
Gloag on Contract 2nd edition
Scottish Parliament Information Centre 03/17 (“SPICe”)
Trayner’s Latin Maxims

Submission for landlords

[7] Sir Crispin provided a written submission, a copy of which is held by the Court. In the circumstances, we attempt no more than to summarise the main points.

[8] The landlords moved the Court to dismiss the application on the basis that it was plain that many items of fixed equipment were not in reasonable state of repair on 22 October 2007 and the tenant had not attempted to show that such items were no worse than they had been at the time of the PLA. The landlords stressed their willingness to drop the whole PLA from 22 October 2007 if, broadly speaking, Mr Telfer would accept that he remained liable in terms of the PLA in respect of work outstanding at that time. [It may be noted that the terms of the PLA are set out in SLC-212-04]

[9] Sir Crispin clarified the landlords’ position in respect of the items of fixed equipment provided at joint cost. Such items were to be treated as fixed equipment provided by the landlords. They accordingly had to be in the state required by 4B.

[10] The new provisions had the effect of removing contractual rights beneficial to the landlords without compensation. The provisions should, accordingly, be construed, in case of ambiguity, in a sense favourable to the landlords. The nullification provisions were of limited scope. It was necessary to look closely at any particular agreement to determine which parts of it were covered by the statutory provisions. Any parts of an agreement which were separate and independent of provisions caught by subsection 4A should be severed and would remain enforceable: Cairney v Harvey; Neilson v Stewart.

[11] He submitted that the provisions of subsection 4B required identification of a specific date. The Court had no power to change the date. So, there was no scope for waiting until any outstanding work was done before assessing whether the equipment was in a reasonable state of repair. If it was not in that state on the date specified in the tenant’s notice, the notice simply had no effect.

[12] It was accepted that the dropping of the PLA would have no bearing on the rent fixed. But, the absence of the PLA would be relevant at any future rent review. One significant point in relation to construction of the new provisions was that the effect of nullification of the PLA was that the landlords got no compensating consideration for any past deterioration of fixed equipment by way of natural decay and fair wear and tear. For the future they could expect a rent increase which could go to a “sinking fund” for ultimate renewal and replacement. The tenant has had the benefit of the reduced rent in the past and could have put that reduction into a sinking fund of his own.

[13] In the written submission Sir Crispin had contended that the onus under subsection 4B(b)(i) rested entirely on the tenant. It was for the tenant to bring himself within the scope of the Act. If the landlords did not accept the notification, it was for the tenant to prove his entitlement. In course of discussion, counsel modified this position. He accepted that while the legal onus might rest on the tenant, the practical evidential onus was a matter of circumstances. He accepted that it would make practical sense for the landlord to have to show that equipment was not in a reasonable state of repair on a specified date. He said that the landlords’ pleadings gave ample notice of this. But this situation in relation to head (i) could be contrasted with that envisaged by head (ii). There was no reason why the onus under that provision should not remain with the tenant. He pointed out that there was no attempt by the tenant in pleadings to deal with either (i) or (ii). He accepted that there was enough material to go to proof on head (i). However, the tenant’s acceptance that some items were wholly clapped out and in need of renewal as at the 22 October 2007 and his failure to invoke head (ii) meant that his case was wholly irrelevant.

[14] In any event, in relation to head (ii), the landlords were entitled to rely on the statement in the lease that the tenant accepted the buildings and fixed equipment “as in a sufficient tenantable and habitable condition and adequate for the purposes for which the farm is let”. The lease was a probative agreement. It was not competent for the parties to try to lead evidence to qualify this statement: Gloag page 365. It did not matter that there was no record to prove the condition. The contractual provision effectively stated that the fixed equipment was accepted as being at least in a reasonable state of repair. “Tenantable condition and repair” had been held to mean “in good order”: Davidson v Logan. A contractual provision could only be taken as the equivalent of an agreement to take over the landlords’ obligations if it meant that the landlord could use it to compel the tenant to do something. The provision in question did not have that effect. It could not be treated as such an agreement if it merely prevented the tenant from complaining about the state of the equipment. Properly construed that was its effect. The landlords were entitled to rely on the presumption omnia praesumuntur rite acta. The equipment should have been put in a thorough state of repair at the outset. If that had not been done it would have been open to the tenant to enforce the landlords’ obligation. There was no evidence of any breach. Further, any right the tenant had to complain had prescribed.

[15] The reference to “the buildings and other fixed equipment” in subsection 4B could have a variety of meanings. It might mean all the buildings and fixed equipment on the holding; all the buildings and fixed equipment provided by the landlords; or only the buildings and fixed equipment which were subject to the agreement to be set aside. The landlords’ principal submission was that it related only to the fixed equipment covered by the agreement in issue. Many PLAs would, of course, cover all the fixed equipment. But there was no reason to think that Parliament would be concerned with items which were not relevant to the agreement. Some restriction on the wide meaning would be necessary to make sense of the provision. It might require to be limited to all the equipment provided by the landlords. It could not have been intended to cover equipment in respect of which the tenant had no obligation to the landlords. In other words, it could not include the tenant’s own improvements. If a restriction in meaning was to be implied the most sensible was to relate it to the relevant agreement.

[16] On a proper construction of subsection 4B, each separate item of relevant fixed equipment had to be in a reasonable state of repair at the specified date. The provision plainly had regard to separate items and not to the fixed equipment as a whole. This made sense in the context of passing an obligation from the tenant to the landlords. All parts of the fixed equipment had to be in a reasonable state of repair. He noted that the concept of fixed equipment on a farm was not to be regarded as a single totality: SLC/212/04 at p 70.

[17] The actual state of repair had to be determined objectively. The relevant context was that, at the point of nullification, the tenant was burdened by an obligation to accept natural decay and fair wear and tear because he would have an obligation to pay for replacement and renewal of buildings and fixed equipment so worn out. Accordingly the requirement to put something into a reasonable state of repair must mean that defects arising from natural decay and fair wear and tear had to be dealt with so that any item which was beyond repair was replaced so that it was in a reasonable state of repair at the point when liability was passed back to the landlords. If an item of fixed equipment was “done” at a date before the tenant sought to nullify the PLA, the tenant had incurred a liability at that date under the PLA either to renew or replace the items or to contribute to the cost of renewal or replacement. The equipment could not be said to be “in a reasonable state of repair” until that item had been renewed or repaired. The tenant could compel the landlords to carry out such work. He could give notice requiring this in ample time before the specified date.

[18] In attempting to define the standard of “reasonable”, counsel submitted that the state of repair could be defined as being such that “a willing landlord acting reasonably would agree to take over the replacement or renewal obligation in respect of the fixed equipment from the tenant having regard to the fact that the landlord could reasonably expect a rent increase at the next rent review in respect of that liability”. He pointed out that the corollary of the reference to an unreasonable state of repair at the outset in the context of (ii) was that it would normally be assumed that fixed equipment was in a thorough state of repair at the outset. The tenant’s obligation to contribute to renewal and replacement might suggest that the equipment was expected to be of that standard. In any event, what was a reasonable state of repair would be a matter of expert assessment in each case. But, on any view, if equipment was “done” or “clapped out” it was not in a reasonable state of repair.

[19] Sir Crispin then referred to various dicta bearing on the meaning of “repair” in various statutory contexts. It would cover renewal of parts. It was a question of degree and assessment. He cited Inglis v Buttery and Co; Day v Harland and Wolffe; Mackie (Stewarts JF) v Gallagher;(and authorities there cited);and Secretary of State for Scotland v Greig. He suggested that help could be obtained by contrasting the straightforward provisions of subsection 4B with other similar but qualified provisions. The provision was quite different from section 5(2)(b). Where the standard had to account for age etc, this could be expressly stated. He contrasted the example of the Civic Government (Scotland) Act 1982 at section 87.

[20] Whatever the test, it was clear that some items were not in a reasonable state of repair. Where the tenant had the obligation, direct or indirect, in relation to renewal or replacement of such items, the tenant could not set aside the PLA. Sir Crispin stressed that it was not through any “fault” of the landlords that the work had not been done as at October 2007. There was an ongoing dispute as to how the work was to be done. The new provisions were not concerned with fault but with a transfer of a contractual obligation which could take place if, and only if, the fixed equipment was objectively in a reasonable state of repair.

[21] Sir Crispin made some submissions in relation to the effects of a tenant’s contribution under a PLA. Such a contribution could not create a tenant’s improvement. He contended that an “improvement” had to involve the provision of something new and not the replacement of something that existed before. Items were only capable of being improvements if they fell under Schedule 5, part 2. For the tenant to do something which the landlords were under an obligation to do could not be an improvement except in so far as covered by the provisions of paragraph 23. But as the tenant was under an obligation in terms of the PLA, these provisions had no bearing.

[22] Counsel looked at section 33A and submitted that the decision of the Chairman, sitting as a Divisional Court in SLC/107/05 was wrong. He discussed the passage in that decision at page 170. He contended that the section did not apply to any PLA which simply provided for a tenant’s contribution to work and was not about reducing compensation otherwise due to the tenant. He challenged the factual basis of the decision but in any event submitted that the principle should not be applied. He stressed his submission that an improvement had to be something additional to what had already been provided. There was, he said, ample authority dealing with the distinction to be drawn in certain statutory contexts, at least, between “repairs” and “improvements”: Mackie (Stewarts JF) v Gallagher.

[23] On the wider question of the distinction between “repair” and “renewal” he submitted that guidance could be derived from a range of cases: for example Sharp v Thomson; Brew Bros v Snax (Ross) Ltd; Secretary of State v Greig; Inglis v Buttery; and Mackie v Gallagher. The distinction between “ordinary” and “extra-ordinary” repairs mentioned by the Court under reference to House of Fraser v Prudential Insurance Co Ltd was not, in fact, relevant to the issue. It was abundantly clear that repair of an item included replacement of parts of it.

Submission for tenant

[24] Mr Telfer’s submissions were characterised by a detailed knowledge of the provisions of the Agricultural Holdings (Scotland) Act as amended and an impressive grasp of legal principles. However, his submissions were not always immediately easy to follow, largely because of his natural anxiety to be sure that all his points were fully ventilated. This led to a tendency to repetition and some confusion in the order of presentation of argument. He also had some difficulty in hiding his irritation with the landlords and this tended to lead to submissions which distracted from the legal issues under discussion.

[25] While he was prepared to engage in discussion of hypothetical examples, he stressed that his own position did not raise all the difficulties we foresaw in relation to construction of the Act. He was confident that he had carried out all his obligations in a reasonable way. For example, he said that it did not really matter to him whether the test under section 5(4)(b) was related to all the equipment on the farm or just the equipment covered by the PLA. He said it was obvious that he had been trying for years to get the landlords to fulfil their obligations. If they had done so, his obligation to pay for the work would have crystallised long before he could have dropped the PLA. The landlords had had ample opportunity to do the work. One suggestion understandably resented by him was that he had manipulated the timing of his attempt to nullify the PLA to gain some advantage.

[26] In relation to examination of the detail of the new provisions, we think it can fairly be said that Mr Telfer was unhappy about the whole idea of debate being necessary. He considered his position clear on the facts. Parliament, he said, had intended it to be easy for a tenant to drop a PLA. The test, accordingly, could not be too high. He was confident that, taken as a whole, the farm was in a good state of repair on 22 October 2007 as far as his obligations were concerned. It was not disputed that some items were completely worn out and needing replacement but these were all the landlords’ responsibility. If the landlords had done the work in time he accepted that he would have had to pay for it under the PLA. But they had not even started the work and there was no outstanding liability resting on him as at 22 October 2007. The landlords would now have to do the work as part of their statutory responsibility but he had no further liability for it.

[27] We shall attempt to summarise what we understand to be the essential points of his argument and then set out further detail of the submission in relation to certain aspects. However, before looking at the individual points made, it is appropriate to refer to a recurrent issue; namely, the proposition that change in the extent of the tenant’s obligations in relation to fixed equipment would have no bearing on rent. In course of attempts to discuss this matter it proved impossible to agree even a starting point that “all else being equal” a tenant who was undertaking a full repairing and maintenance obligation would expect to pay a lower rent than one who was not. Mr Telfer appeared to regard this proposition as entirely false. It was at best “cloud cuckoo land”. We think it clear that there must have been some fundamental misunderstanding between the Court and Mr Telfer on this issue but we were unable to identify the precise point of difficulty and without agreement on a starting position, it proved impossible to explore matters much further.

[28] Mr Telfer’s substantive proposition on this issue was clearly stated: dropping the PLA should have no bearing whatever on the rent, either immediately or at the next review. Only the latter point was in dispute. He made it clear that he expected to derive support from evidence as to the factual position in relation to farms tenanted by others from the respondents. In a previous litigation between the parties, SLC/107/05, he had not challenged evidence that the existence of a PLA would typically tend to a 20% drop in rent. However, he said that this was because the point was not relevant to the issues in that case.

[29] His position in relation to rent was stressed at various points of his submission. However, we have not found it easy to identify the precise significance in relation to construction of the new provisions. It may be noted, in passing, that the proposition that dropping a PLA should have no effect on rent would tend to support the contention for the landlords that the new provisions should be read narrowly because they had the effect of removing their current rights without any compensation. However, as we do not accept Mr Telfer’s position on this issue, nothing turns on this.

[30] We now attempt to set out what we understand to be the fundamental points in Mr Telfer’s submission. He made much of the absence of a record. He repeatedly made the submission that the landlords were in dereliction of their duty under the lease in that respect. One consequence, he said, was that the tenant could have no idea what the fixed equipment was. The absence of a record was also said to be important in relation to the issue of onus.

[31] He contended that subsection 4A did not allow the Court to nullify parts of a PLA or other document. There was no need to consider questions of severability. His essential submissions in relation to subsection 4B were that the reference to “buildings and other fixed equipment” was a reference to all the equipment on the farm covered by the definition in section 84. This included equipment provided by the landlord and equipment provided by the tenant. The tenant could only drop the PLA if he had complied with all his obligations in relation to the holding. The provisions of subsection 4B(b) were not limited to the equipment covered by the PLA. But Parliament must have recognised that there were many items of fixed equipment on any farm. The tenant’s repairing programme would be an ongoing one. It would not be reasonable to expect every last item to be in good order at any particular date.

[32] His main submission in relation to the state of the equipment was that the onus was on the landlords. Although certain fences and drains were in a useless state it had not been shown that they were in a worse state than they had been when the PLA was made. The landlords did not offer to prove that they were. In any event, they could not show this because of their failure to provide a record. He submitted that it was clear that the onus was on the landlords in relation to both heads of subsection 4B. That was the obvious intention of the legislature. Further, as the landlords had accepted an onus on them in relation to head (i) it was ridiculous to suggest that the onus under head (ii) should be on the tenant. It was the landlords’ farm. It was their equipment. The new provisions gave the tenant the right to put obligations back on to the landlords. If the landlords were not satisfied with the state of the equipment, they had their remedies. It would be up to the landlords to prove any allegations of impropriety. It was difficult to prove a negative.

[33] However, he also contended that items which were wholly done, or clapped out, ceased to be fixed equipment. Such items could not be treated as part of the fixed equipment of the farm. If, contrary to this submission, they were to be regarded as fixed equipment for the purposes of the statute, their condition should be ignored for the purposes of subsection 4B. It was not right that the landlords could prevent a tenant from dropping a PLA due to their own failure. That would be a fraud on the lease. He did not attempt to elaborate that proposition and acknowledged that there was nothing in the Act to create an exemption to head (i) based on any concept of default by the landlords. This might have been an oversight but he accepted that we could not simply write in such a provision.

[34] In any event, even clapped out items could be regarded as being in a reasonable state of repair within the meaning of the Act because the provision was looking at the tenant’s obligation. He contended that the idea of a reasonable state of repair required consideration of the age of the item. If the tenant had done all he could by way of repair, the item was properly to be regarded as being in a reasonable state of repair.

[35] We think that this summary covers the essentials of the tenant’s submissions in relation to the new provisions. But these points were presented in the context of a careful analysis of the related provisions of the Act and we shall now try to provide more detail of that context.

[36] The start point of Mr Telfer’s submission was the obligation under section 5(1) to make a record. He contended that, in terms of the lease that was clearly the landlords’ obligation. We understood him to say that the lease superseded the provisions of section 8. If there was no record it was hard to say that any equipment was part of the fixed equipment. But in any event, the most important provision was section 5(2)(a). The landlords had to put the fixed equipment into a thorough state of repair at commencement of the tenancy or as soon as reasonably practicable thereafter. The tenant had no obligation in relation to fixed equipment until the landlords had put it into a thorough state of repair. Section 5(2)(b) exempted the tenant from liability in relation to fixed equipment which was not provided in a thorough state of repair. Such equipment could not be regarded as being part of the fixed equipment of the farm. He argued that the PLA could relate only to the fixed equipment of the farm and accordingly did not apply to equipment which was not put into a thorough state of repair by the landlord at the outset.

[37] It was obvious, he said, that many pieces of “equipment” on the farm were not part of the fixed equipment because they had never been put in a thorough state of repair. There were many disused items. These included stells, bothies, foundations of old buildings and the like. These items were not part of the fixed equipment. The dyke at Howatsburnfoot was a good example. The Court had found, in SLC/107/05, that the dyke was not covered by the PLA. There were plenty other examples. A pile of stones was not a dyke.

[38] In his submission, a PLA was, or related to, an agreement to take over the landlords’ obligations in relation to some equipment provided by the landlords. If the tenant did not receive the equipment in proper condition, he could not be said to have received it. In that situation there was no obligation under Section 5(2)(a) and, accordingly, no obligation under the PLA. If a new fence was put on an old fence line this fell to be regarded as the provision of a new piece of equipment. The rent might have had to be reduced while there was no fence. It could be increased if the landlords provided the new fence but not if it was provided by the tenant.

[39] Mr Telfer contended that if an item of fixed equipment ceased to be useful because it became completely worn out, it ceased to be part of the fixed equipment. A fence which was completely worn out and plainly not capable of its function of retaining stock should be described as “old posts and wires” rather than as a fence. It was no longer part of the fixed equipment. Another example he gave was a contention that if the farmhouse roof was worn out and needing renewal or the farmhouse doors were similarly worn out, they would cease to be fixed equipment. The Duntercleuch fence was in that category. Such items would not have to be taken into account for the purposes of 4A(b)(i).

[40] A further reason advanced by Mr Telfer in support of the contention that clapped out items could be ignored for the purposes of that provision was that, if they were to be regarded as fixed equipment, which he disputed, they were to be regarded as being in a reasonable state of repair. This was because the tenant had done all he could by way of his statutory repairing obligation. Their state of repair was reasonable even if they were properly to be described in terms of being completely clapped out.

[41] Mr Telfer contended that what was a reasonable state of repair required due consideration of age. An item in a reasonable state of repair for its age might be nearly worn out. If an item with a 20 year lifespan could be said to be in a reasonable state of repair for its age at 19 years, even if almost on its last legs, it was perfectly logical to say that it was in reasonable state of repair for its age even if, by year 20 it was completely done or beyond repair. The landlords’ obligation contrasted with the tenant’s very limited obligation under section 5(2)(b). Mr Telfer made it clear that he recognised that his submissions in relation to this provision seemed somewhat surprising but he stressed the words of the Act. His submission was that the exclusion of natural decay and fair wear and tear meant that the maintenance burden on a tenant was a very light one. When an item of equipment required attention it was usually because of damage by natural causes. If a stone fell off a dyke due to frost or being dislodged by the branch of a tree, that would be fair wear and tear. It would not be the tenant’s responsibility. He gave further similar examples. Most damage, in his contention, was simply fair wear and tear or natural decay. It arose from normal activities. He gave examples of damage to fences. On a stock farm such damage would normally be fair wear and tear. Cattle rubbing on fences or dykes was entirely natural behaviour. If this dislodged a staple from a fence or some stones from a dyke that was just fair wear and tear. A specific example he gave was that on investigating recent damp ingress to the farmhouse he had found defective pointing high on the wall. Assuming that the house was in a thorough state of repair at the beginning, this must have been due to natural decay or fair wear and tear. Nothing done by the tenant had caused the failure.

[42] It is fair to make the point that Mr Telfer expressed some doubt about the practical implications of his submission. He contended, however, that this was the clear meaning of the Act. Properly understood the tenant’s obligations were very limited indeed. It was the landlords’ obligation to put equipment in a thorough state of repair and effect such replacement or renewal as was rendered necessary by natural decay and fair wear and tear which was a heavy and important obligation. Parliament’s intentions were clear: subsection (3), which was the basis upon which PLAs had their validity, had been repealed. It was not now possible for the landlords to avoid that heavy obligation. The repeal was reinforced by the provisions of subsection 4D.

[43] It was submitted that the effect of subsection 4D was that all the attempts by the landlords, since 2003, to try to persuade the tenant to agree to arrangements relating to replacement or renewal of fixed equipment were null and void. There was no longer any scope for negotiation about work to be done in relation to fixed equipment. Where there was a PLA each party was bound to do what the agreement required. Any, so-called, compromise agreement would be null.

[44] Mr Telfer was at pains to point out the practical realities. He was somewhat scornful of the landlords’ submissions about the remedies available to a tenant. In practice, tenants had to work with what they were given. The remedy of withholding rent was of little value. The cost of renewal of some items would be far in excess of rent. Similarly, the supposed option of the tenant doing the work himself would mean that he might be out of pocket for years before he got the money back by way of retention of rent. In any event, tenants have enough work of their own to do without taking over landlords’ work. A tenant entering a tenancy where the equipment was not in a thorough state of repair would assume that the landlords would get round to the work sooner or later. He would be reluctant to press for action.

[45] He did not object to the landlords’ clarification of their position in relation to equipment provided at joint expense. He submitted that the decision in SLC/107/05 in the passage challenged by Sir Crispin at page 170 had been correctly decided. He pointed out that there were hundreds of metres of similar dyke on the farm. If the payment by a tenant meant that the tenant was taking over what was properly a landlords’ obligation, this meant that the work fell to be treated as a tenant’s improvement.

[46] We heard a good deal of reference to the concept of a “tenant’s improvement”. Mr Telfer said that the statutory provisions in relation to tenant’s improvements were “hugely difficult”. However, his fundamental submission was that if a tenant carried out any work which ought to have been done by the landlords, such work fell to be treated as a tenant’s improvement. The work became part of the fixed equipment of the farm. He did not accept the landlords’ contention that a tenant had no obligation to maintain his own improvement. The tenant remained responsible for routine maintenance of all fixed equipment under section 5(2)(b). But the tenant was not to be rented on such work and he was entitled to compensation for it at waygo. Mr Telfer referred to the provisions of section 33A and to our said decision in SLC/107/05. When pressed on the implications of Schedule 5 and the question of work being “done as an improvement” he appeared to accept that an improvement could only be something covered by the Schedule. But he argued that it was quite wrong to say that it had to be something additional. A new fence could be an improvement even if it was erected on the line of the old fence. He did not attempt to deal with the authorities cited by the landlords. He stressed the importance of section 33A. Work done by a tenant which a landlord should have done was to be regarded as a tenant’s improvement.

[47] He appeared to take from the decision in SLC/107/05 the proposition that work done under a PLA would be an improvement if the tenant had taken over the landlords’ obligations and no compensation was provided for. He submitted that it was only if the landlords could show that there had been a reduction in rent – as compensation – that normal replacements paid for by the tenant would not be tenant’s improvements. It was important to keep in mind the distinction between the effects of 4A and section 33A. The first would remove an obligation, the second related simply to compensation. He suggested that the effects of section 33A in fact went further than the Court had previously held.

[48] He accepted that the term “fixed equipment” was often used as if it was restricted to equipment provided by the landlords but the proper definition was that provided by section 84. It was all equipment on the farm. If a particular item of fixed equipment was a tenant’s improvement, this simply meant that the tenant would be entitled to compensation at way-go and that he was not to be rented on it. However, that status did not affect the maintenance obligations. The landlords remained liable to renew and replace and the tenant to repair, all in terms of section 5(2).

[49] In relation to the specific terms of the PLA, Mr Telfer submitted that Paragraph 1 of the Agreement did not go much beyond the tenant’s statutory obligation. He reminded us of the effect of the decision in SLC/212/04. Para 1 added some liability in respect of “storm tempest and flood and repointing” Otherwise nothing altered section 5(2)(b). In relation to fencing and dyking, the PLA did impose higher duties. The tenant had taken over the landlords’ obligations in part at least. These provisions fell to be nullified. The whole agreement had to fall. There was nothing in the Act to justify cutting parts out. If the Court did consider it appropriate to cut out parts they would need to be large parts because the provisions were inter-related.

[50] It was wrong to say that he had any present obligation in respect of equipment which was “done”. His obligation only arose when the landlords had completed the renewal work. Or, if that was wrong, it could only arise when they started work. It could not be said to arise before that because there would be no defined start point. Equipment begins the process of being done from the beginning of its working life. No doubt a landlord might decide it should be replaced at any time. But the tenant could have no liability until the landlord actually did something.

Response

[51] In reply, Sir Crispin made further submissions about the onus under subsection 4B(b) to which we have referred above. He dealt with the distinction in section 5(2)(a) between the obligation resting on the landlord at the outset of the lease and obligations which arose during its currency. The tenant had had ample time to enforce the former if necessary. There was no evidence of any need to enforce. The right to enforce might have been lost by prescription.

[52] The effect of the PLA was that the tenant took on part of the landlords’ obligations under the second branch of section 5(2)(a). That was quite separate from the first. For the purposes of the tenant’s obligations under the PLA it did not matter what the state of the equipment was at the start provided that it was not actually worn out and unusable. The tenant had simply taken over responsibility for the fixed equipment from the landlord.

[53] In any event, if the landlords did not put the equipment into a thorough state of repair from the outset, the tenant’s statutory obligation might not arise but his common law obligation remained: Gill 7.22, 7.23. The tenant had to maintain the equipment at the level it was in at the start. The landlord had an obligation to put it into a thorough state of repair. The tenant took over that obligation under the terms of the PLA. The obligations on the tenant under section 5(2)(b) and at common law, were substantially the same although the starting standard might well be different.

[54] In any event, the tenant was bound by the PLA. The state of the equipment would be reflected in the rent. The terms of any particular PLA and the state of the equipment would reflect how quickly the obligation would come into practical force.

[55] Sir Crispin dealt with the tenant’s submissions as to the very restricted nature of the tenant’s obligation under section 5(2)(b). These submissions were, he suggested, based on a misunderstanding of the implications of the exceptions. The intention of the Act was to exclude liability for deterioration due to the inevitable effects of old age. That was not the same as excluding deterioration due to natural causes. The tenant’s liability to maintain the equipment by renewal of defective parts was not excluded by the Act.

[56] Sir Crispin did not accept the contention that fixed equipment which needed renewal or replacement ceased to be fixed equipment for the purposes of the legislation. If it remained a recognisable item it was clearly still part of the fixed equipment.

[57] In relation to the Order now sought by the tenant, Sir Crispin contended that the Court had no jurisdiction to pronounce a blanket order. The Court had to deal with identified individual agreements. In any event, the Order could not deal with any agreement which was not covered by the tenant’s initial notice. Any agreements prior to the lease were also irrelevant. They would have been superseded by the lease. He said that the landlords would not resist the tenant’s apparent contention that if any provision in the lease fell under subsection 4A the lease should be nullified in full with effect from 22 October 2007 rather than attempting separation of parts, but he questioned where that would leave Mr Telfer in relation to any claim to occupy the farm. That very example showed the logic and importance of the concept of severability.

[58] As a pure procedural matter, counsel suggested that the issue of whether Glenim farmhouse was still part of the tenancy, and the issues of boundaries at Wanlockhead, should both be dealt with separately within the existing SLC/101/07 process. In relation to the latter he complained of a lack of specification in the present pleadings. We had some discussion of these issues and deal with them below.

[59] Counsel moved for certification of senior counsel for the hearing.

Discussion

[60] It is convenient in this discussion to follow the broad order of the provisions of section 5 as amended although the issues do not all turn on construction of that section.

Absence of Record

[61] Subsection (1) provides for the making of a record but does not specify who is to make it or the consequences of failure to do so. It was not contended by the tenant that anything turned on the statutory requirement. The issue arose under the terms of the lease. We simply note, for completeness, that section 8 makes it clear that either party may require the making of a record and subsequent sections provide that a record is a pre-requisite to certain types of claim: see Gill 7.33. There is no overarching statutory provision covering failure to make a record.

[62] The dispute in the present case relates to the provision in the lease that: “And the tenant hereby ACCEPTS the houses and offices (including grates and other fittings and fixtures therein) and other buildings on the Farm, as also the remainder of the fixed equipment thereon, or serving the same …. in the condition in which they are now, as evidenced by a Record to be made by the Proprietor in conjunction with the Tenant (which Record shall be prepared at mutual cost), as in sufficient tenantable and habitable condition and adequate for the purposes for which the farm is let, and shall be bound at his own expense, to keep, maintain, and leave the same, together with any others which may be made during the Lease, in the like good condition, natural decay and fair wear and tear accepted;”. We shall refer for convenience to the provision whereby the tenant accepts the equipment as in tenantable condition, as “the acceptance provision”

[63] Although Mr Telfer placed a good deal of weight on the landlords’ so called dereliction of their duty under the lease, he did not attempt any analysis of the effect of the absence of a record on the operation of the clause as a whole. His assertions ranged from the proposition that in absence of a record it was not possible to say what the fixed equipment was, to a suggestion that in absence of a record the landlords could not prove that the fixed equipment was in a thorough state of repair or in a reasonable state of repair at the outset of the lease. He did not explicitly advance an argument that subsequent provisions in the lease were conditional on a record although we take it that he intended this.

[64] We are satisfied that the absence of a record does not preclude the leading of other evidence. We find nothing in the lease to indicate any intention by the parties that the record was to be the only possible source of evidence in relation to the condition of the fixed equipment. Unless the lease can be read as intended to confine parties to the record for any particular purpose, the state of the equipment is a matter upon which evidence can be led if, and as, appropriate. It can hardly be argued that the parties in 1971 had a positive intention to tie themselves to a record for the purpose of statutory provisions which were not enacted until 2003. Accordingly, the lease could only have that effect if it was an agreement in such terms as to show that the parties intended the record to be the exclusive measure of their rights in relation to the state of equipment for all possible purposes. We are not satisfied of this.

[65] The acceptance provision was a provision which had immediate effect. The making of a record was something which was to follow at an unspecified later stage. Further, the actual making of the record could have no effect on that acceptance. If a record had subsequently been prepared showing the equipment to be in good condition, it would add nothing to the tenant’s acceptance. If, on the other hand, the record appeared to show equipment which was not in a tenantable condition, this would not detract from the initial acceptance. The plain intention of the parties was that the tenant was to be taken to accept the equipment as tenantable, whatever the detail of its actual condition. In these circumstances, we cannot hold that the provision of a record was a condition precedent to the effectiveness of the other provisions of the clause.

[66] The acceptance provision was plainly intended to be a term of the contract and to bind the tenant. If the provision was effective, the tenant would not be free to argue that the fixed equipment was not in tenantable order at the outset. We have not heard argument which persuades us that there is, in the lease itself, anything which would prevent such a provision being effective. The tenant’s submissions in relation to the statutory provisions did not address this issue directly but we shall return to this point. It is convenient to observe at this stage that, even if, for any reason, the clause is not binding in the sense of precluding the tenant from leading evidence that the equipment was not in a tenantable condition, the clause will remain as an adminicle of evidence. Where a tenant has agreed that the fixed equipment was in tenantable order, this tends to suggest that it was in fact in tenantable order. The circumstances in which the tenant came to such acceptance will, of course, have a bearing on the matter. Where, as here, the tenant had the protection of an existing tenancy at the time he voluntarily entered a written lease, it may not be easy for Mr Telfer to displace the inference that the tenant’s acceptance was based on fact.

Dilapidated equipment

[67] Under section 5(2)(a) landlords have an express obligation to put the “fixed equipment” into a thorough state of repair at the commencement of the tenancy or as soon as reasonably practicable thereafter and a similar obligation to replace it when necessary due to natural decay or fair wear and tear. This means that the Act contemplates equipment falling into the category of “fixed equipment” even when in a poor state of repair and requiring attention. In particular, it contemplates “fixed equipment” being in such a state as to require replacement. So, the term “fixed equipment” is plainly used in the Act in a sense which can be taken to cover items even when they are done and beyond repair. Unless there is some additional other justification for the view that a particular item is to be regarded as redundant, we are satisfied that equipment can be regarded as part of the fixed equipment even if it is in such a condition that it requires to be replaced.

[68] The question of whether a particular item has become redundant depends not on its physical condition but on other factors including, primarily, the intention of the parties. The Court had to deal with this matter in Kennedy v Brackenbury where we referred to fixed equipment having two elements. In addition to being fixed to the land it had to be something which could be regarded as “equipment”. Derelict items would not be included if they were not necessary for the proper conduct of the agricultural holding. We think the converse applies. Dilapidated items must be regarded as part of the fixed equipment if they are regarded as part of the equipment of the farm.

[69] We are satisfied that, at least where a particular item, when in good order, would have been regarded as being required for the proper conduct of the holding, it will fall to be treated as part of the fixed equipment even if it is in a dilapidated condition. We have no doubt, for example, that the march fences are in that category and plainly drains are regarded as part of the necessary equipment at fields 7 and 23.

[70] It may be added that, although the construction contended for by Mr Telfer might, in some cases, have removed the perceived difficulty arising in relation to subsection 4B head (i) in cases where direct responsibility for execution of work on equipment did not rest with the tenants, it would create a separate problem in relation to a common type of PLA where a tenant has simply accepted all responsibility for maintenance of fixed equipment. It would plainly be contrary to the scheme of the section for the tenant to be able argue that head (i) was fully complied with because some equipment for which he was responsible had ceased to be fixed equipment because it was no longer functional.

[71] Mr Telfer made much of the argument that the landlords’ obligation to put equipment into a thorough state of repair under section 5(2) was the start point of all the tenant’s obligations. He contended that, until that was done, the tenant had no liability. But he did not expressly address the differences between obligations under section 5(2)(b) and obligations under the PLA. Our present concern is with the latter. Sir Crispin contended that if the statutory obligation did not come into play, then the common law obligation remained. It was to the same effect. We did not find this submission immediately persuasive but think further consideration of this point is best left to any case where the PLA does not apply and the extent of tenants’ duties under subsection (2)(b) are directly in issue.

[72] In so far as relating to the obligations under the PLA, Mr Telfer’s submission was not supported by direct reference to authority. It is plain that the provisions of subsection (3), as it stood when the PLA was agreed, were not restricted. Parties were free to enter an agreement whereby the tenant took over the landlords’ initial responsibilities as well as his continuing obligations of maintenance by way of replacement or renewal. It may be that Mr Telfer had in mind the provisions of section 33A and the terms of our decision in SLC/107/05. We deal with that below. We do not think that the decision went as far as the very broad proposition for which Mr Telfer appeared to contend.

Nature of tenant’s repairing obligations under Act

[73] Although it does not appear to us to rise sharply in relation to any issues currently in dispute between the parties, it is necessary to deal with Mr Telfer’s submission as to the limited scope of the obligations resting on a tenant under section 5(2)(b). It may be noted that the landlords’ submissions were directed, primarily, at the matters raised in our Note and we are not satisfied that we have heard full submissions on all matters touched on by Mr Telfer. We are aware of the need for caution in relation to issues not fully debated. It is clearly necessary to make appropriate findings in relation to the issues raised between the present parties. We also think it appropriate in this case to give some indication of our thinking on matters which may not have been fully explored. But, some of the views we express may require revision in light of any more complete submissions. It was not made entirely clear to us what bearing the dispute over the meaning and effect of the exception in subsection (2)(b) was thought to have on proper construction of the new provisions. But this issue was fully ventilated and clarification of this point will be of significance to the present parties if the PLA comes to be nullified. It may have a significant bearing on the scope of paragraph 1 of the current PLA.

[74] Mr Telfer’s submission was, essentially, that as most damage to equipment was caused by nature or by normal use, it was not the responsibility of the tenant because it was within the scope of the exception of “natural decay and fair wear and tear”. He did express some surprise at how limited the resultant tenant’s obligation appeared to be but he stressed that this was the plain effect of the Act. The traditional understanding that the tenant has to carry out all maintenance work unless the equipment was beyond repair by reason of natural decay or fair wear and tear was not consistent with a proper reading of the Act.

[75] We do not accept Mr Telfer’s contention. The provision has to be read in context. The context is that the provisions of section 5(2) deal with the allocation of responsibility for maintenance of items of fixed equipment between the landlord and the tenant. The landlord is given the responsibility of effecting such “replacement or renewal” of items of fixed equipment as may be rendered necessary by natural decay or fair wear and tear. Maintenance of these items up to the point where they require to be replaced or renewed must be intended to rest with the tenant. The obligation is, of course, expressed in terms of “maintenance” and not as a duty to repair but there is little doubt that the latter concept is intended. It is important to note that the Act is not dealing with the issue of responsibility for each and every individual example of disrepair - a missing slate, failed pointing, or a dislodged fence staple - but is dealing with the concept of maintenance of units of fixed equipment. If equipment needs repair and can be restored to proper order by works of repair it is for the tenant to carry out such repair even if the need for repair is due to natural decay or wear and tear. (The standard of maintenance required does not have a direct bearing on the present issue of construction and we adopt a neutral reference to “proper order” simply for convenience.) The statutory exception has its effect where the item of equipment, taken as a whole, is so worn out by natural decay or fair wear and tear that it cannot be restored to proper working order by repair but needs replacement or renewal. The effect, in other words, is that the tenant has to repair what can be repaired until the effects of natural decay and fair wear and tear are such that repairs are not sufficient to maintain the equipment in a state fit for its purpose and substantive replacement is required.

[76] Although the distinction between work which is the responsibility of the landlord and that which is the responsibility of the tenant may be described in terms of the contrast between responsibility for renewal on the one hand, and repair on the other, it is clear that in practical terms the essential contrast turns on the scale and character of the different work involved. This is because most repair involves some element of renewal or replacement. Work of repair will obviously include work such as repositioning, reconnecting, tightening or adjusting of parts but there is no doubt that in the usual case it covers “restoration by renewal or replacement of subsidiary parts of a whole”: per Buckley L.J. in Lurcott v Wakely and Wheeler, p924. Most repair involves some element of renewal of parts. His Lordship went on to say: “The question of repair is in every case one of degree and the test is whether the act to be done is one which is in substance the renewal or replacement of defective parts, or the renewal or replacement of substantially the whole” p925. The classic example is a broken or defective slate. To maintain the roof the slate must be replaced. The slate is simply a minor part of the roof. Renewal of the slate is not renewal of an item of fixed equipment. However, although the roof is only a part of the building, it can normally be seen as being, in itself, such a significant part that if the defects in the slates led to a need to carry out maintenance by replacement of a whole section of roof, this might properly be seen as a work of renewal or replacement of fixed equipment. These are questions of fact and degree - to be viewed from the perspective of the parties to the lease and not from that of a professional builder or expert.

[77] For avoidance of doubt, we should add that, although we accept Sir Crispin’s submission that the distinction between items of “repair” and items of “renewal” is not normally assisted by reference to the concept of a distinction between “ordinary” and “extra-ordinary” repairs, we are not satisfied that such a distinction is wholly irrelevant. Even although renewal of minor parts is usually a work of repair, there may be occasions where such work would not be thought of as an ordinary repair. A door is, for example, only a small part of a building and would not, in itself, be described as an item of fixed equipment. Accordingly, maintenance of a house by replacing a door might arguably be seen as no more than repair of the building as a whole. However, in the context of a house, replacement of an external door would not ordinarily be thought of as a work of repair. If the replacement of such door was necessary because the door itself was beyond repair due to natural decay or fair wear and tear, we think the obligation would rest on the landlord. A different view might have to be taken, for example, of an internal door in a steading. Replacement of a broken door might be a routine task to maintain the building in a functional state. The question is essentially one of fact and degree and an understanding of what would be an “ordinary” repair may be a useful practical guide.

[78] Sir Crispin cited English authority dealing with the distinction between repairs and renewals. It is plainly a line which is difficult to draw in any particular case. One practical effect of the use of PLAs has been to avoid the need for dispute over this point in the agricultural context. Similar maintenance provisions are common in a commercial context. There is, accordingly, little direct Scottish authority and few examples directly relating to agricultural holdings. The authorities cited provide limited assistance. We think great care is needed in relation to dicta dealing with the scope of an obligation to “repair” in the context of quite different statutory provisions. Dicta intended to show a contrast between “repairs” and “improvements” in the context of specific statutory provisions relating to leases of domestic property, cannot be relied upon as providing sound guidance to the meaning of these terms for the purposes of Scottish Agricultural Holdings legislation.

[79] In Buchanan v Buchanan, a case under a provision of the Agricultural Holdings (Scotland) Act 1949 in substantially the same terms as section 5, the Court set out details of its findings as to the state of equipment as they found it. There was reference to a leaking roof, missing gutters and missing slates which had, they said, obviously been blown off. The chimney heads had not been pointed. They plainly regarded these items as indicative of a breach of the tenant’s obligations.

[80] In relation to fences the Court commented that it was clear that the lack of maintenance had brought some of the fences into a state where some required renewal. That would normally be the responsibility of the landlord. The Court expressly recognised that remedying fair wear and tear was the landlord’s responsibility but as the cause of the poor state of the fences was the tenant’s breach of his obligation to maintain, this would not mitigate the failure on the tenant’s part.

[81] In other words, it is plain that the Court accepted, as implicit, the proposition that the tenant had to carry out works of maintenance by way of repairs to try to prevent or limit deterioration by natural decay or by fair wear and tear. It was only the unavoidable consequences of natural decay or by fair wear and tear for which a landlord was liable.

[82] Mention was made of the joint reference in Haggart and Brown. Implicit in the consideration of the Court of the factual issues in that case is, again, the understanding that the tenant’s maintenance obligation covers all ordinary repair work even when the need for repair is due to natural decay or deterioration. He must carry out repairs to prevent further deterioration. The exception excuses him from having to replace items of fixed equipment at the stage when the unavoidable effects of natural decay or by fair wear and tear lead to a need for replacement of significant parts. For example, the Court clearly expected the tenant to reglaze skylights; to replace pantiles or tiles; and to patch other forms of roof coverings. In most of such instances the defect needing repair would have been due to natural decay or fair wear and tear. But it was only when the pantiles could not be replaced because the underlying battens were incapable of gripping them, or where a great number had been blown off, that the landlord’s obligation to renew came in.

[83] Many of the other decisions cited raise issues of statutory construction of provisions remote from those of the Agricultural Holdings legislation. Mackie (Stewart’s Trustee) v Gallacher is simply an example. We look again at this case below in the context of discussion of the scope of the term “improvements”.

[84] Mr Telfer did not attempt to support his construction of the section by reference to authority but it may be noted that the construction he proposed appears similar to one adopted by the English Court of Appeal in Taylor v Webb. In that case, the roofs, skylights and glass coverings of a building were in a seriously defective condition caused solely by the ordinary wear and tear of the elements. The Court held that because of the contractual exception of fair wear and tear there was no liability under the relevant repairing obligation.

[85] However, that view of the meaning of such an exception was expressly disapproved by the House of Lords in Regis Property v Dudley. Their Lordships preferred an earlier decision in the case of Haskell v Marlow and Viscount Simonds quoted with approval a passage in the following terms:

“The exception of want of repair due to wear and tear must be construed as limited to what is directly due to wear and tear, reasonable conduct on the part of the tenant being assumed. It does not mean that if there is a defect originally proceeding from reasonable wear and tear the tenant is released from his obligation to keep in good repair and condition everything which it may be possible to trace ultimately to that defect. He is bound to do such repairs as may be required to prevent the consequences flowing originally from wear and tear from producing others which wear and tear would not directly produce”: at p498B-D.

[86] Lord Denning agreed. He said:

“I have never understood that, in an ordinary house, a ‘fair wear and tear’ exception reduced the burden of repairs to practically nothing at all. It exempts a tenant from liability for repairs that are decorative and for remedying parts that wear out, or come adrift in the course of reasonable use, but it does not exempt him from anything else. If further damage is likely to flow from the wear and tear he must do such repairs as are necessary to stop that further damage. If a slate falls off through wear and tear and in consequence the roof is likely to let through the water, the tenant is not responsible for the slate coming off but he ought to put in another one to prevent further damage”: at p511- 512.

[87] This decision plainly supports the proposition that the tenant is required to carry out work on parts of an item of fixed equipment, even if the defect is due to fair wear and tear, in order to carry out what can properly be described as repair of the unit as a whole. It is only where that unit is beyond repair because of the effects of fair wear and tear, that the exception applies. It may be added that their Lordships were dealing with a lease of a dwellinghouse. More might be expected of a tenant in the context of an agricultural lease where the tenant can be assumed to have a much wider range of practical skills than an ordinary domestic tenant.

[88] In short, the effect of section 5(2)(b) is that the tenant’s obligation to maintain requires him to repair parts which can be repaired even if the damage or disrepair is due to natural decay or wear and tear. But it does not oblige him to maintain an item when defects due to natural decay or fair wear and tear cannot be put right without substantive replacement.

Section 33A

[89] At various points Mr Telfer emphasised his contention that work of replacement or renewal paid for by the tenant in whole or part, fell to be regarded as a tenant’s improvement. We understood this to be intended to relate to work which was not in a thorough state of repair in 1971 and that he relied on the decision in SLC/107/05. Sir Crispin invited us to reconsider that decision. It was a decision of the Chairman sitting as a Divisional Court.

[90] Section 33A is, of course, another new provision and the Court reached its decision in that case expressly recognising that it had not had the benefit of full submissions. We, accordingly, welcome any opportunity to give further consideration to the proper construction and application of this provision.

[91] Sir Crispin’s main challenge was based on repetition of the proposition that an improvement had to be something new, not the replacement of something which existed before. This contention was supported by reference to a line of English authority dealing with the distinction between “repairs” and “improvements” in the context of legislation relating to tenancies of domestic dwellings. We are not persuaded that dicta in that context can properly be treated as demonstrative of any overarching principle. In ordinary language, a “repair” might well be described as bringing about an improvement. But, in any event, the main answer to this argument is that “improvements” are strictly defined for the purposes of the 1991 Act. It is not every renewal of equipment which would fall within the provisions of Schedule 5 but the Schedule appears to us to include various items which would fall into the category of replacement of equipment, or parts of equipment, which already existed on the holding. Para. 11 refers to “Making or improvement” of watercourses etc. Para 15 refers to “Renewal of embankments”. Para 18 includes works of “improvement” as an alternative to “making”. The latter clearly relates to new items and by contrast the reference to “improvement” shows that work on existing items is covered. Of particular significance, in the present context, may be the reference to “repairs” in terms of paragraph 23 of Schedule 5. The importance of this reference is that the English cases cited all turned on a contrast between “repairs” and “improvements”. It is plain that the latter word is used in the 1991 Act as including repairs and this means that the cited cases proceeded on a different basis.

[92] Because of the various references in the Schedule to works which plainly are not limited to additions to the holding we do not think it possible to find that Parliament intended Schedule 5 to be construed in light of any principle that improvements had, necessarily, to be additional. Accordingly, we do not find the authorities cited to be of assistance. We are satisfied that we must look to the terms of Schedule 5 for the meaning of “improvement” in the context of section 33A and cannot assume that any item which might fall within the Schedule is deemed to be excluded because it is not new to the holding. That is not to cast doubt on the need to keep in mind the distinction between repairs, renewals and improvements. Although we reject the view that the term “improvement” falls to be restricted to something which is new or additional, it may be observed that the idea of something new may in practice give useful guidance. Work of maintenance of an existing item will rarely be an improvement within the scope of Schedule 5. We see no need, at present, to qualify the comments made at the foot of p179 and 180 in the previous case.

[93] Sir Crispin further submitted that the PLA made no provision about reduction of compensation in respect of any contribution by the tenant to renewal or replacement work undertaken by the landlord, and that section 33A simply did not apply. He went on to argue that the decision was wrong in holding that contributions to the cost of work were to be treated as equivalent to “executing” work and challenged the view that payment which a tenant was obliged to make under the PLA could possibly be an “improvement”.

[94] In the previous decision the Court said that, in applying section 33A to an agreement, it was necessary to have regard to the substance and not the language. That may have been thought to be self evident. The Court did not attempt to support it by any analysis. Mr Telfer had not advanced any line of authority in support of such a proposition. We must consider the possibility that Parliament intended section 33A to cover only agreements under which the landlord and tenant were agreed that the work in question was “an improvement” and had agreed specific provision for writing down, or otherwise, which would have the effect of limiting the compensation due. Plainly such a literal construction would get some support from the presumption that a restricted construction was appropriate in relation to retrospective legislation.

[95] Before returning to that issue we look briefly at the terms of the previous decision. Neither party attempted analysis of what the Court said and we think there is a risk of taking too broad view of it. It is important to recognise that the Court considered the four separate factors it thought necessary to bring a case within section 33A: listed as (a) to (d) at p.169. The first, (a), was that the work in question had to be capable of being treated as an “improvement”

[96] The Court treated the PLA as an agreement which had the effect of requiring the tenant to pay for work which would have been capable of being treated as an improvement had it been done at the instigation of the tenant and with due notice under section 38. In relation to the dyke, the Court treated the evidence as justifying a conclusion that what was involved was the “making” of a stone dyke within the meaning of head 13 of Part II of Schedule 5. It is to be noted that the Court said expressly that: “Reducing part of a wall to ground level and rebuilding would rarely be equivalent to building a new wall because the foundations are a critical part of most walls”:p 181. We note that the decision did not spell out the distinction which the Court perceived between building from the ground and building from the foundations. In any other case where a similar issue arises, that matter may require closer examination. It does appear, however, that the Court had in mind that rebuilding using existing foundations might not be within the scope of head 13.

[97] It is clear that the Court took, as the start point of the discussion, a finding for the purposes of that case that the work in question did fall under head 13: p181. The work done could be treated as an “improvement”. The question it went on to consider was the significance of the absence of notice under section 38. (It may be noted that the paragraphs at p174 setting out the terms of that section in the Note seem to have been printed in reverse order) In any event, the critical provision is the new subsection 2A. Notice is not required where the improvement was carried out by executing work which the landlord was required to carry out at the time of the lease. The Court found it possible to draw an inference that the dyke could not have been in a thorough state of repair at that time.

[98] It is important to stress that the reference to the landlords’ failure to put the dyke in a thorough state of repair was in the context of applying section 38(2A). The earlier finding that the work fell within the scope of section 33A was because the complete rebuilding of a wall could be treated as an improvement under head 13, not simply because it involved work which the landlords should have executed at the outset in terms of section 5(2)(a). Work to put a dyke into a thorough state of repair might well involve reduction of part of it to ground level and rebuilding. It might be seen as work of repair. If more extensive it might be replacement or renewal. The Court expressly commented that this would not, in itself, be the same as “making a wall”. In other words, it would not be an improvement under head 13. It might, in other contexts, be an improvement under head 23 but we accept that it is necessary to take account of the PLA when considering that head. That head is not limited to obligations required by virtue of section 5(2)(a). Work carried out, or more accurately the payments made, by the tenant because of the obligation resting on him under the PLA would not fall within the description in head 23 and nothing in Section 33A can be taken to change that description.

[99] In relation to the broad question of whether it is right to look at the substantive effect of a PLA rather than the words used by parties, we have heard nothing to lead us to decide that the previous decision was wrong. An agreement by which a tenant agreed to carry out work which was in fact an improvement on terms which clearly implied that he would get no compensation at all, appears to us to be within the scope of section 33A. That conclusion gets support from the new subsection 2A of section 38. It has not been suggested that this was intended simply to cover a situation where a tenant had thought he was carrying out an improvement but had forgotten to give notice. It plainly envisages a situation where the work was not recognised at the time as being a work of improvement. That supports the view that it is the substance of any agreement which has to be considered.

[100] Any broad contention that all work by a tenant in relation to equipment which was not put into a thorough state of repair by the landlords at the outset is be regarded as an improvement clearly goes too far. For avoidance of doubt, we observe that a passage in the previous decision - in the second paragraph at p174 - which might be thought to support such a view must be read in context. The Court was dealing specifically with the last of the four matters which had to be established under section 33A. It had dealt with (a) and was dealing only with (d). Most work of repair or renewal would, in our view, be covered by the PLA. The new provisions of section 5 show the very limited way in which existing agreements may be interfered with. Section 33A is a different provision. Unless the work is properly to be described as an improvement that section has no application.

[101] Although we remain willing to reconsider the construction of section 33A, we are not persuaded by the arguments so far advanced. We consider it sufficient to say that we reject the present challenge and are not yet persuaded that the decision is unsound in point of principle. We shall, of course, have to consider carefully how it applies in the circumstances of each case. It may be that the approach taken to the facts in SLC/107/05 will be shown to have been erroneous. Even in circumstances superficially similar to those of the dyke at Howatsburnfoot, we shall have to consider all relevant evidence in any particular case and reach a decision based on proper assessment of that evidence.

Relationship of rent and maintenance obligations

[102] Identification of the relationship between maintenance obligations and rent might have been expected to have a bearing on construction had it been possible to be confident of Parliament’s approach. However, the intention of Parliament in this regard remains obscure. The timing of the right to drop the PLA is related to the fixing of rent and that tends to suggest that Parliament recognised a relationship between rent and maintenance obligations. But there is nothing in the Act which appears calculated to give positive effect to that. We heard that the original proposal had been to allow a tenant to drop his PLA before a rent review: SPICe at pp.3 and 4. That would be consistent with a recognition that the terms of a PLA were important in relation to rent. The rent would be fixed on the assumption that the PLA had been or would be nullified. However, as enacted, any such relationship has been ignored. We heard nothing to suggest that this was due to a change of policy. It may have been an accident of drafting. However, other provisions such as section 33A plainly give tenants a right to set aside certain types of contractual agreements relating to fixed equipment without any explicit recognition that this would be expected to have a bearing on rent.

[103] We have little doubt that the weight of informed opinion would be to the effect that agreements relating to maintenance of equipment have a bearing on rent and that this is consistent with underlying theory, but Parliament has made no explicit provision to allow for this. In the circumstances, we do not think it possible to pray in aid any assumption, one way or another, as to the intention of Parliament based on an understanding of the relationship between rent and maintenance obligations. To that extent, accordingly, Mr Telfer’s submissions on this matter can be considered to have a bearing on construction.

[104] Although we are not satisfied that this issue provides any guidance to construction of the new provisions, it is right to indicate for guidance of parties that we are entirely satisfied that there is inevitably a relationship between rent and the terms of the contract. If a tenant has to undertake full maintenance obligations in place of the landlord he would be entitled to expect to pay a lower rent.

[105] The tenant did not accept that basic relationship and we are aware that he may have had a variety of arguments in his mind which, if correct, would obscure the practical effect of it. However, it may be salutary for Mr Telfer to have in mind that a landlord requires to obtain the money from some source to carry out his obligations of renewal and replacement. He conceded that the landlord could not be assumed to have an independent “pot of gold” from which to fund maintenance or provision of equipment. He suggested that the funding would come from other income from the land (we assume that he had things such as shootings in mind) and from the Government. These factors may well have a part to play and the underlying theory may well have been obscured in practice by the availability of grants and the benefit from inflation in capital values. But, the expectation, over the long term, must be that payment for maintenance or provision of equipment will be derived or recouped from the fruits of the land. That, we think, is well understood in ordinary commercial leases and we are not aware of any justification for a different approach to leases of agricultural land. Some landlords do have independent sources of income and are prepared to use it to support their tenanted farms. We do not think that it can be intended that the legislation be construed on the basis of any assumption that this is inevitably the case.

[106] We have not found our acceptance of a link between rent and maintenance obligations to be a relevant factor in relation to any immediate issue of construction. But, recognition of such relationship might help moderate some of the sense of grievance Mr Telfer obviously feels towards his landlords. The point is likely to be of relevance in the next rent review and it is as well to deal with Mr Telfer’s concern that he would face an argument that dropping of the PLA would automatically lead to an increase in rent at that review. He was aware of evidence, in the application SLC/107/05, that the existence of a PLA would normally reduce rents by at least 20%. We understood him to have a fear that if the assumption had to be made that the current rent was correctly assessed and if no other relevant change was demonstrated, acceptance of a differential of 20% due to a PLA would mean that his rent would have to be increased by that amount if the PLA was dropped. It may be said that our understanding of the effect of section 13 is that at each review a fresh assessment is required. The rent fixed for the past period may be an adminicle of evidence. But it is no more than that. There will be no question of an automatic increase just because of a change in maintenance obligations. The Court would have to have regard afresh to all the circumstances mentioned in the section. The maintenance obligations would simply be a factor.

[107] Mr Telfer made clear his intention to recover, by specification, details of all other leases where the respondents were landlords. We understood that this was with a view to demonstrating that there was no established connection between maintenance obligations and rent and no evidence to support the view that a differential of 20% applied. We shall have to deal with such a motion if and when it is made. It does not appear to have any bearing on the issues in the present case. However, we take this opportunity to express some thoughts which might be of assistance to the parties. It can be said that we shall be slow to be persuaded that recovery should be allowed without a very clear understanding of the expected outcome and, in particular, the purpose to which any material recovered might be put. Although the provisions of section 13 invite consideration of the terms of other leases a great time of time and effort will be wasted unless there is a positive focus of attention. It is highly unlikely that the type of in depth analysis of every lease necessary to see the role played by the PLA, would prove to be worthwhile. Even if a particular example could be found of a tenancy where the PLA had been dropped by agreement and no apparent change in rent had followed, this, of itself, would tell us nothing. We would need to know all the circumstances and the motivations of the parties. The landlord might have been willing to drop the PLA rather than drop the rent. The fixed equipment might have been in a reasonable state of repair and the tenant been in a position to take advantage of the new provisions. Agreement reached in that context might simply have reflected recognition of this by the landlords.

[108] One possible approach which Mr Telfer might be considering would be to specify the documents required as all documents “showing or tending to show that there was a change in rent directly consequent upon a change in maintenance obligations”. If the respondents were unable to produce any such material Mr Telfer might rely on that failure as an adminicle of evidence supporting his proposition that the dropping of a PLA had no effect. But the fact that particular parties have agreed a rent without explicit reference to changes in maintenance obligations does not mean that the Court would necessarily follow the same course.

Severability

[109] Mr Telfer argued that the effect of subsection 4A was that the whole of any formal agreement had to be set aside if it contained provisions which fell within the scope of the provisions of the subsection. However, for present purposes, it is enough to say that there is ample authority for the general proposition that a statutory provision nullifying an agreement does not necessarily vitiate the whole terms of any formal arrangement of which the particular agreement forms part. It is necessary to consider the particular provisions struck at by the statute, the reasons why they are struck at, and to consider to what extent other provisions are either inter-related with the provisions in question or tainted by the reasons for setting such provisions aside. We accept that it is not necessary to strike down the whole agreement if the provisions caught by the Act can be cleanly severed from the rest.

[110] “Questions of severability are often difficult. There are no set rules which will decide all cases. Tests …. that have been formulated as useful in particular cases are not always satisfactory for cases of other kinds”: Carney v Harvey, at p309H. Some types of illegality will necessarily taint the whole provisions of an agreement: see the example in Carney at p311 C-D. However, we think the present case is at the opposite end of the spectrum. No question of illegality arises. The tenant is simply given a right to set aside certain types of agreement if certain conditions are fulfilled. It is for the tenant to identify the provisions he seeks to have set aside. Issues of severability will depend on particular circumstances and will be raised by the party having the relevant interest. The point will normally be one of pure construction and questions of onus would not be expected to present particular difficulty.

[111] In practical terms a clear example of the need for operation of the doctrine of severability is the lease in the present case. The argument was presented on the basis that the only provision directly challenged as falling under subsection 4A was the obligation on the tenant to pay for the haulage of all materials required in connection with the maintenance of the fixed equipment and the execution of renewals and improvements. Mr Telfer argued that if we were satisfied that this came within the provisions of subsection 4A, the whole lease should be nullified. The landlords made it plain that they would not resist this, but they contended that the provision was readily severable. We agree. We simply note that although Mr Telfer seemed confident that nullifying the lease would not affect his right to occupy the farm, we understood that this was based on an assumption that if the lease was nullified with effect from 22 October 2007, this would restore him to the position of his father in 1970. We are not satisfied that his confidence was soundly based, although some other arguments might be open to him.

[112] The cost of transporting material for work of renewal is an inevitable part of the cost of the work. It is true that, traditionally, haulage has been treated as a separate item and where the materials can be found on the farm, the cost may be seen as simply part of the routine work of a farm moving material from one part to another. However, it is an element of cost in the same way as delivery costs from outside suppliers. A tenant’s time is valuable. Haulage might well be a significant element of cost. We are satisfied that the haulage provision is one which falls within the scope of 4A. We are not persuaded that it is inextricably linked with any other provision. The landlords accepted that it could be treated on its own. We see no prejudice to the tenant in doing so. It is apparent that a tenant might be greatly prejudiced by a provision which required the whole of any agreement to be nullified in order to obtain the benefit of subsection 4A in respect of a particular provision. Although expressed as part of a package we see no good reason why the haulage provision should not simply be excised

[113] The position in relation to the PLA is more difficult. Mr Telfer limited himself to contending that it should all go. He did not attempt an alternative submission analysing particular provisions. Having decided that we can and should take a selective approach, we think that it would be safer to hear further submissions in relation to the PLA if we come to the stage of determining that parts of it can, indeed , be dropped.

[114] In any event, we accept that the tenant is limited to the agreements referred to in his notice. We cannot allow amendment to his crave seeking to add additional types of agreement. We also accept that it is not appropriate for us to pronounce a “blanket order”. The tenant must identify the documents he challenges. We would consider any further attempt to amend to make matters more specific but that might be left until we reach the stage of giving positive consideration to the form of our order. We recognise Mr Telfer’s concern that there may have been agreements at rent reviews between his father and the Estate of which he has no knowledge. We would not be surprised to find parties discussing matters relating to provision or maintenance of equipment as part of review of rent. This is consistent with our understanding that these matters are widely accepted as essentially related. Sir Crispin appeared to give an assurance that there were no such documents in the present case. There was some discussion at the hearing of the possibility of Mr Telfer satisfying himself on the point by way of motion for recovery of documents. We do not necessarily accept that this is an appropriate procedure. We would have to hear submissions if Mr Telfer did try to proceed in that way. The problem might be forestalled by a suitable formal letter from the respondents.

Scope of section 5(4B)

[115] It may be noted that parties were agreed that the sub-section contemplated only a specified date and gave the Court no power to allow a PLA to be dropped from any date other than the one specified in the notice. This agreement seems to us to be sensible.

[116] The first contentious issue in relation to subsection 4B(b) related to identification of the equipment covered. Although the traditional PLA tends to be wide in its scope and to be intended to cover all fixed equipment on a farm, the provisions of subsection 4A are not limited to such all-embracing agreements. They would cover a range of different types of agreement including, for example, the present, where the main agreements are those relating to fencing and drainage. Conceivably an agreement might relate to only a single item or one type of item of equipment. For that reason, we consider that on a proper construction of subsection 4B(b) it should be read as if it included the word “relevant”. If a PLA was limited in scope there would be no reason to make the dropping of it conditional on all equipment on the farm being in a reasonable state of repair. It can always be assumed that Parliament intended its provisions to be relevant to their context. We see no difficulty in assuming an intention to limit the provision to relevant equipment.

[117] 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.

Reasonable state of repair

[118] We are satisfied that the concept of a “reasonable state of repair” is an objective one, to be determined by looking at the state of the equipment. We cannot accept that Parliament intended an assessment of condition based on issues of responsibility for that condition or requiring a division between dilapidation due to want of repair and that due to natural decay and fair wear and tear. Put bluntly, we have no doubt that Parliament did not contemplate that a fence which was “on its last legs”, “worn out”, or “of no practical use as a fence” could, nevertheless, be described as being in a “reasonable state of repair”. That would not be consistent with normal English usage. We can recognise the logic in Mr Telfer’s submission although it seems to us that it did not give proper regard to the context. The new provision applies only where the tenant is responsible for renewal of equipment. It can be said in a broad sense that the substantive intention of the new provisions must have been that the tenant could drop the PLA in circumstances where the obligations under it had been fully performed and where, accordingly, there might be expected to be no real prejudice in a fresh start in relation to maintenance obligations. That would require the equipment to be in a reasonable state of repair in an objective sense.

[119] In any event, our starting point is the plain English meaning. When that meaning seems to make perfectly good sense in its context, there is no justification for any inference that the subtle artificial construction contended for by the tenant was intended by Parliament.

[120] We are entirely satisfied that the natural meaning does make sense in its context. Although we have found that the present PLA is limited in its scope, it is plain that the new provisions contemplate a situation where the tenant has some responsibility for both repair and renewal of the items in question. There would be no justification for looking only at the effects of repair as opposed to general condition. It is the state of equipment having regard to that existing responsibility which is to be the start point for change.

[121] Assessment of what is, in any particular situation, “a reasonable state of repair” will present its own problems but that does not alter the basic construction of the legislation. On a robust approach, a landlord and tenant could be expected to have little difficulty in most cases in identifying equipment in a reasonable state of repair. Various different tests may be applied in practice to try to help that decision. One practical consideration might be the period of rent review. If equipment is likely to remain fully functional for at least three years it might reasonably be said, in the context, to be in a reasonable state of repair. Sir Crispin’s discussion of reasonableness as between a willing landlord and willing tenant agreeing to give up the PLA might be a factor. However, the objective approach does not require us to start by assuming that any different standard should be applied depending on age. The question is essentially one of function and the capacity of the equipment to continue to function effectively for an acceptable period.

[122] Although the tenant made much of his assertion that the intention of Parliament was to make it easy to drop a post-lease agreement we see no reason to make that assumption. In any event, Parliament can be seen to have proceeded on the straightforward basis that, at the point when the PLA was to be dropped, the obligations arising under it would have been performed. On the face of it the PLA could be dropped only if all the equipment in question was in a reasonable state of repair. We accept that the concept of reasonableness applied to the equipment as a whole might allow a degree of disrepair in respect of one particular item to be outweighed by the weight to be given to the generally good state of the rest of the relevant equipment. But, subject to that, the new provision can be treated as capable of robust application based on an objective assessment of the state of the equipment.

[123] We note that, of course, different considerations may arise where the tenant relies on head (ii). But it does not appear to us that this has any direct bearing on the proper construction of the main provision which can be assumed to have been seen as head (i). In any event, the same approach to reasonable condition can be taken in both.

[124] It may be said that it is our impression that the scale of work outstanding on 22 October 2007, in relation to Duntercleuch and Hopetoun march fences was such that it might be difficult to say that the relevant equipment was in a reasonable state of repair. The tenant had had serious problems arising from the state of the Duntercleuch fence. However, if this is not agreed, we would need to look again at all the equipment covered by the agreements in question. We would need to hear evidence of the significance of the defects and cost of outstanding repairs.

Onus - with particular regard to Section 5(4B)(b) head (ii)

[125] The initial onus or burden of proof rests on the party who is bringing the case. He is the one who will lose if nothing is proved - unless he has the benefit of some presumption in his favour. In the present case, the tenant must show that he is entitled to have the PLA nullified. To do that he must satisfy the Court that the provisions of subsection 4B are complied with. There is no suggestion of any relevant legal presumption. On the face of it, accordingly, this means that he must establish that he has given the appropriate notice under subsection 4B(A) and that the circumstances fall within either head (i) or head (ii) of subsection 4B(b).

[126] The landlords initially adopted that position and we heard no persuasive argument to the contrary. There was no attempt by Mr Telfer to refer to any authority or to analyse the role of the burden of proof in a case such as the present. Not surprisingly, there was no attempt by him to consider the distinction which might arise in particular circumstances between a legal or persuasive burden, on the one hand, and an evidential or practical one, on the other. On the face of the pleadings the tenant appeared to have accepted the persuasive burden. He averred that on 22 October 2007 the buildings and other fixed equipment were in a reasonable state of repair, or where they were in an unreasonable state when the agreement was made, they were not in a worse state of repair than they were then. Despite that averment, the tenant presented his arguments on the basis of an assumption that the onus was on the landlord. The point was not critical in relation to head (i). The detail of the state of repair of a number of items in October 2007 was part of an ongoing dispute well ventilated in pleadings. The landlords eventually conceded that the burden of establishing head (i) rested on them. That was a helpful practical concession in the circumstances of this case. For the purposes of the tenant’s submission, we have taken the concession as equivalent to a concession that the “persuasive” burden under head (i) rested on the respondents. But, we did not understand the landlords to go so far and we would not preclude further submission on this point if relevant.

[127] The substantive dispute in the present case related to the burden of proving head (ii). We have no doubt that the starting presumption must be that the onus rests on the applicant who has to prove his case. We are entirely satisfied that had head (ii) stood alone, there would have been no grounds for a contention that the onus had shifted. The terms of head (ii) in themselves provide no basis for argument that the onus was intended to be transferred to the landlords. The provision applies only when the buildings and other fixed equipment were in an unreasonable state of repair when the agreement was made. We do not accept that Parliament could have intended to place an onus on the landlords to prove that the equipment was in an unreasonable state of repair when the agreement was made. So there is nothing in the wording to shift the starting burden on an applicant to prove the case.

[128] In addition to the main rule that the onus is on an applicant to make out his case, some reference was made to the supposed rule that a party would not be obliged to prove a negative. That can be a useful practical test. However, it must be applied in a practical way. It is not simply a matter of finding a negative label such as “not” being in a reasonable state of repair. Where a person needs to rely on equipment being in an unreasonable condition in the past, we see no difficulty in treating this as a positive averment which requires to be proved. It is equivalent to an assertion of a breach of contract by the landlords. That is normally to be seen as an affirmative proposition with the burden on the party who asserts it: see McLure, Naismith Brodie and Macfarlane v Stewart at p12.

[129] Mr Telfer urged the view that the onus on each head should “logically” be the same. He contended that as the respondents had conceded that they had an onus of proving head (i), it was incomprehensible that they did not also have the onus of establishing head (ii). However, we are satisfied that a discriminating approach to onus is required and we see no difficulty in distinguishing the two heads for this purpose. We are entirely satisfied that the burden of proving head (ii) rests on the applicant.

[130] The respondents contended that such a conclusion would be fatal for the applicant having regard to the admitted state of the equipment on 22 October 2007 and the absence of any specification as to the state of the fixed equipment in 1971 when the PLA was concluded. In relation to head (ii) the applicant does have an averment about the condition of the buildings and other fixed equipment when the agreement was entered and he has made no secret of his contention that the dykes, fences and drainage were in a poor state at that time. We are satisfied that he should be given an opportunity of making a case under head (ii) if he thinks he will be able to establish it.

Where landlord has responsibility for execution of work

[131] We turn to the difficult question which seems to lie at the heart of the present case. Can the tenant bring himself within the scope of subsection 4A when the express provisions of subsection 4B are not complied with but the reason for this is that the responsibility for the actual work necessary to put the fixed equipment into a reasonable state of repair rests with the landlords. The new provisions are, in terms of 4A, aimed at a situation where the tenant has, by agreement, undertaken to execute the work of replacement or renewal of the buildings or other fixed equipment on the holding which would otherwise have rested on the landlord. As the work of routine repair would, in any event, rest on the tenant under subsection 2(b) the new provisions might seem to contemplate a situation where the state of the equipment would be entirely the responsibility of the tenant. However, it is plain that the new provisions are not limited to situations where the tenant has direct responsibility for actual execution of the necessary work. Agreements such as the present PLA are brought within the scope of subsections 4A and 4B by the provisions of subsection 4C.

[132] This gives rise to the obvious difficulty, exemplified in the present case, where equipment is plainly in need of work to put it into a reasonable state of repair but that work has to be executed by the landlords. The legislature has made no express provision to cover that situation. The question is whether some such provision can be implied or whether some other relevant principle of law can be found to deal with the situation.

[133] In looking at this question, Mr Telfer urged the view that the obvious intention of Parliament was that it would be easy for a tenant to drop a PLA. We are not satisfied that this was necessarily the intention. Parliament can be taken to have been aware that agreements covered by subsection 4A might be of some complexity. The legislature plainly recognised, by the provisions of subsection 4C, that such agreements did not always relate simply to work to be done by the tenant. They may well have recognised that the process of change would present the type of difficulties we see in this case. They may well have decided to introduce a change to deal only with straightforward situations. It may be added that we accept that the effect of the new provisions was that the landlords would lose rights. It is clear that the new provisions allow a tenant to have a rent fixed at a stage when he has onerous obligations under a PLA and then free himself from these obligations. This could potentially give a tenant the benefit of a lease for three years where the rent had been fixed on the basis of his having onerous maintenance obligations when such obligations had ceased. We see no good reason why the new provisions should not be applied strictly. If, as a matter of fact, the equipment is in a reasonable state of repair, the consequences of dropping the post-lease agreement might have been considered to be tolerable. It could be viewed as giving parties a fresh start in relation to their obligations of maintenance if all the equipment was in fact in a reasonable state of repair when the change was made. By contrast, as Mr Telfer’s own contentions demonstrate, nullification of a PLA while work was outstanding might have a serious adverse effect on the landlords. Mr Telfer freely accepted that if the equipment had not been in a reasonable state of repair at the critical date but work had been started on it, he would have been responsible to pay for it in terms of the post-lease agreement. He also seemed to accept that this would not be limited to a start of physical work but could include some stages of active planning. But he contended that in the present case because the work had not been started he could drop the PLA. The landlords would be liable to do the work under the terms of section 5(2)(a) but he would no longer have to pay for it.

[134] In the present case, it seems that the landlords did have plans for much, if not all, of the work. They did not dispute that it was required. They were in discussion as to the issue of responsibility for payment. Indeed, there was a litigation over it. Mr Telfer blames the landlords for delay and for present purposes we must proceed on the assumption that he would be able to establish this. But there are types and degrees of “fault”. A landlord might not have been made aware of some defect and yet still be in breach of obligation. It is not difficult to imagine other situations where no real question of fault could be said to arise. A landlord might have accepted full responsibility for doing the work under the PLA but invited his tenant’s proposals as to how best to carry it out. There might have been genuine uncertainty on this point with quite a lengthy period of sensible discussion. Or the need for work might have arisen quite suddenly giving the landlords no time to plan a scheme of replacement. Had Parliament addressed this issue we think it would have had to conclude that no simple term could be included which would distinguish fairly between the many factual circumstances in which the equipment was not in a reasonable state of repair because the landlord had not executed work it was obliged to do. A simple proposition that subsection 4B might be deemed to be complied with if the responsibility for carrying out any necessary work rested on the landlord, would work capriciously and unfairly. We are satisfied that no simple term can be found which would do justice over the range of readily foreseeable situations.

[135] The policy behind the new provisions is not self explanatory. Parliament must be taken to have understood that the question of responsibility for renewal of equipment would be part of a package of obligations including an obligation to pay a rent appropriate to the terms of the tenancy. The decision to allow the tenant to make a change must have been driven by a desire to benefit the tenant at the expense of the landlord. How far that was to go is an issue of policy. Should the tenant be allowed to drop the PLA only where the defective state of equipment arises from some real fault by the landlord? If so, how should real fault be defined?. The Court may be able to fill a gap in legislation where an intention is obvious. But it cannot itself create new provisions.

[136] Mr Telfer did not attempt to argue that we could insert a new head in subsection 4B providing that 4A applied where the equipment was not in a reasonable state of repair and that was due to the fault of the landlords. That would have been a somewhat rough and ready exclusion. A more explicit provision might have been to add a new head (iii) saying “the buildings and other fixed equipment are not in a reasonable state of repair and, in terms of the agreement it was for the landlord to execute any work necessary to put it into a reasonable state of repair.” But such a provision would not have distinguished fairly between work which the tenant should have to pay for under the PLA and work in respect of which the Parliament might have wished to free him from liability. In the present case, we do not think that the terms of any potential additional clause are obvious enough to be inferred.

[137] It was contended that for the landlords to be able to rely on their own failure to maintain the equipment would be a fraud on the lease. Mr Telfer did not elaborate that proposition. The term “fraud on the lease” is most commonly used in relation to resumption clauses where it may be seen as a short-hand for the proposition that an apparently unrestricted provision in a lease must be construed in light of the reasonable contemplation of parties at the time the lease was entered into. We think it clear that little help in construing a statutory interference with the contractual rights of parties can be expected to come from consideration of the reasonable contemplation of the parties in entering either the lease or the PLA. They cannot be taken to have had the provisions of the 2003 Act in mind.

[138] As we are satisfied that no simple term can obviously be implied, we consider that the provisions of head (i) must have effect as they stand. It seems plain that certain items of fixed equipment, the fences, dykes, and drains were not, objectively, in a reasonable state of repair. Steps were in hand to have them dealt with under the PLA. Accordingly, it is tolerably clear that the condition specified under head (i) was not fulfilled as at 22 October 2007. Unless the tenant can bring himself within the terms of head (ii), he will not succeed in his attempt to set the agreements, or any part of them, aside.

[139] The condition set out in head (ii) is expressed as one which turns on a state of fact. It does not provide for any separate, alternative or additional, test. Sir Crispin contended that, in relation to head (ii), the landlords were entitled to rely on the acceptance provision. The lease was a probative agreement. It was not competent for the parties to try to lead evidence to qualify the statement in the lease that the tenant accepted the buildings and fixed equipment as in a sufficient tenantable and habitable condition and adequate for the purposes for which the farm was let. Mr Telfer made no express submission. We understood him to rely on the view that failure to make a record prevented the landlords from relying on any part of the provisions of the lease relating to the state of equipment. We have rejected this contention in relation to the contractual arrangements.

[140] It is sufficient at this stage to say that we are not persuaded that Sir Crispin’s submission meets the difficulty he faces in relation to the express statutory provisions. We do not preclude further submission on this issue but we consider it proper to intimate our preliminary view that the acceptance provisions cannot over-ride the explicit provisions of head (ii). As we have indicated above, the contractual provisions will be entitled to weight as an adminicle of evidence that the equipment was in fact in the condition the tenant accepted it to be. But to treat the acceptance provisions as having the effect of preventing consideration of the state of the equipment at the time of the PLA would appear to have the effect that the express provisions of head (ii) were qualified by reference to the parties’ agreement. We are not yet persuaded that there is any justification for this approach. For completeness if may be added that further submission on this head might require to consider the scope of the principles discussed in Johnson v Moreton. There may be little doubt that part of the intention of Parliament in enacting the changes to section 5 was based on an acceptance that tenants had often found themselves forced into agreements which were not in their best interests. In that context, it can be assumed that Parliament would not have intended that the main thrust of the new provision could be avoided by a contractual restriction on competent evidence.

[141] The practical importance of this issue is not yet entirely clear to us. If we hear no further submissions as to procedure, it can be left to be dealt with in the context of a proof before answer. But we can see circumstances in which it might be thought advisable to have it conclusively resolved by way of further debate or perhaps written submission.

Negotiations - subsection (4D)

Mr Telfer argued that the provisions of subsection 4D were so wide that they prevented any discussion between parties as to implementation of agreements in force between them. We are not satisfied that it is necessary to treat the provisions as having this effect. In the first place, it must be observed that if a compromise agreement is acted on, the question of whether it was enforceable or null, is of little significance. It is also important to have regard to the specific terms of the provisions. It is not all agreements relating to the landlords’ obligations which are in issue. It is only agreements where the tenant is to pay for work which should have been done by the landlord under the lease. Until the PLA is set aside, it forms part of the lease. Accordingly agreements as to how the PLA is to be implemented, would only be null if it could be demonstrated that they involved the tenant accepting an obligation to pay for something in addition to his obligations under the PLA. It may be assumed that Parliament, like the courts, would be keen to encourage parties to settle outstanding disputes without litigation and in relation to agreements intended simply to facilitate the implementation of an agreement already in force, compromise agreements would not lightly be interfered with..

[142] The tenant’s wider submissions in relation to the obligations of parties in respect of items provided as tenant’s improvements were not within the scope of the matters which we expected to have resolved at this debate and we are not satisfied that we heard full submissions in relation to them. As it is not clear to us what bearing they have on issues currently outstanding between the parties, we have decided that it is inappropriate to express any views at this stage.

Decision

[143] Counsel invited us to have in mind the decision of the Inner House on 3 February 2009 in the appeal in SLC/119/07. The Court decided that an appeal could not proceed where it could not identify any determination or definitive decision in the Land Court’s Note. It will be for the Appellate Court considering its own jurisdiction to decide what type or types of findings are properly to be regarded as “determinations” within the meaning of section 88. We, accordingly, avoid use of that word. However, we consider it appropriate to make the following findings based on the foregoing discussion. Our intention in making these findings is to express a concluded view on certain matters of law for the purposes of litigation between the present parties. It may be, of course, that other expressions of view in the Discussion above should also properly be regarded as “determinations” for the purposes of section 88. We make the following explicit findings purely for avoidance of doubt.

[14] The failure to make a record in this case does not preclude the leading of evidence as to the condition of the fixed equipment at the date of the lease and does not preclude the landlords from relying, where it is otherwise open to them to do so, on any other provisions of the lease.

[145] In terms of section 5(2)(b) a tenant has to carry out such maintenance as can be effected by way of repair of an item of fixed equipment even if the damage requiring repair is due to natural decay or fair wear and tear. The exception relates to the stage where, due to natural decay or fair wear and tear, the item of equipment in question requires to be renewed or replaced.

[146] If particular provisions of an agreement which are caught by the terms of the section 5(4A) can be separated from other provisions without prejudice to the parties, it is appropriate to take a discriminating approach and nullify only provisions falling within subsection 4A.

[147] Section 5(4B)(b) should be construed as implicitly limited to relevant buildings and other fixed equipment; in other words to items of equipment affected by the terms of the agreement to be nullified.

[148] An item of equipment which has not been superseded as redundant, does not cease to be part of the “fixed equipment” for the purposes of section 5(4B) simply because it is worn out and requiring to be replaced.

[149] The concept of a “reasonable state of repair” in section 5(4B(b)(i) is an objective one, to be determined by looking at the state of the equipment without regard to the issue of which party is responsible for its condition.

[150] It is not possible to construe section 5(4B) as if it included a further provision allowing a PLA to be nullified when the fixed equipment was not in a reasonable state of repair on the relevant date but the work necessary to put equipment into a reasonable state of repair was to be carried out by the landlords.

[151] If an applicant seeks to rely on section 5(4B)(b)(ii) the onus is on the applicant to bring himself within the provisions of head (ii).

Procedure

[152] It is a matter of agreement that on 22 October 2007, the fences at Duntercleuch and Hopetoun needed a good deal of work to be made functional, and that the fence at Coshogle was incomplete and ineffective due to the absence of a water-gate. It is contended by Mr Telfer that the drainage at fields 7 and 23 was not functional. It seems to follow that none of these items was in a reasonable state of repair within the meaning of subsection 4B(b)(i).

[153] It was not argued that the condition of any of these items could be overlooked for the purposes of head (i) on the basis that the rest of the equipment covered by the PLA was in good order. Plainly each involved a significant state of disrepair and significant expense to remedy. In that situation there would seem to be little point in a proof relating to the condition of equipment on 22 October 2007 although we should make it clear that we do not go so far as to preclude Mr Telfer from making a case that in considering the question of reasonableness of repair, the state of the fences and ditches was outweighed by the condition of the rest of that equipment. We simply caution that he should give careful consideration to the merits of such argument before incurring the expense of embarking on it

[154] However, further procedure is necessary in relation to head (ii). Mr Telfer has made clear his contention that much of the equipment on the farm was in a poor state in 1971. It was implicit in all his observations that, if he had not relied on the absence of record and his contention that the onus was on the landlord, he would have made further averments to that effect. We think he must have the chance now to do so.

[155] We repel the tenant’s pleas in law intimated by letter of 27 March 2008. The first plea is covered by the finding made at paragraph [151]. The second appeared to relate to the proper construction of section 5(2)(b) and is inconsistent with our finding at paragraph [145]. In any event, as discussed above we were not persuaded that is was relevant to the question of dropping the PLA.

[156] In theory there might be some merit in dealing with the status of the Glenim farmhouse separately because it seems to raise substantive issues which are quite distinct from the other issues. However, if all matters are going to have to be dealt with by judicial proceedings, the practicalities may point in a different direction. It is unlikely that we would neatly occupy a fixed number of full days for proof in relation to either Glenim or the other issues. To avoid wasting time in two separate processes it will be as well to try to deal with them together. If further site inspection is required or if witnesses are required who are dealing with both issues, it might be as well for them to deal with all matters at once.

[157] It may be added that we well recognise the advantage of a procedure where individual issues can be dealt with and disposed of as the hearing proceeds. Such procedures are common in agricultural arbitrations. However, we are satisfied that most of the issues between the present parties appear to be of such complexity as to require the traditional judicial approach. Unless the hearing can be split up in some way, witnesses must give their evidence on all matters at one time. This factor might make it appropriate to attempt some form of division of subject matter before a hearing. It might help both sides to have the hearing dealt with in distinct chapters. That, however, is a different matter from having separate hearings.

[158] In relation to the boundaries at Wanlockhead, parties did take the opportunity at the hearing of trying to identify the precise dispute by reference to certain maps or plans. This may have clarified some of the issues. We understood it to be thought that further reference to IACS maps might be of assistance. In any event, we invite further submissions as to how to deal with this issue, once the parties have had a chance to clarify this matter by agreement or in the pleadings.

[159] We are satisfied that the debate raised several difficult and important issues relating to the proper construction of new legislation. The issues were of importance not only to the present parties, as such, but other agricultural landlords and tenants. We are entirely satisfied that it was appropriate to use senior counsel for the hearing.

[160] In course of submissions, Mr Telfer made clear his wish to proceed with the rent review application SLC/97/08. This was sisted on 30 October 2008 for the reasons set out in paragraphs [21] to [23] in our Note of that date in the present case. We indicated that the question of sist might fall to be reconsidered in light of our present decision. We think that the proper course now is for Mr Telfer, if he thinks fit, to make a formal motion for recall. We shall deal with that in light of any answers in the usual way.

For Applicant: Party

For Respondents: Sir Crispin Agnew of Lochnaw, QC; Messrs Anderson Strathern, Solicitors, Edinburgh