FULL COURT

(Lord McGhie, D J Houston)

EXECUTORS OF THE LATE C G TELFER v BUCCLEUCH ESTATES LIMITED

(Application RN SLC/30/07 – Order of 15 February 2008)

AGRICULTURAL HOLDINGS – SUCCESSION TO IMPROVEMENTS – TENANTS FITTINGS AND FIXTURES – TENANT’S IMPROVEMENTS –OWNERSHIP OF FIXTURES – VESTING – RIGHTS TO COMPENSATION – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 1991 sections 12 18, 19. SUCCESSION (SCOTLAND) ACT 1964 SECTION 16

An executor of a tenant of a farm brought an application for an order finding the landlord liable to pay compensation for the tenant’s improvements that belonged to tenant at the date of his death, which were said to be vested in the Executors, or finding that the legal ownership of the said tenant’s improvements have been passed on when a new tenant was nominated as tenant by the Executors and accepted as tenant by the landlord. He also asked the Court to determine a reasonable amount of time in which the landlord should inform the Executors of the fixtures and fittings the landlord wishes to pay compensation for and which the landlord does not, or determine that the legal ownership of the said fixtures and fittings had passed on to the new tenant. The landlords did not dispute that the whole “rights” of the deceased tenant had passed on to the new tenant. Accordingly, although the term “legal ownership” was disputed, a substantive finding could be made in respect of the alternatives to each of the craves.

HELD that the appropriate finding in respect of the alternatives was that the whole rights and interests of the deceased tenant in relation to the improvements and the fixtures and fittings passed to the new tenant; that although his rights in fixtures may be rights of “property” it was unnecessary for the purposes of any live dispute between parties to make any finding to that effect and inappropriate to make any finding in general terms when the Court had not heard full submission as to the significance and effect of the exception in section 18(1)(b).

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

[1] This application was at the instance of Mr Telfer as executor of his father, the former tenant of Auchengruith. Mr Telfer himself was joined as a party when he was accepted as tenant. The substantive issues raised by him related to the nature of the tenant’s rights following a transfer by succession. That matter has been dealt with.

[2] The landlords, in response, narrated that in so far as there was a dispute between the parties as to what were the tenant’s improvements, fixtures and fittings on the holding, the Court was asked to determine the improvements, fixtures and fittings, the original cost, the respective contributions of the landlords and/or tenant and the relevant grant contributions. The landlords set out their contentions in a schedule. They expressly stated that the inclusion on the schedule did not mean that any of the items qualified for compensation or that they fell under section 18 of the 1991 Act.

[3] Following debate in relation to the tenant’s own application we sisted the case insofar as relating to the counter claim. At the debate on 29 November the landlords moved to recall the sist. It was their intention that the status of all items of physical equipment on the farm should be clarified. This was an aspect of clarification of the question of liability for repairs.

[4] Mr Telfer opposed the motion to recall the sist. He contended that as the question of rent had been resolved and there was no current claim for compensation or claim under section 18 it was unnecessary for issues relating to tenant’s equipment to be resolved at this stage. He accepted that there was a dispute about the application to change the post-lease agreement. However, he contended that the provisions of section 5(4B) of the Agricultural Holdings (Scotland) Act 1991, as amended, related to all fixed equipment. He said that it followed that there was no need to know which equipment was landlords’ and which was tenant’s. He suggested that as the reference to that section was the only reason asserted for a need to distinguish these matters at present and that distinction was unnecessary for the purposes of the Act, the case should remain sisted.

[5] He observed that he would not expect to object to many of the items set out in the landlords’ schedule. His contention was that some items had been omitted. However, for rent purposes he said it was unnecessary to have any more detail.

[6] Mr Telfer made the point that the tenant did not want any specific matters to be determined by the Court before it was necessary. He said this was in case the law changed to the advantage of tenants. There might be questions about writing down agreements. If matters were fixed now by the Court in light of current legislation the whole matter might have to be reconsidered as and when a specific claim arose.

[7] For the landlords Sir Crispin argued that Mr Telfer’s submissions were misconceived. Section 5(4B) could not be construed as covering tenant’s equipment. Plainly it related only to equipment for which the tenant had a responsibility to the landlord. He accepted that a problem would arise where particular items were to be regarded as “part-owned” following cost sharing agreements. However, for present purposes it would have to be accepted that if items were partly tenant’s improvements and partly landlords’ fixed equipment such item would require to be treated as a landlords’ responsibility for the purposes of section 5(4B).

[8] The distinction between tenant’s improvements or landlords’ fixed equipment was not academic. It was relevant to any future rent agreement. It was relevant to questions of enforcement of liability for repair or renewal work. There plainly was a live dispute between parties because the tenant had not been prepared to agree the list. If the whole question of fixed equipment had to go to a proof before answer it would be convenient to be able to deal with all items of equipment at the same time.

Discussion

[9] We can only deal with the law as it stands. Having regard to the range of matters concerning equipment on this holding and the history of the various disputes between the parties, we are satisfied that the landlords are entitled to have the status of items of equipment clarified. However, we have a discretion as to the order in which applications will be dealt with and the real issue is whether the present action should remain sisted. We have not been persuaded that it should. Indeed Mr Telfer’s argument was not directed at that issue. His position was that it was unnecessary to deal with the issues raised in the counter claim rather than that it be deferred to await other proceedings.

[10] It may be noted that if the landlords insist on a record in terms of section 8(4), then it too will have to contain a full list of equipment on the holding and a note of who provided it and in what proportions. Plainly these are real issues between the parties and the landlords are entitled to have them resolved by the Court. Questions of expense will, of course, depend largely on success at the end of the day

[11] The next formal stage will be for the tenant to lodge adjustments to answer the detail of the counter-claim. It is expected that most items will be agreed. He may add further items to which the landlords will need time to respond. Consideration can then be given to the question of how, precisely, to deal with the remaining disputed issues.

[12] We have made some observations in the context of SLC/101/07 in relation to the significance of the distinction between landlords’ equipment and “tenant’s improvements” and reference should be made to our Note of even date in that case. We understand that in the present case the landlords are simply intent on a distinction between equipment provided by the landlords and that provided by the tenant. They aver that such items as are tenant’s improvements and fittings and fixtures will fall to be disregarded in relation to rent and we also understood their position to be that he would have no obligation to the landlords to maintain such items. They can adjust to clarify their position as they see fit in light of these observations.

[13] In this present application, we understood Mr Telfer to contend that for the purposes of section 5(4B), all equipment on the holding has to be in a reasonable state of repair. However, it was accepted on behalf of the landlords that the new provisions in that section related only to equipment of the landlords in respect of which the tenant had an obligation of maintenance. We tend to agree with the landlords’ concession that the new provision cannot be construed to cover tenant’s equipment and can only relate to equipment in respect of which a tenant has an obligation to the landlord.

[14] There are complications in relation to jointly funded and grant aided equipment. For the landlords, it was helpfully agreed that those jointly funded items would require to be treated as landlords’ responsibility for the purposes of section 5(4B). We touch on some other possible problems in our Note in SLC/101/07.

[15] We expect soon to carry out an inspection for the purposes of that case. We shall try to take the opportunity of looking at all significant items in dispute. We hope that after adjustment it will be possible to see which items in the present case need to be considered at that time. It will obviously be important to try to define the issues as closely as possible without undue delay. That said, the preliminary inspection will be aimed at familiarising ourselves with disputed items rather than attempting to make a decision in respect of any of them. If necessary we shall have a formal inspection at a later stage.

[16] As we note above, resolution of the matters raised in this counter claim will be necessary for the purposes of any record. It does appear to us that it may well be in the best interests of parties that a proper record is made. Although it comes at a late stage in relation to the many changes made by way of improvement and the like, it is still a very early stage in the current parties’ relationship. Although it will, no doubt, be a major task to produce a full record, this should be very much easier once this action and SLC 101/07 are resolved. Future negotiations on rent would take place against a much clearer background. We well understand why Mr Telfer does not want more determined than is necessary. We entirely accept that he is entitled to avoid any unnecessary expense. However, we must apply the law as it stands and we do not consider it relevant that the tenant has hopes of retrospective legislation being passed by a future Scottish Parliament.

[17] We shall recall the sist and appoint the applicant to adjust his pleadings, such adjustment to include schedules matching the three schedules lodged by the landlords and setting out the tenant’s short response to each item. Mr Telfer should indicate clearly in relation to each item listed whether or not the listed detail is accepted and if not, what facts he disputes, and what he says is the true situation. Where a short statement in a schedule is insufficient to give adequate notice of his arguments in relation to any item, these should be set out in the adjustments. The tenant should add his own itemised schedule adding any further items which he contends fall to be treated as tenant’s improvements or tenant’s fixtures.

[18] The tenant may face some difficulty in fitting adjustments in to the present pleadings where the landlords have mixed a counter claim in with answers to the original application. However, as long as matters are spelled out clearly he should not worry unduly about the formal layout.

[19] We realise that the tenant’s position in relation to many of the items listed in this case may have been set out already in previous cases. We think productions 25 and 26 in the rent application, SLC/ 109/05, may cover some of the ground. We recognise that Mr Telfer may assume that everything which has been before the Court in relation to his holding will be known to the Court. However, we have to point out that it is not possible for a Court to retain a full awareness of all the detail in every process. Indeed, the rule in ordinary courts is that factual material in one case cannot be relied upon as evidence in another. In the Land Court, actual findings in one case may be relied on in another but this does not apply at the pre-hearing stages. If material is to be relied on in a particular application, it must be produced in that application unless specific arrangement is made to accept the evidence in one case as being evidence in another. That rent application did not come to proof and we have had no reason to study the productions in it.

[20] It appears that at least some of the material in question has been held on computer and we hope that it can be reproduced in a form appropriate to the present case without undue difficulty. It may be that the parties will be able to co-operate in exchanging tables in the same format and this would be likely to be of assistance to the Court as well.

[21] Once the tenant’s answers are in we shall allow a period for the landlords to adjust. We need not determine further procedure until we see the nature of the issues between the parties in relation to specific items. It may well be that we can deal with the disputed items as part of the hearing to be fixed for SLC/101/07. However, we have felt it important to press on with that action and if all the issues in the present action cannot be dealt with as part of that hearing it will simply be necessary to fix a separate one.

Decision

[22] We have allowed the tenant until 7 March to lodge answers by way of adjustment. If he can get them in sooner well and good. The landlords will need a period thereafter. It will obviously help if this process is completed as soon as possible to try to take advantage of the hearing to be fixed in SLC/101/07.

NB The case also involved a counter-claim with which this report is not concerned.

For tenant applicants: Mr T G Telfer

For landlord respondents: Sir Crispin Agnew, QC, Messrs Anderson Strathern, Solicitors, Edinburgh