Decision of the Scottish Land Court

James Richardson & Sons (Applicants) v The Kipp (Respondents)

Case reference SLC 33/16
before
Lord Minginish, Chairman, and Mr Tom Campbell
9 May 2017

[1] In this application the applicant, Alistair Richardson (“Mr Richardson”) claims the tenancy of an agricultural holding, within the meaning of the Agricultural (Holdings) Scotland Act 1991 (“the 1991 Act”) over an area of land at The Kipp, Kippford, Dalbeattie. The respondents having challenged the relevancy of the applicant’s pleadings. We heard parties’ agents in debate at Edinburgh on 5 April 2017 when the applicant was represented by Mr Santoni of Messrs Freelands, Solicitors, Wishaw, and the respondent landlords by Mr Laurie of Messrs Hewats, Solicitors, Castle Douglas.

The facts

[2] Before narrating agents’ submissions it is convenient to set out the factual matrix:

(i) The applicant was formerly a partner in a family partnership known as “James Richardson & Son” (“the partnership”) comprising, in addition to the applicant, John Bigham Richardson, Ralph Richardson and Bruce Richardson, the partnership being constituted by Contract of Co-partnery dated 12 March 1975 (production 38A) whereby the partnership was declared to have commenced on 12 November 1973.

(ii) On 28 February 1985 a Minute of Variation (production 39) was entered into whereby it was agreed that in the event of the bankruptcy or death of one of the partners the surviving partners would be entitled (and bound in the case of death) to acquire the share of the bankrupt or deceased partner at market value.

(iii) By letter dated 10 July 2000 from solicitors acting for Kastix Limited, the then owners of the Kipp Estate, (production 28), the partnership was offered a grazing lease over various areas of land on the Estate, the lease to endure from 17 July 2000 to 28 February 2001 and the rent to be £1,000. The offer expressly stipulated that “The let shall be a mowing and grazing let only and shall not be protected by the Agricultural Holdings (Scotland) Act 1949 or any other statute”.

(iv) Notwithstanding the terms of said letter the partnership or Mr Richardson as an individual had grazed stock on this land since the 1970s by virtue of informal arrangements with the owners of the land from time to time.

(v) Notwithstanding the terms of said letter partnership stock remained on the land beyond 28 February 2001 and the partnership or Mr Richardson has had the use of that land ever since, all without objection until the present respondents acquired it as hereinafter narrated.

(vi) On 26 January 2001 Kastix Ltd went into receivership, a state of affairs which continued until 28 November 2014.

(vii) On 12 November 2002 John Bigham Richardson died but the partnership was continued in existence by the remaining partnership.

(viii) At some point prior to 2004 it was agreed between Mr Richardson and a land agent acting for the receivers that the partnership could also use additional land, over and above that referred to in the grazing let.This land continues to be used by Mr Richardson and is part of the subjects over which he claims a tenancy of an agricultural holding.

(ix) On 12 April 2005 Messrs MacRoberts LLP, Solicitors, Glasgow, (“MacRoberts”), acting on behalf of the receivers, sent the partnership a recorded delivery letter (production 41) in the following terms:

“Dear Sirs,

Landlord: Kastix Limited (In Receivership)

Grazing Let at Kipp Estate

In terms of Section 22(2)(d) of the Agricultural Holdings (Scotland) Act 1991 on behalf of your Landlord, we hereby require you within two months of the service of this demand, to pay the undernoted rents which are now due in respect of the holding.

Yours faithfully

Undernote referred to:-

Rent from 1st March 2001 to 28th February 2005 - £4,000”

(x) That sum was paid but no further rent has been paid in respect of the subjects.

(xi) The respondents were incorporated as company limited by guarantee in or around 2005 for the purpose of constituting a “community body” capable of exercising the community right to buy contained in Part 2 of the Land Reform (Scotland) Act 2005. With that in mind, they registered a community interest in the land at The Kipp. Such registrations subsist for five years but are capable of re-registration. When application for re-registration of this interest came to be made, in June 2010, it was opposed by MacRoberts on behalf of the said landowners by letter dated 1 June 2010 (production 50) wherein they said “The land in question is currently subject to a secure agricultural tenancy. In 2006 the agricultural tenant’s position was further strengthened by registration of an agricultural right to buy in terms of the Agricultural Holdings ( Scotland) Act 2003 thereby securing the continued future use of the land in question as agricultural land. Even if The Kipp acquire this land, it would be with a sitting tenant”. The outcome of the application to re-register is not clear from the parties’ pleadings but the respondents were eventually able to purchase the land from the Receivers as narrated below.

(xii) On 12 April 2006 the partnership registered a Notice of Interest in respect of the land at The Kipp in the Register of Community Interests in Land held by the Keeper of the Registers of Scotland in terms of sec 25 of the Agricultural Holdings (Scotland) Act 2003. That registration (an extract or partial extract of which is production 43) was rescinded by the Keeper on 7 May 2013 following an objection by the Receivers of Kastix Ltd on the ground that the Notice of Interest submitted by the partnership was materially inaccurate in that “the land let by the Landlord to the firm of Messrs J Richardson & Sons does not comprise a tenancy in terms of the Agricultural holdings (Scotland) Act 1991” (production 34).

(xiii) By Minute of Dissolution dated 12, 21 and 28 July 2009 (production 40) the partnership was dissolved with effect from the last of these dates. Notice of Dissolution appeared in the Edinburgh Gazette on 11 August 2009.

(xiv) Clause Two of the Minute of Dissolution recorded that “Alistair will receive the Single Farm Payment Entitlement of the firm and any payments associated therewith and will be entitled to any benefit due to the partnership arising from occupation by the partnership of land” and Clause Five entitled him, exclusively, to go on using the firm name.

(xv) In around August 2014 the respondents bought the land at The Kipp from Kastix Limited (In Receivership), taking entry on 28 August that year. Production 15 is a copy of the relevant Land Certificate.

(xvi) Since their acquisition of the land in question the respondents have endeavoured, through Sheriff Court proceedings, to have the applicant removed from the land.

(xvii) On 18 August 2016 the applicant formed a new partnership, still using the name “James Richardson & Sons” with his daughter Pauline and son Robert (production 54 is a summary of the terms of this partnership agreement). However the present application is brought only by the applicant and seeks to declare that he has a 1991 Act tenancy over the subjects in his own right.

[3] Although the point of the application is to find that Mr Richardson has a 1991 Act tenancy of the land in question, the craves of the writ are more elaborate and it is necessary to quote them to show how the applicant seeks to present his case and establish his claim:

“1. The Applicant applies to the Court:-

To find and declare that the now dissolved firm of James Richardson & Sons had an annual Lease of ground at The Kipp per the plan attached production number 1 from 1st March 2001 up to and including 28th July 2009 being a tenancy of an Agricultural Holding in terms of Section 60 of the Agricultural Holdings (Scotland) Act 1991;

2. The applicant applies to the Court:-

(a) (1) To find and declare that the Applicant was the successor in title to the Lease of the ground at The Kipp, from the now dissolved firm of James Richardson & Sons and continues to have a Lease of the said ground being a tenancy of an Agricultural Holding; (2) and which grounds are now extended to include all the lands hatched red and red over blue being the additional areas numbered 5 and 6 on said plan per production numbers A12; all in terms of Section 60 of the said Act.

3. To find any party offering opposition hereto liable in expenses.”

SUBMISSIONS

(i) for the respondents

[4] Notwithstanding the terms of the foregoing craves, in an attempt to focus and shorten the debate, Mr Santoni suggested that we could confine ourselves to the period from the dissolution of the partnership. In retrospect we think there was considerable merit in that, as will be apparent from what we say in the discussion section below. However, since this was Mr Laurie’s debate and he had come armed for a wide-ranging assault on the applicant’s pleadings, we allowed him to present his argument in full. In fairness to him he could scarcely have done otherwise, given how the application was framed, albeit it has proved possible for us to decide the case without going into all of the areas of law to which his submissions took us. These submissions took the form of addressing the various arguments contained in, or to be deduced from, the applicant’s pleadings.

Whether any lease held by the partnership was a lease “to the house”

[5] It was possible to have a lease to a house (Inland Revenue v Graham’s Trs 1971 SLT 46) but this was not one. The grazing let offered to the partnership on 10 July 2000 was expressly restricted to the purpose of mowing and grazing, was confined to a specified period which was less than a year and expressly excluded the protection of the Agricultural Holdings (Scotland) Act 1949 or any other statute. It was a short term let to which the normal rules for such lets applied. One such rule was that tacit relocation did not apply; sec 2(2)(a) of the 1991 Act, then in force, excluded such lets from the definition of agricultural holdings and, therefore, from the tacit relocation provisions of sec 3.

The effect of the deed of variation

[6] The deed of variation allowed the remaining partnership to continue despite the death or bankruptcy of one of the partners but, in the absence of a lease to the house, it had no effect in a question between the partnership, as tenant, and the landlords of any lease in existence at the date of death of a partner; Jardine-Paterson v Fraser 1974 SLT 93, Moray Estates Development Co v Butler 1999 SLT 1338, followed by this court in Carter & MacIver v Kenneth MacIver and Philip MacIver 2010 SLCR 13. If the case of William S Gordon & Co Ltd v Thomson 1985 SLT 122 was being relied upon by the applicant as authority to the contrary, the point that an agreement among the partners inter se could not bind the landlord had not been taken in that case and, in those circumstances, on the authority of Gill, Agricultural Tenancies 4th ed, para 6-10, “[t]his case cannot therefore be held to have altered the basic principle that in a question between the landlord and a partnership tenant the private arrangements of the partners inter se cannot maintain in existence a lease that has been granted to the partnership as constituted at the time”. Accordingly any lease held by the partnership had terminated with the death of John Bigham Richardson on 12 November 2001.

The effect of dissolution of the partnership

[7] The effect of the Minute of Dissolution was to dissolve the partnership with effect from 28 July 2009. The business of the partnership terminated on that date. Although Clause Two allocated certain rights to Mr Richardson it did not operate as an assignation of any lease held by the partnership to Mr Richardson. In the statement of assets annexed to the Minute of Dissolution no mention was made of any right to occupy the land at the Kipp. The Minute of Dissolution “did what it said on the tin”; it dissolved the partnership as at the date of dissolution with the consequence that the tenant under any lease no longer existed and the lease itself came to an end. Esto, therefore, there had ever been a tenancy of an agricultural holding and esto it had survived the death of John Bigham Richardson, both of which were denied, it had come to an end with the dissolution of the partnership on 28 July 2009.

The effect of sec 38 of the Partnership Act

[8] This provision did not operate so as to keep alive a tenancy held by the partnership, or any other right to occupy the land, as some sort of unfinished business of the partnership. The provisions in the Minute of Dissolution authorising Mr Richardson to go on using the partnership name and allocating to him “any benefit due to the partnership arising from occupation by the partnership of land” had no such effect. Instead they were just normal provisions of dissolution; Mr Richardson was authorised to go on occupying the land in order to wind up the partnership business. Reference was made to dicta of Lord Reid in Inland Revenue v Graham’s Trs (supra) at pp 20-21 to the effect (a) that where the tenant in a lease is a partnership and the partnership ceases to exist the lease itself ceases to exist, “there being no provision anywhere for anyone being, so to speak, the heir of a partnership” and (b) that the right and duty of surviving partners is to complete all unfinished business of the partnership, not to bind the assets of the dissolved firm by making new contracts. In the context of this case, sec 38 did not operate to keep any lease in which the partnership was tenant alive beyond the date of dissolution.

Personal Bar

[9] Mr Laurie submitted that the applicant’s averments to the effect that the respondents were personally barred from denying the existence of a 1991 Act tenancy were irrelevant for a number of reasons. As to personal bar by representation, the representation being relied on here was MacRoberts’ letter of 1 June 2010 to the Keeper of the Registers wherein they asserted, on behalf of the then landlords, the existence of such a tenancy. However, per Lord Cameron in Cantors Properties (Scotland) Ltd v Swears & Wells Ltd 1978 SC 310 at pp 322-323, there was a distinction between representation as to the legal position and representation as to fact. In the present case there had been a representation as to the legal position. That representation proceeded on an erroneous view of the law. Such a representation could not be binding, even on the person on whose behalf it was made never mind their successors. Moreover, personal bar required the party asserting it to have acted to their prejudice on the faith of the representation made. Here, far from having suffered prejudice, matters had worked out to the “supreme advantage” of the applicant because he had continued to occupy the subjects.

[10] As to acquiescence, there must be acquiescence on the part of the person barred in something which was so obvious that he could not, in all conscience, deny it, such as the expenditure of great cost incurred by operations carried out under the eye of one having the right to stop them; Bell’s Principles para 946. There was nothing of that kind here.

[11] As to personal bar by notice, what was being relied upon here was Mr Richardson’s occupancy of the land and his attempt to have the partnership’s notice of interest as tenants under a 1991 Act tenancy in the Register of Community Interests in Land renewed. What was being argued by the applicant was that the respondents had bought the land in the knowledge that he was asserting the existence of a 1991 Act tenancy over it and were therefore not now entitled to dispute the existence of such a tenancy. That argument was fallacious. The respondents were not bound by MacRoberts’ representation – they being entitled to take a different view of the law as it applied to the facts – and there was no judicial or other finding of the existence of such a tenancy, so they were entitled now to deny the existence of such a tenancy. Whilst it was frankly acknowledged by the respondents that they knew that Mr Richardson was asserting such a tenancy that did not put them in bad faith. Part of what the respondents knew when they bought the land was that the Keeper of said Register had refused re-registration of the interest registered by the partnership in the Register of Community Interests in land and that Mr Richardson had declined to appeal that decision, as he could have done, to this court. Accordingly he had not continued to assert a right to re-registration of this interest. This was not a situation such as that in Rodger Builders Ltd v Fawdry 1950 SC 483 where the second purchaser had continued with the recording of title to the property in the knowledge that the first purchasers were asserting their rights to it with the consequence that he was found to be in bad faith. Here the Keeper’s decision, adverse to Mr Richardson, and Mr Richardson’s failure to appeal that decision, meant that the respondents had not purchased the subjects in the knowledge that they were burdened by the tenancy of an agricultural holding. The Keeper’s decision had ruled what might otherwise have been an off-side goal onside.

[12] The terms of the warrandice clause in the disposition in favour of the respondents was also being relied upon by the applicant. It was as follows:

“6 Warrandice

6.1 The sellers grant simple warrandice.

6.2 The Joint Receivers grant warrandice from their facts and deeds only.

6.3 The foregoing grants of warrandice except all third party use, occupation and access affecting the Property howsoever constituted and whether by right or otherwise.”

[13] It was being said by the applicant that a warrandice clause in those terms was very unusual. That would be a matter for evidence but even if it was true the qualifications contained in 6.3 were redundant, given what was said about the limitations of simple warrandice by Halliday, Conveyancing Law and Practice, 2nd ed,at para 4-31. Moreover, if what Mr Richardson possessed when this disposition was granted did not amount to a 1991 Act lease, the terms of the warrandice clause did not put the respondents, as purchasers, in bad faith; Mann v Houston 1957 SLT 89.

[14] For the foregoing reasons we should find that the applicant had not stated a relevant case and dismiss the application.

(ii) for the applicant

Lease to the house

[15] Mr Santoni submitted that the applicant’s pleadings set up a lease to the house. They covered the entire period of occupation of this land whether by the partnership or by Mr Richardson as an individual. Mr Richardson was the common denominator. The appropriate way in which to characterise “the house” was “the partnership howsoever constituted so long as it included Mr Alistair Richardson”. He had been the one who had dealt with the directors of Kastix and they had been content for him to have the land, whether as an individual or as a member of a partnership. The point was often made that the lease of an agricultural holding involved a strong element of delectus personae as to the tenant. That was present in the instant case but it was in confined to the person of Alistair Richardson, not his partners. There was sufficient averred in the applicant’s pleadings to set up a lease to a house so defined.

[16] The applicant was not relying on the offer of the grazing let as setting up any sort of lease to the house, nor as a lease on the expiry of which tacit relocation had operated. It was merely part of the narrative. What was being said was that a 1991 Act tenancy had come into existence on the expiry of the grazing let, when the stock had remained on the ground with the consent of the landlords, year-on-year, until 2005, when four years’ rent was paid in a single payment, and beyond. The existence of such a tenancy had been acknowledged by MacRoberts, as agents for the then landlords, both when they issued the demand for rent under sec 22(2)(d) of the Act in April 2005 and much later, when they opposed the respondents’ registration of their interest in the land in June 2010. Accordingly it was being said that the partnership had held a 1991 Act tenancy dating from 1 March 2001.

Death of John Bigham Richardson

[17] It followed from the submission as to the existence of a lease in favour of the house that any such lease survived the death of John Richardson.

Effect of Minute of Dissolution

[18] What was being said here was that Mr Richardson, by virtue of a combination of the rights reserved to him in the Minute of Dissolution and sec 38 of the Partnership Act 1890, had been entitled to pursue and complete certain unfinished business of the partnership. The particular matter was the purchase of the land, of which intention they had given notice in terms of the entry made in the Register of Community Interests. Reference was made to dicta of Lord Reed in Duncan v MFV Marigold 2006 SLT 975 at paras [18], [19] and [27] to [32] on the continuing authority of partners to bind the firm and the other rights and obligations of partners, post-dissolution, one of these rights being to complete transactions begun but remaining unfinished. Lindley on Partnership, 19th ed, at para 13-62 was relied upon to the same effect. However, we had some difficulty in following Mr Santoni’s development of his argument beyond that point, in particular as to the process by which this power to complete unfinished business had the effect of allowing Mr Richardson to succeed to, or in some fashion keep alive, the lease held by the partnership.

[19] At all events, in Mr Santoni’s submission, sufficient was averred by the applicant to set up a lease in favour of Mr Richardson following upon the dissolution of the partnership. A number of factors were relied on. The publication of notice of dissolution in the Edinburgh Gazette was to be taken as having the effect of informing the landlords of the termination of the partnership. Occupation of the land thereafter could only be by Mr Richardson as an individual. Therefore all the requirements of a lease were in place. The parties and subjects were known. It was a lease from year to year, continuing on tacit relocation on the expiry of each year. The rent was still £1,000 per annum, albeit it had never been paid, repeated approaches as to payment of rent made to the Receivers and their agents having gone unanswered. Moreover the existence of a 1991 Act tenancy at this point in time had been expressly acknowledged by MacRoberts on behalf of the landlords in their opposition to the respondents’ attempt to register an interest in the Register of Community Interests in June 2010.

Personal Bar

[20] Mr Santoni made a brief submission on personal bar in which he rehearsed the matters being relied on under that head but stated in terms that he did not dispute the law on the subject as set out by Mr Laurie.

[21] His motion was that we allow the application to proceed to a proof before answer.

[22] Mr Laurie made a brief rejoinder but it added nothing of substance to his earlier submissions.

Discussion

[23] We are satisfied that the applicant has averred enough to set up a 1991 Act lease to the partnership. After the expiry of the grazing let, partnership stock continued to occupy the land and rent was paid for that occupation at the rate of £1,000, albeit the payment took the form of a lump sum back-dated over four years. The issue of a sec 22(2)(d) demand payment by the then landlords’ agents on 12 April 2005 confirms the landlords’ understanding that this was the basis upon which the land was occupied by the partnership at that time.

[24] In that context we do not consider that argument as to whether this was a lease to the house and the effect of the death of John Bigham Richardson, coming as it did in the second year of that lease, are particularly to the point and we do not propose to go into them. The matter can be foreshortened by saying this: that even if the lease then (on the applicant’s averments) in force was terminated by the death of Mr Richardson, the applicant’s averments are sufficient set up another 1991 Act tenancy having taken its place. That lease endured until the dissolution of the partnership on 28 July 2009, albeit no rent was paid beyond February 2005.

[25] What really matters is the dissolution of the partnership. It is incontrovertible that the dissolution of a partnership tenant ends the tenancy; MacFarlane v Falfield Investments Ltd 1997 SLT 518 is an example concerning the effect of limited partnerships. In the face of that Mr Santoni sought to persuade us that, as he put it, a Phoenix had arisen out of the ashes. We remain, however, wholly unpersuaded.

[26] His difficulty was that since the coming into force of sec 1 of the Agricultural Holdings (Scotland) Act 2003 (on 27 November 2003) the constitution of a new 1991 Act requires to be in writing. So he was unable to set up a new 1991 Act tenancy in favour of his client at any time after the dissolution. He accordingly required to rely on some sort of derivative arrangement. But the fact is that no such device is available. As Lord Reid said in IRC v Graham’s Trs (supra) in the words already quoted “there [is no] provision anywhere for anyone being, so to speak, the heir of a partnership”.

[27] In particular sec 38 of the Partnership Act has no bearing. Mr Santoni prayed it in aid to allow Mr Richardson to pursue the partnership’s interest in acquiring the land. But that interest was registrable only while the partnership subsisted and its pursuit could not be used as a means of keeping the partnership alive. It was not unfinished business of the partnership in the sense discussed by Lord Reid in IRC v Graham’s Trs (at p 21) where the sense is of fulfilling partnership obligations and doing whatever is necessary to complete and conclude the business of the partnership. Bearing in mind that the landowners’ only interest in this was to oppose it (their position as to the existence of a 1991 Act tenancy having evidently changed) it certainly cannot be used to extend the lease beyond the termination of the partnership or as a device for transferring the lease in some fashion to Mr Richardson as an individual.

[28] The applicant’s submissions on personal bar are likewise without merit. For one thing no prejudice is averred: on the contrary, as Mr Laurie observed, the failure of earlier landlords to do anything to have the applicant removed from the land has been of considerable benefit to him in that he has had some eight years of rent-free occupation of the land. For another, the present respondents have never represented the existence of a 1991 Act tenancy nor acquiesced in the subsistence of one. On the contrary they have, as we understand it, been intent on challenging it ever since acquiring the land. We agree with Mr Laurie that they are not in any sense bound by the representations made by MacRoberts as to what the legal position was in 2010. No relevant case of personal bar or acquiescence has been pled.

Decision

[29] The position is, therefore, that whilst a relevant case has been pled in respect of crave 1 no such case is pled in respect of crave 2 and, since that is ultimately what matters to the applicant, there is no justification for sending anything to proof. Accordingly the respondents’ submissions (they have no formal pleas-in-law) are sustained and the application is dismissed.

Expenses

[30] Following our usual practice, we have allowed 21 days for lodging of motions and submissions on expenses.