THE COURT

(Lord McGhie, Mr J A Smith)

SERUP v McCORMACK & OTHERS

(Application RN SLC 73/10 – Order of 18 April 2012)

AGRICULTURAL HOLDINGS – WHETHER 1991 ACT TENANCY – WHETHER LIMITED DURATION TENANCY – VALID WRITTEN LEASE – TENANT BECOMING PRO INDIVISO PROPRIETOR – CONFUSION – WHETHER TENANCY EXTINGUISHED – WHETHER TENANCY SUSPENDED – POSSIBLE ANALOGY WITH SERVITUDES – ACCEPTANCE OF PAYMENTS IN NAME OF RENT – TENANT TRANSFERRING HER PRO INDIVISO SHARE TO PARTNERSHIP – TENANT A PARTNER – CONTINUED ACCEPTANCE OF RENT – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 2003 SECS 1, 4 AND 5.

The applicant was the owner of a one half pro indiviso share of a farm. The farm had originally been owned by the applicant’s parents, who in 1971 granted an agricultural lease of the farm to the applicant’s sister, the first respondent. In 1972 the parents conveyed their interest in the farm to trustees, who in 1995 conveyed the farm in equal pro indiviso shares to the applicant and her sister. In 2003 the sister conveyed her one-half share to a partnership in which she and her two daughters were partners. Thereafter, she continued to pay an annual sum to the applicant in name of rent. The applicant sought declarator that the agricultural lease was extinguished confusione on the respondent’s acquisition of the one half pro indiviso share. The respondent counter-claimed that esto the 1991 Act agricultural tenancy had terminated, she occupied the farm under a limited duration tenancy created on the transfer of her one half share of the property to the partnership. Held, (1) applying Clydesdale Bank plc v Davidson 1998 SC [HL] 51, that the 1991 Act tenancy had been extinguished by virtue of the respondent’s acquisition of the one half share of the farm; and (2) that a limited duration tenancy had been created.

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

[1] The applicant sought various orders to the effect that the respondent, who is her sister, had no current rights as a tenant in relation to Muirton Farm, Cluny, by Kirkcaldy. The respondent counterclaimed contending that if she did not occupy the farm as a tenant under the Agricultural Holdings (Scotland) Act 1991, she occupied under a limited duration tenancy (“LDT”) in terms of the Agricultural Holdings (Scotland) Act 2003. For convenience, we shall refer to the respondent as the tenant of the farm although this is, of course, the point in issue.

[2] We heard parties in debate on 2 and 7 March 2012 when Mr Peter Barclay, advocate, appeared on behalf of the applicant and Sir Crispin Agnew Q.C. appeared for the tenant.

Authorities cited

The Advice Centre for Mortgages v McNicoll 2006 SLT 591
Atkins v Johnson 535 So. 2d 1063 (Louisiana App. 2d Cir. 1988)
Axis West Development Ltd v Chartwell Land Investments Ltd 1999 SLT 1416
Balfour v Kinsey, 1987 S.L.T. 144.
Clydesdale Bank plc v Davidson 1998 SC(HL) 51.
Colville’s Trs v Marindin 1908 SC 911
Compugraphics International Ltd v Nikolic 2011 SLT 955
Craig v Mair 1914 SC 893
Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1998 SC (HL) 90
Eadie Cairns v Programmed Maintenance Painting 1987 SLT 777
Gray v Edinburgh University 1962 SC 157
Howgate Shopping Centre Ltd –v- Catercraft Services Ltd 2004 S.L.T. 231
Lord Blantyre v Dunn (1858) 20 D 1188
Moncrieff v Jamieson 2008 SC (HL) 1
Morrison-Low v Paterson 1985 SC (HL) 49
Munro v Bowman (1932) 49 Sh.Ct.Rep. 3
Perera v Samarakoon (1922) 23 NLR 502 (Ceylon/Sri Lanka)
Pickard v Richie 1986 SLT 466
Pinkerton v Pinkerton 1986 SLT 672
Reed v West (1860) 16 Gray 283, 82 Mass. 283
Sharp v Thomson 1997 SC (HL) 66
Sherry v Sherry’s Trs (1918) 1 SLT 31

Statutory material

Agricultural Holdings (Scotland) Act 1991
Agricultural Holdings (Scotland) Act 2003
Requirements of Writing (Scotland) Act 1995
The Scotland Act 1998 (Transitory and Transitional Provisions) (Publication and Interpretation etc. of Acts of the Scottish Parliament) Order 1999 (the “Transitional Provisions Order”)

Textbook and Institutional Authority

Bankton, Institute of the Laws if Scotland IV. XLV. 42 & 43
Bell, Principles of the Law of Scotland 10th Ed
Rankine, Law of Landownership 4th Ed
Notley, Scottish Agricultural Law Handbook
Stair, Institutes of the Law of Scotland I.18.9
McBryde, The Law of Contract in Scotland 3rd Ed.

Factual background

[3] We heard parties at debate. There was no formal minute of admissions relating to the documentary evidence and Mr Barclay contended that there should be a proof before answer. He referred to Eadie Cairns –v- Programmed Maintenance Painting. However, when pressed he did not identify any factual issue between the parties which might require to be resolved. There was some suggestion that there might be a need for evidence of intentions but we did not identify any matter in which this was relevant to the issues canvassed. The following narrative can fairly be said to be undisputed

[4] The tenant entered into a written lease of the farm from 1 March 1971. Her parents were the landlords. They left the farm in trust for the tenant and the applicant and in March 1995 the farm was conveyed to the applicant and the tenant in pro indiviso shares. The productions lodged make it tolerably clear that the sisters regarded the tenancy as continuing thereafter. It is accepted that the tenant made annual payments to the applicant and the documentary evidence shows that this was demanded and paid as “rent”. By disposition dated 26 November 2003 and recorded 27th November 2003 the tenant conveyed her half share of the farm to a partnership in which she and her daughters were the partners. This was intimated to the applicant’s agents on 28 November 2003.

[5] Payments in name of rent were regularly made by the tenant first to the applicant and, since 2003 to the applicant and the partnership. The tenant has continued to occupy and work the farm since 1971.

[6] In addition to that bald outline it may be noted that the documentary productions provide clear support for the proposition that the parties regarded the respondent as full tenant of an agricultural holding after 1995 and, indeed, at all material times. There were formal Deeds of Variation of Lease in 1996, 1999 and 2002. There were various formal demands for rent arbitration by the applicant. Formal appointments were made on two occasions. There was correspondence about resumption of cottages. After 26 November 2006, in addition to clear evidence of payment of rent, there was a notice by the tenant in March 2004 giving formal intimation in relation to improvements.

[7] The interest of the respondent in purchase of the subjects as tenant was apparently registered with the Keeper of the Registers on 9 February 2005 in terms of sec 25 of the 2003 Act. There are no averments dealing with the applicant’s reaction to this. However, a new right to buy application was said to have been lodged with the Keeper on 13 January 2010 and it appears that this triggered the present application. It also appears that the partnership then raised an action for division and sale in the Sheriff Court. This has been sisted to await the outcome of the present action.

Submissions for the tenant

[8] Sir Crispin accepted that pro indiviso proprietors could not grant a lease to one of their number: Clydesdale Bank plc v Davidson. However, he contended that the decision was based on the proposition that one cannot contract with oneself. He submitted that the situation was different where there was a pre-existing competent right. The underlying rule was that something which was validly constituted initially would continue to be effective even if there was a subsequent event which would have prevented the right being constituted in the first place: Bankton IV. XLV. 42 & 43.

[9] An exception to this depended on the operation of the doctrine of confusio. This only operated when there was a direct common identity between the holders of each right. It was submitted that a pro indiviso owner on one hand and a right as sole individual on the other, did not create a confusion of the two rights. In any event, if the situation was properly characterised as one where there was a common identity or partial common identity, but this was based on different titles or destinations, the right was simply suspended confusione while the two rights were held by one person, but the rights would re-emerge when the rights passed into separate ownership. Accordingly, even if the tenancy could not be said to exist in the period from 1995 to 2003, it resumed in November 2003 when the tenant passed her share to the partnership.

[10] It was accepted that the authorities quoted, in general, did not deal with leases, but dealt with rights such as servitudes, ground annuals or bonds in security. In Blantyre v Dunn the court used servitudes as an analogy for a lease in considering confusio. It was therefore submitted that the same principles should apply to a lease on the tenant becoming a pro indiviso owner of the landlord’s interest in the land. Counsel referred to Rankine, p 444; Bell Principles p 997

[11] Sir Crispin referred to a number of Scottish cases in support of the proposition that servitudes did not cease to exist when the burdened proprietor became entitled to a pro indiviso or part share of the benefited subjects: D. Rodger v J. Miller; Balfour v Kinsey; Munro v Bowman. This proposition was also supported by relevant foreign authority: Perera v Samarakoon; Reed v West, Atkins v Johnson. Counsel cited Compugraphics International Ltd v Nikolic; Axis West Development Ltd v Chartwell Land Investments Ltd; and Moncrieff v Jamieson, in support of the proposition that it was appropriate to have regard to foreign law for guidance in relation to land rights such as servitudes, at least where such law was based on Roman Dutch principles. He provided several authorities in support of the proposition that, for there to be confusion in relation to a servitude, the parties must hold in the same capacity and, in relation to any obligation, the debtor and the creditor must be the same individual: Craig v Mair; Colville’s Trs v Marindin. Where rights were held in different characters, any debt due from the right could be extinguished each time it was due for payment, but the underlying obligation revived when the rights separated. His primary submission was that an individual owner and an individual holding as a pro indiviso proprietor were not to be regarded as holding in the same capacity.

[12] He submitted that while the decision in Blantyre v Dunn established the concept of temporary suspension of the right to rent under a lease, it left open the question of whether or not the lease itself was extinguished confusione. Dicta in Howgate Shopping Centre Ltd v Catercraft Services Ltd showed that this question was open.

[13] In Pinkerton v Pinkerton Lord Mackay held that a lease by A to A, B, C & D was a valid lease and, at page 676, commented that if B succeeded to A as landlord that that would not extinguish the lease. He accepted that this decision was not directly in point but contended that it gave support to the proposition that for there to be confusio the parties had to be exactly the same. He distinguished the case of Sherry v Sherry’s Trs . While the case might suggest partial confusion could apply, it was clear that the court left the question open. In any event there was a difference between confusion in relation to a debt, which was a one- off event, and confusion of a right. Periodic payments could be extinguished confusione but the principal right could continue.

[14] In the present case, the respondent was the tenant in her own right, but only a pro indiviso proprietor of the landlord’s interest and therefore confusion did not apply. Alternatively, he contended that the respective rights had separate destinations: as the lease was subject to a statutory right of transmission and the property title followed the disposition, confusion did not apply. This was supported by the fact that the parties had taken positive steps to keep up the lease: Blantyre v Dunn.

[15] Esto the original lease did terminate and did not revive, counsel contended that a new 1991 Act lease was created on 26 November 2003 because the tenant was allowed to remain in occupation and paid rent after the disposition of her half share had been delivered. The dates were critical because the relevant provisions of the 2003 Act came into force on 27 November 2003. He founded on the provisions of sec 1 of the Act and on dicta in Morrison-Low v Paterson. The disposition was dated 26 November 2003, registration was 27 November and the applicant was informed by letter dated 28 November 2003. Therefore she knew and did not object to the continued occupation and payment or rent. The actings post November 2003 were all on the basis that it was a 1991 Act lease. The effect of the decision in Morrison-Low was that where a party was allowed to remain in occupation and paid rent a new lease was created by those actings and was to be taken to run from the first day it could have started.

[16] 26 November 2003 was the date on which the tenant ceased to have an interest as pro indiviso proprietor in the property. The interest ceased on delivery of the disposition not when the new owners registered their title: Sharp v Thomson. Under the Transitional Provisions Order the Act came into force at the beginning of the day on 27 November. He accepted that there might be a need to prove that delivery was actually effected on 26 November but as it seemed clear that the solicitors acting at that time were aware of the nature of the problem it could reasonably be inferred that that there would not be much difficulty in doing this.

[17] If the court rejected the arguments that there was a 1991 Act tenancy it was submitted that the tenant now had an LDT for 15 years. This would run either to 28 November 2023 or, possibly, to 27 or 28 November 2019. From 27 November 2003 the tenant had been allowed to remain in occupation and had paid rent for each year of occupation. This was sufficient to create a lease: Morrison-Low. It had to be taken to be a lease for a year. In terms of sec 4 of the 2003 Act, where a tenant remained in occupation after the end of the year with the consent of the landlord, then the lease became a 5 year SLDT. The effect of sec 4(3) was that the tenancy which commenced on 27 or 28 November 2003, would have become a 5 years SLDT which would come to an end on 27/28 November 2008. No objection was made to the continued occupation from 28 November 2008 and, in consequence, under sec 5 of the 2003 Act, the SLDT became an LDT from 27/28 November 2008 and would run until November 2023.

[18] Sir Crispin asked for certification of the case as suitable for employment of senior counsel. It was an important case for the respondent as she was at risk of losing her 1991 Act tenancy and possibly losing any right to a tenancy of the farm. The law was novel and difficult in relation to all the alternative issues. He invited us to reserve the question of liability for expenses.

Submission for applicant

[19] Mr Barclay founded strongly on the proposition that when the farm was conveyed to the applicant and the respondent in equal pro indiviso shares, the tenancy of the farm, which the tenant had enjoyed in terms of the lease from her parents, was extinguished confusione: Clydesdale Bank v Davidson. He founded on various dicta of the Lord Justice Clerk, Lord Ross, and the decision in the House of Lords. A pro indiviso proprietor could not, at the same time, hold a right of occupation of the subjects under a tenancy. The greater right absorbed and extinguished the lesser right. Any purported rental payments fell to be regarded as compensatory payments for the applicant not exercising her own right of occupation. The lease, having been extinguished confusione upon the recording of the 1995 disposition, did not revive upon the delivery or recording of the 2003 disposition by the respondent of her share of the farm to the firm of the McCormack Partnership. He further submitted that the 1971 Lease was not converted to a new 1991 Act tenancy or to an SLDT or LDT under secs 4 and 5, respectively, of the 2003 Act. Accordingly, the title to the farm was held in the names of the Applicant and the McCormack Partnership in equal pro indiviso shares with no subsisting agricultural tenancy.

[20] Following the Disposition by the respondent in favour of the McCormack Partnership in 2003 the 1971 Minute of Lease could not revive, it having been extinguished in 1995. There could be no new enforceable lease as the respondent effectively remained a pro indiviso proprietor in her role as a partner of and trustee for the partnership. The partnership would require to consent to any action against her as tenant and, as partner, she would not consent to any such action being taken against her. Any lease would be unenforceable, ineffective and a nullity. All co-proprietors are entitled to a voice in the management of their property. The respondent along with the applicant as co-proprietors had to make decisions as to their heritable interest in the farm. If there was an agricultural tenancy and action required to be taken against the respondent as tenant, she would hardly be expected to consent to proceedings being raised against her. Any tenancy would be unworkable from the point of view of the legislation as there would be no sanction available to enforce the provisions of an agricultural lease against the recalcitrant tenant.

[21] Where, following the conveyance in 1995,the lease was extinguished, then, in order to bind the applicant as a pro indiviso proprietor any deed would have required to be executed in writing by the parties in compliance with secs 1(2)(b) and 2 of the Requirements of Writing (Scotland) Act 1995. There were no averments of any new written contract for the creation of an interest in land in terms of sec 1(2)(a), 1(3) and 1(4) of that Act. Accordingly there was no lease binding the parties between 1995 and 28 November 2003.

[22] The 2003 disposition in favour of the partnership was signed on 26 November 2003. There were two letters both dated 28 November to the applicant’s former agents, Alexander Moffat & Co, advising of the transfer of the share to the Partnership and intimating that rent was paid for the period from 28 November 2003 to 28 May 2004. The earliest the applicant could have had notice of the transfer was 28 November. There could have been no consensus in idem to a 1991 Act tenancy as at 26 November 2003.

[23] The letter of 28 November 2003 narrated that rent had been “paid in advance in the normal way” which could only mean that it had been paid as it had previously been by the respondent to the applicant. It was the respondent’s name which appears in the heading of the letter, not that of the Partnership. In the circumstances “rent” should be taken to mean simply a compensatory payment for exclusive occupation: Clydesdale Bank v Davidson. It was not averred that the applicant knew that the Partnership thought it had entered a lease from 26 November 2006. Counsel referred to Pickard v Ritchie and The Advice Centre for Mortgages v McNicoll . He pointed out that the letters of 28 November 2003 expressly stated: “Neither this letter nor any enclosures herewith shall constitute or form part of a binding obligation unless signed in self proving form.” The letter was not signed in self-proving form in accordance with sec 3 of the 1995 Act.

[24] SLDTs and LDTs came into operation by virtue of secs 4 and 5 of the 2003 Act. Mr Barclay submitted that it was clear from these sections that before any new tenancy could come into effect there had to be an agreement between the parties for a lease for a “term”: either “not more than 5 years” under sec 4(1)(b)”) or “not less than 15 years” under sec 5(1)(a). A Morrison Low type argument was not available to the respondent because of the abolition of Section 2 of the 1991 Act.

[25] Counsel commented on certain of the authorities cited by the respondent. He submitted that a servitude could not readily be equiparated with an agricultural lease. The implications of an agricultural lease being suspended were entirely different from those arising where a servitude was resurrected where the two tenements fell back into different ownerships. The lease began as private contract. Statute gave it the characteristics of a real right but there were many obvious differences. The question, of whether separation or disunion of the interests of landlord and tenant might be anticipated, simply did not arise in the context of an agricultural lease. He agreed that expenses should be reserved. He did not oppose certification for counsel but submitted that there was no justification for certification of senior counsel. The issues were novel but not necessarily difficult.

Submissions for tenant in response

[26] Sir Crispin referred to Stair I.18.9 and comments thereon in McBryde 25-30 in support of the proposition that a servitude might be suspended rather than extinguished by confusion. He stressed the analogy between servitudes and leases in the Blantyrecase, at p 1197. Servitudes and leases were both personal contracts initially which were made real rights in the land by possession or registration. They were derivative rights once they had been made real. Servitudes were not feudal. Stair 2.9.2 referred to leases or tacks as “ranked amongst servitudes personal”. He submitted that this supported the proposition that cases on servitudes should govern this case on leases.

[27] He stressed that the Clydesdale Bank case was not authority to support the proposition that the 1991 Act lease was extinguished confusione when the respondent became a pro indiviso proprietor because, on its facts, it dealt only with the question of whether pro indiviso proprietors could grant a lease to one of their number: anything else was, at best, obiter. The Court did not consider the question of whether a lease was extinguished when the tenant became a co-proprietor. None of the authorities cited to the Land Court appeared to have been before their Lordships. They did not have to consider the point made by Bankton that there was a distinction between a right that could be created and a right already created. They did not address the point of what is “unity” of identity as between the landlord and tenant.

[28] Further he submitted that some of the comments made in the Clydesdale Bank case could plainly be seen either to be too widely stated or to be erroneous. For example it was suggested that it was not possible for a person to have two real rights in the same property but, for example, you might have a servitude over your neighbour’s property for the benefit of your own and then have a lease over the same land. You could have a standard security securing a right granted in a lease, such as an option to buy or to secure a loan. An heir of entail could have a right in the entail and also be a bondholder over the property. An owner of land could lease it and take a sub-lease back: Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd He cited Gloag on Contract p 727 in support of the proposition that two rights can exist together.

[29] Although an action of removal against a tenant would not effect a removal of the pro indiviso proprietor because he could remain in occupation, this did not deal with the point that an action of removal of the tenant would change the nature of the right of occupation; i.e. the tenant would have exclusive occupation, whereas a co-proprietor would only have a joint right of occupation; the tenant of an agricultural lease or a statutory lease would have the statutory rights, which would no longer be available after removal; division and sale would still be available, either after removal or before removal, but the land would be subject to a lease. It was important to treat the dicta in the Clydesdale case with caution as the Lords did not have to consider this point in the context of the present facts.

[30] Lord Hope had referred to the lesser right being absorbed into the greater right but the right of a sole tenant could well be greater, in practice, than the right of a pro indiviso proprietor. The matter could be tested by imagining a situation where parents left their farm to all the members of a large family. A modest pro indiviso share would not be as valuable as a sole tenancy. That is a situation that the court should seek to avoid – the authorities quoted resolved the difficulty either on the basis that the lease was not extinguished in such circumstances or that it was only suspended.

[31] Counsel further submitted that the applicant’s reliance on the Requirements of Writing (Scotland) Act was simply misplaced. Although a lease for a number of years required to be in writing, sec 1(7) made it clear that “if a tenancy or right is not granted for more than a year” it was not included in the requirement to be in writing. A lease created by occupation and payment of rent would start out as a lease for a year only. It therefore did not require to be in writing, but was continued by statute either in terms of the 1991 Act or in terms of secs 4 and 5 of the 2003 Act. If the court accepted that a new lease started on 26 November then sec 1 of the 2003 Act would not apply. It was not suggested that any lease that commenced on or after 27 November could be a 1991 Act lease. The applicant’s references to sec 2 of the 1991 Act were accordingly irrelevant.

[32] In relation to the alternative case of a new lease he contended that the applicant had all the necessary knowledge, or at least had it through her Agents. She knew that she had been paid rent for the period May 2003 to 28 November 2003. She knew, by the fax of 28 November, that the half share had been transferred to the partnership with effect from 26 November 2003. She accepted rent from 28 November 2003 to 28 May 2004 and knew on 28 November that the rent had been paid into her bank account on that day. She was given 7 days to refuse the rent, but did not do so. In these circumstances, where she took no steps to decline the rent or otherwise express dissatisfaction with the offer of rent, she must be treated as having the knowledge of the consequences arising from the transfer of title that took place on 26 November 2003.

[33] Lord Keith’s observations in Morrison-Low were important in their reference to the fact that when the parties in acted ignorance of the true legal situation, the law would apply the true legal situation. In this case the true situation was that the applicant accepted the respondent’s continued occupation from 26 November and retained the rent applicable to 26, 27 & 28 November and then accepted further rent from 28 November. Therefore a new 1991 Act lease was created from 26 November 2003.

[34] Although no ish had been expressly agreed the law implied a lease of an agricultural holding for a year and that was sufficient: Gray v Edinburgh University. Even if the payment of rent implied only agreement of parties for six months, nevertheless, under section 2(1) of the 1991 Act this became a lease for a year, or under sec 4 of the 2003 Act, at the end of the six months, the SLDT lease became a 5 years SLDT. He noted that, if so the relevant dates would move forward by six months.

Discussion

Procedure

[35] Before discussing the substantive issues, we must comment on an issue of pleading or practice. Mr Barclay contended that, because there was no formal agreement in relation to the correspondence, it would be necessary to have a proof before answer. He referred to the decision in Eadie Cairns v Programmed Maintenance Painting Ltd.

[36] While it is no doubt correct to say that a case cannot be decided at debate on the basis of material which has not been properly incorporated into pleadings or formally admitted, it is important to bear in mind that there is an obligation of candour. Parties are expected to admit what they know to be true. Litigation ought to be a co-operative process. The aim should be to work with the court to try to find the most efficient way of obtaining an authoritative decision on matters which cannot be agreed. Where the sending or receipt of particular items of correspondence may have a direct bearing on the relevance of a line of argument, it is plainly in the interests of efficient administration of justice if both sides give careful consideration, at an early stage, to their positions in relation to each item. If receipt of material which bears to have been sent in the normal way, is to be denied or qualified in some respect, this should be stated explicitly. There is no point in deferring legal issues until a proof before answer if there is to be no dispute as to fact. Eadie Cairns is an example of a different problem. The pursuers made reference in their pleadings to two reports, not for the purpose of proving that the reports were sent or received on particular dates but, in order to rely on the facts asserted, and opinions expressed, by the authors of the reports, as part of the basis of their grounds of breach of contract. Even where reports are explicitly incorporated, a serious practical difficulty arising from such an approach is that it is not easy for respondents to answer clearly when material set out in this way. But the main problem identified in Eadie Cairns was that although the reports were referred to in the pleadings, the pursuers had not formally adopted the material in a way which addressed the legal issues. Although the trenchant observations of Lord Avonside at p 780 E-F are familiar, it is less easy to define the precise rule of pleadings. It is often convenient to incorporate the terms of productions into pleadings by reference and where the material is clearly so incorporated, it can be referred to at debate whether it is admitted or not. Incorporation of reports in wide terms may well lead to a finding of a lack of proper specification. But no such difficulty arises here.

[37] Mr Barclay made some observations about the form of the crave of the counter-claim under reference to styles adopted in the Sheriff Court. However we are satisfied that, despite the comments in para [59] below, the respondent’s crave gives adequate specification of what is sought. It arises naturally out of the facts and circumstances which form the background to the applicant’s craves and it is entirely appropriate to deal with it as a counter claim.

Was the initial 1991 tenancy affected by the doctrine of confusion?

[38] It was not disputed that the decision of the House of Lords in Clydesdale Bank v Davidson established that the sisters as joint pro indiviso proprietors could not have created a tenancy in favour of one of them. But, the first line of argument in support of the proposition that the respondent was now to be treated as a tenant under the 1991 Act lease was based on the proposition that a valid tenancy could continue. Its validity was not affected by the change in the landlord’s interest. It appeared to be accepted that a tenancy would end, confusione, if the tenant became owner but it was argued that the situation was different where the tenant simply became a co-owner.

[39] We accept that there is force in Sir Crispin’s criticism of some of the reasoning behind the decision in the Clydesdale Bank case. In particular, it can be seen that in practical terms the right of a pro indiviso proprietor is not necessarily a greater right than the right of a tenant, at least in the sense that the practical value of a tenancy could well exceed that of a co-proprietor. It is also plainly correct to say that the Court was dealing with the possibility of creation of rights and not the merging of existing rights. However, we think it impossible to avoid the conclusion that the issue, as perceived by the court, was whether a person “could remain at one and the same time both tenant of the property and one of its pro indiviso proprietors”: Lord Hope of Craighead at p 56A. In addressing that question, none of the judges gave any hint of the possibility of a distinction between the creation of a separate tenancy and its continuation. The very use of the word “remain” may be taken as showing that Lord Hope saw no such distinction. But we think it of greater significance that he actually made express reference to confusio. This doctrine had no direct bearing on the case before him. He was not dealing with two pre-existing rights merging and could have dealt with the matter in terms of the impossibility of creating a separate right. But he effectively worked backwards, relying on the rule governing the merging of rights to find the answer to the problem of creation of rights. His reliance on the concept makes it plain that he had no doubt that it would apply to the merging of existing rights of co-proprietors. Lord Clyde dealt with the matter under express reference to the decision in Blantyrev Dunn. He said: “In Lord Blantyre v Dunn the tenant of lands under two long leases acquired the ownership of them. While there were differences of opinion expressed on the question whether confusio operated to extinguish the rights and obligations or only effected a temporary suspension of them it was perfectly clear that the subordinate right of tenancy had merged with the higher right of property”: 58E. That case is, itself, sufficient authority for the proposition that confusio operates, at least temporarily, in the case of leases and reference to it in the context of the complex debate about the role of co-proprietors cannot properly be regarded as an unconsidered aside. The question of whether the concept of confusio applied in the case of co-proprietors was at the heart of the whole approach to the primary problem of whether co-proprietors could create a right of tenancy in favour of one of them.

[40] Although we think the views of Lord Hope and Lord Clyde are clear and of sufficient weight in themselves, it may be noted that, in the Inner House, the Lord Justice Clerk, Lord Ross, was to the same effect. “It follows that the first defender as a pro indiviso landlord could not contract with himself as tenant. Putting the matter another way, where the same person is both creditor and debtor in the same obligation, the obligation is extinguished by confusion:” p 442 I. The effect of the decision in Clydesdale Bank was that there was no distinction to be drawn, in this respect, between a single and a pro indiviso proprietor.

[41] In short, although Sir Crispin was able to find a selection of comments or dicta bearing on this issue, we are satisfied that any weight they might have had must be regarded as superseded by the weight of the opinions expressed in the Clydesdale Bank case.

[42] However, we can deal briefly with some of the points he made. He referred to Bankton for the proposition that a distinction could be drawn between contracts void from the start and issues of validity arising from changing circumstances. He laid emphasis on Bankton’s statement at Rule 12: “That which is validly constituted must continue tho’ matters have come to that state wherein it could not have had a beginning.” However, it may be enough to say that this is too widely expressed to be a sound guide. The scope of the proposition is illustrated by Bankton’s examples. A solvent person can grant a gratuitous disposition. This will not be subject to challenge on his latter becoming insolvent. A person of sound mind may marry. The marriage will not be dissolved by supervening insanity. But, on any view, the rule cannot have been intended to exclude or supersede the principle of confusio. There is no doubt that confusion would apply where a tenant acquired sole title to the land as owner. That itself is contrary to Bankton’s rule and we are satisfied that the rule cannot be regarded as a relevant guide to the scope of the principle.

[43] As Sir Crispin made clear, his submission in relation to the operation of confusio relied to a substantial extent on the proposition that a lease under the 1991 Act, or its predecessors, ought to be treated in the same way as a servitude. His support from this came from an observation of Lord Ivory in Blantyre v Dunn. His Lordship rejected cases bearing on distinct feudal estates as being in an entirely different category to leases but he went on: “The illustration of a servitude comes nearer to the case in hand. The servitude is a burden on the servient tenement as a lease is an encumbrance upon the lands. And when the owner of the servient tenement becomes owner of a dominant tenement, holding both subjects simply and absolutely in fee-simple, the burden of servitude becomes absorbed in the right of property res sua nemini servit. That has a very considerable analogy to the present case.”

[44] It may be noted that a reference to something as “analogous” is simply to refer to it as having some similar or potentially similar feature. It is not the same as saying that the subjects are directly comparable in every respect. The feature of servitude which Lord Ivory picked out as analogous was that the burden of the servitude was absorbed in the greater right of property. He took that to support the proposition that a lease was wholly extinguished. We accept that there is a tract of authority which would support the view that a servitude should not be regarded as extinguished by operation of confusio except in the case of a sole proprietor coming into possession of both dominant and servient tenements in the same capacity. It may well be that, in relation to servitudes, the position is different where there are co-proprietors. But we are satisfied that nothing in the material relating to servitudes can prevail by analogy against the direct weight to be given to the views expressed in the context of leases in the Clydesdale Bank case.

Was the 1991 Act lease extinguished or merely suspended?

[45] The second contention in support of the continued existence of a 1991 Act lease was that, if it was affected by confusio, suspension was only temporary. The lease was not extinguished but revived on a change of parties. This submission was based partly on the reservations said to be expressed in Blantyre v Dunn, and partly by reference to authority dealing with servitudes. However, it may be noted that we were not directed to any authority supporting the concept of suspension of a lease as opposed to total extinction. None of the judges in the Blantyre case was positively to that effect and we are satisfied that dicta in the Clydesdale Bank case are to the opposite effect. We are satisfied that the weight of authority supports the conclusion that leases are wholly extinguished. This is consistent with the view expressed by Lord Macfadyen in The Howgate Shopping Centre Ltd v Catercraft Services Ltd at paragraph [61].

[46] Further, we are not persuaded that the features of a servitude have sufficient similarity with those of an agricultural lease to form any basis for the proposition that they should be treated in exactly the same way. An obvious difference between leases and servitudes is that the dominant property has a physical identity distinct from the servient property. The servitude is a right held by a dominant property over the servient property. It is possible to identify properties which could come into different hands and in respect of which the servitude would serve a positive purpose. It is hard to see any justification for the concept of an agricultural lease re-emerging. It is clear that there are practical reasons which would justify the view that servitudes should simply be suspended. They are essentially simple in character and operation. It will be obvious in most cases that changes of ownership of the main subjects might be expected to occur in circumstances where re-emergence of the servitude right might reasonably be expected to be intended. No such expectation can be said to arise in relation to an agricultural tenancy. Any attempt to bring in a new tenant would depend upon a positive assignation but there would be no person who had a tenancy to assign. Similarly it is plain that sale by an owner of subjects in respect of which he previously had a tenancy would not be expected to revive the tenancy. We see no sound basis for any difference merely because ownership is held by pro indiviso proprietors. We were not persuaded by the attempt to demonstrate that the land and the tenancy were to be regarded as held on different destinations. If the tenancy ended there would be no question of destination or rights of succession.

[47] In any event the concept of suspension of an agricultural lease is fraught with practical difficulties. To take one example: the landlord and tenant of an agricultural holding have quite different onerous obligations in respect of maintenance of equipment. If these obligations were to be inoperative for any significant period it would be hard to say where responsibility lay when the lease resumed.

Whether a new 1991 Act tenancy arose by implication from 26 November 2003

[48] The third basis for the assertion of a 1991 Act tenancy rested essentially on the fact the respondent was allowed to continue in occupation of the subjects after she ceased to be a co-owner and that the applicant accepted rent for them. There is no doubt that, prior to the operation of the 2003 Act, the circumstances might well have pointed to creation of a 1991 Act tenancy for reasons discussed in Morrison-Low v Paterson. However it was not disputed that all relevant provisions of that Act came into effect from the beginning of the day on 27 November. The respondent did not lose her rights as joint owner of the farm until some time on 26 November. We have no doubt that, in a question with the applicant, her occupation of the farm on that day falls to be attributed to her rights as pro indiviso proprietor. The applicant has no knowledge of any change on that date. In short, we do not think that there is any basis for the contention that she possessed under a new 1991 Act tenancy at any time before the new Act came into force. Payment received in respect of occupation on 26 November was made in May and was clearly made and received in respect of the existing arrangement. It can readily be attributed to a sole occupancy agreement. We think that the continuation of the respondent’s existing rights of occupancy on 26 November is sufficient to deal with the argument that a new 1991 Act tenancy was, in some way, created before the start of the new Act.

[49] In any event, we think that there is no sound basis for any argument that a new agreement came into effect before 28 November at best. We say nothing of the possible argument that it did not come into effect before 29 November. The distinction was of no relevance in this case and we can accept 28 November as the date in issue.

[50] It is helpful to restate the underlying assumptions. For reasons we have discussed above, the first is that at least at the start of 26 November there was no agricultural tenancy. The respondent was to be taken as having a right to sole occupation of the farm as pro indiviso proprietor by an arrangement with the other proprietor. On that day she gave up all right to occupy as such proprietor. However the applicant had no knowledge of this. The respondent did not vacate the farm on 26 November. Had the applicant given any thought to the true legal position on that day she would have had no reason to conclude otherwise than the respondent was simply exercising her sole occupancy rights as co-proprietor. On 28 November intimation of change was made. As from that date, the co-owners may have to be taken to be aware that the respondent was in occupation purportedly as tenant. They allowed her to remain in occupation and accepted rent. On the authority of Morrison-Low agreement to a new tenancy can be inferred from that date. We accept that the decision in that case was to the effect that the implied agreement could be taken to run from the first date on which it could have started. But we find nothing in the decision to support the view that an agreement must be deemed to have started at a time when there was no basis for any inference of agreement on the part of the landlord.

[51] We need not repeat the short summary of the essential facts of that case. These can be found in the second paragraph of the speech of Lord Fraser: page 74. The critical fact was that the parties thought that the tenants were occupying the holding as successors under a lease. However, to have had that status the executors of the previous tenant required to have given notice by 4 December. They had not done so. The same solicitor had been acting for both parties. There was no question of either side not being aware of all the facts. But the solicitor had wrongly advised the successors that no notice was necessary. It was accepted that although occupation after 4 December had been assumed, by both parties, to be in virtue of succession under the previous lease, this was wrong in law. In the Court of Session, it was thought that this error as to the basis of the agreement made it impossible to hold that there was any tenancy after 4 December. However, the House of Lords took the view that a new tenancy had to be inferred from continued occupation and acceptance of rent. The obvious start date in that case was from 4 December. But it is to be noted that there was no other relevant date and that the parties could be taken to have both been aware of the very point when the right under the old lease expired and to be aware that the tenant intended to continue in occupation as, in fact, happened. The dicta of Lord Fraser which Sir Crispin relied upon were to the effect that the facts pointed unmistakably “to some agreement having been in place since 4 December.” In the present case, while the facts may point to some agreement having been in place since 28 November the facts show equally clearly that no consensus as to a tenancy agreement could have existed before that date when the applicant had no knowledge of the changed circumstances.

[52] Lord Keith discussed the background facts in more detail and, in particular, examined the evidence of discussions in September bearing on the continuing occupation of a farm by the Paterson family. He said that: “It is enough for the defenders in this case to prove that the farm at Moonzie was let to them for some period from 4 December 1974 when, as is common ground, the lease of 1929 necessarily came to an end.” We have little doubt that this observation, in its context, falls to be construed as meaning some period “after” 4 December. His Lordship was making the point that it was not necessary to be able to infer any specific agreement on any particular day. In other words, we find nothing in the dicta in that case to compel us to conclude that any inference of agreement should be drawn on a day when, plainly, the applicant had no knowledge of the relevant facts. Any new agreement to be inferred from the actings of the parties in the circumstances can only be taken to run from 28 November.

Whether the respondent now holds on an LDT

[53] It was not disputed that sec 1 of the 2003 Act would apply to an agreement after 28 November and, accordingly, that there was no question of a 1991 Act tenancy having been created if the lease did not start before that date. However, we accept that the decision in Morrison-Low has the effect of requiring an inference to be drawn of a tenancy agreement of some sort between the co-proprietors. In absence of any written agreement, the implied agreement would be a lease for a year.

[54] In terms of sec 4(1) of the 2003 Act, “where agricultural land is let under a lease for a term of not more than 5 years … the lease is a short limited duration tenancy”. In terms of sub-section (3) where the tenant remains in occupation of the land after the expiry of the term of an SLDT of less than 5 years, the tenancy “ continues to have effect as if it were for a term of 5 years”. We are satisfied that the effect of these provisions is that the one year tenancy starting on 28 November 2003 which was to expire on 27 November 2004, would have effect as if it had a term of 5 years. In other words it would expire, instead, at midnight on 27 November 2008.

[55] The tenant remained in occupation with consent of the landlords after November 2008. Accordingly, in terms of sec 5(2) of the 2003 Act, “the tenancy has effect as if it were for a term of 15 years commencing on the expiry of the short limited duration tenancy” and the tenancy falls to be treated as an LDT. In the circumstances of this case, this means that the respondent is now a tenant under an LDT which will expire on 27 November 2023.

[56] It may be added that we accept Sir Crispin’s submission that the reliance on the Requirements of Writing (Scotland) Act 1995 was simply misplaced. Although a lease for a number of years requires to be in writing, sec 1(7) makes clear that “if a tenancy or right is not granted for more than a year” it is not included in the requirement to be in writing. We accept that a lease created by occupation and payment of rent would start out as a lease for a year only. It therefore did not require to be in writing. The continuation of it thereafter arose from the effects of statute: in terms of secs 4 and 5 of the 2003 Act. We are satisfied that these statutory provisions operate without regard to the issue of formal agreement between parties.

[57] Mr Barclay’s substantive answer to the idea of any SLDT or LDT rested on the proposition that because the tenant was a partner in one of the landlords, she would not, in practice, enforce rights against herself. He stressed that part of the reasoning in the Clydesdale Bank case relied on the impossibility of a pro indiviso proprietor enforcing a right against himself or herself as tenant. There was certainly considerable discussion of this practical question in that case. However, we are satisfied that the concept of the partnership as a separate legal persona is clear. Practical issues which might or might not arise within the partnership itself are not, in our view, sufficient to make the lease fundamentally null. It may be added, though it is not of any great weight, that leases to a partnership in which the landlord was a partner were common for many years without there being any suggestion that they were fundamentally void. In such cases the tenant would be equally unlikely to attempt to enforce any landlord’s obligations but, again, the separate legal personality was clear.

Decision

[58] In the result, we can grant orders in terms of the applicant’s first three craves. This gives effect to our findings that the respondent has not held under a 1991 Act tenancy since the time when she became a co-proprietor. However, we also find that the respondent now occupies the holding in terms of a limited duration tenancy under sec 5 of the 2003 Act and we are satisfied that it is appropriate to make an order giving effect to that finding.

[59] In these circumstances it is unnecessary to deal specifically with the various pleas in law. However, some confusion arises in relation to the respondent’s crave and in particular the start date of the LDT. It was clear that it was the existence of an LTD which was in issue under the esto case and there was no explicit dispute over duration. We have decided that it is appropriate to make a finding which is based on the view that an LDT commenced at the end of an earlier SLDT. This is effectively what is sought in terms of the first part of the order craved. But the crave refers to an LDT commencing on 28 November 2007. In our view the appropriate start would be 28 November 2008. While we would normally consider it inappropriate to make an award giving a party more than they asked for, we face the difficulty that the duration of a lease is fixed by statute and cannot be varied by simple agreement. Sir Crispin did not make any formal motion to amend the counter-crave. However, the submissions canvassed a range of dates without objection and in all the circumstances we have come to conclude that is appropriate to make a formal order reflecting what we have found to be the statutory position. The LDT must taken be to have started on 28 November 2008.

[60] We have decided that it is not appropriate to make the order sought under the applicant’s fourth head in relation to the Keeper. Although the application proceeded as an ordinary application, the crave seeking to ordain the Keeper of the Registers to remove the entry based on the respondent’s supposed interest as a tenant under the 1991 Act, should properly be viewed as an appeal in terms of sec 25 of the Act. It is not clear from the pleadings what stage any procedures under sec 25 (8) and (9) had reached before the present action was raised. It may well be that the Keeper will be able simply to make an appropriate change to reflect our findings. However, if it is necessary to treat the application as an appeal, intimation must be made to the Keeper before we pronounce any formal order. It may be noted that we would not expect the Keeper to have any interest in appeals such as the present. Where a dispute is between putative landlord and tenant without wider implications, it would not be necessary for the Keeper to take any formal step in response to intimation in most cases. However, the Keeper must be given an opportunity to consider her position.

[61] As agreed by parties, we continue for submissions on expenses. However, we accept the respondent’s submission that the hearing was suitable for the employment of senior counsel. The case raised various difficult and novel questions.

For the applicant: Peter Barclay, Advocate; Stevenson & Marshal, Solicitors, Dunfermline

For the respondents: Sir Crispin Agnew of Lochnaw Q.C.; Gibson & Spears, Dow & Son, Solicitors, Kirkcaldy