Decision of the Scottish Land Court

The Trustees of Miss J M H Gibsone of Pentland's Trust (Applicants) v James Telfer (Respondent)

Case reference SLC/86/17
before
Lord Minginish, Chairman, and Tom Campbell
24 January 2019

INTRODUCTION

[1] By our order of 1 October 2018 we refused this application for resumption and allowed parties 21 days for the submission of motions and submissions on expenses. These have now been received.

[2] The respondent seeks the whole expenses of the application as taxed, certification of the cause as suitable for the employment of senior counsel and certification of Mr Martin Hall FRICS as an expert witness. The applicants argue that this is a case of divided success and that there should be no award of expenses to or by either party, which failing they have a number of submissions as to why any award against them should be modified. They agree that the case justified the employment of counsel, but not senior counsel.

General principle in resumption cases

[3] The normal principle governing expenses is, of course, that the cost of litigation “should fall on him who has caused it”; Lord President Robertson in Shepherd v Elliot (1896) 23 R 695 at 696. In this case that was clearly the applicants.

[4] There is another principle, or, at all events, a practice, which comes into play in resumption cases in this court. It is that the tenant is normally found entitled to his expenses win or lose, provided he has not acted unreasonably. In this case the tenant has, of course, been successful in resisting the application but the practice of the Court is relevant in relation to certain discrete arguments which were unsuccessfully advanced on his behalf; in other words, in relation to the applicants’ agents’ submissions that this has been a case of divided success.

[5] This approach to expenses in resumption cases goes back to the early days of the Court’s existence and the rationale for it can be found in the case of Drysdale v Meiklejohn 1920 SLCR App 149 at 150, where the Court said: “the application for resumption is made entirely for the benefit of the landlord and it is usual to find him liable in expenses whether he succeeds or not, unless in special circumstances”. That was a case in which the application for resumption failed, so one would expect the tenant to get his expenses under the normal rule that expenses follow success. In a case the following year, in which the landlord was successful in part (i.e. in respect of part of the holding where the land was required for feuing but not in relation to the rest of the holding where the ground for resumption was defective cultivation by the tenant), the Court found the tenant to be entitled to his whole expenses, saying, “As this is an application for compulsory interference with the rights of the tenant as constituted under the statutes we have found the tenant entitled to expenses”; Duke of Hamilton’s Trustees v Fullerton 1921 SLCR 29 at 32. Those were both cases involving statutory small tenancies but there is no ground for distinction between them and smallholdings so far as this matter is concerned.

[6] The result of that is that it is not enough for the landlord, in order to avoid being found liable in the whole expenses of a resumption application, to show that there was divided success: the tenant must have acted unreasonably in advancing the matters on which he or she was unsuccessful.

[7] The matters on which the respondent did not succeed were three of his four grounds of opposition, viz (i) the status of holding 1, (ii) part of the land being earmarked for a relief road, and (iii) uncertainty as to whether the project would go ahead. (The ground on which he succeeded was, of course, the lack of a reasonable purpose for resumption.) We deal with each of these in turn.

The status of holding 1

[8] The principal matter at issue here is whether the respondent acted unreasonably in arguing that holding 1 was not a smallholding but was held on a tenancy governed by the Agricultural Holdings (Scotland) Act 1991.

[9] In our view it is not possible to come to that conclusion. Although taking the position that holding 1 was held on a 1991 Act was a contradiction of everything the respondent and those then acting for him (a reference to the exchange of letters between Mr Donald Rennie WS, on the respondent’s behalf, and Messrs McGrigor Donald, the landlords’ then agents, in April and May 2001) had previously argued, it cannot be said that his change of position was unreasonable given that the existence of the 1964 lease appears not to have been known to Mr Rennie and that when his present advisers became aware of it, they could not very well simply ignore the questions its ambiguous terms threw up. Given these questions, the status of the holding had to be determined in this application.

[10] The applicants’ submissions argue that the question of status has to be separated out from the issues bearing on resumption. If it had been litigated as a separate question, they would, they say, have got their expenses because they would have been wholly successful and the rules (or practice of the Court) in relation to resumption expenses would not apply.

[11] However, that is an artificial approach because the status of the holding would only have become an issue in the context of the landlords’ intention to resume it. So the normal rules on expenses in resumption cases would apply. In addition to which it may also be said that, had the applicants wished to attempt to protect themselves from an award of expenses in this way, it was always open to them to suggest a preliminary hearing restricted to the determination of the status of holding 1.

[12] The reasonableness of the respondent’s advisers’ position can also be seen from the fact that the Court held their interpretation of the 1964 lease to be correct. It was because of a point raised by the Court itself while the case was at avizandum that the Court decided that holding 1 continued to be held on smallholding tenure notwithstanding the terms of that lease.

[13] In arguing that the applicants’ success on that point represents divided success, the applicants’ agents cite what was said by this Court in Oosterhof & Co v The Scottish Ministers 2011 SLCR 174 at para [7] to the effect that “where it is clear from the terms of the interlocutor or order of the court that one side has won on one issue and one on another, it may well be helpful to refer to ‘divided success’ when considering who should bear the cost”. However, it is important to note what the Court there meant by “divided success” and for that we have to look at paras [7] and [8] of the judgment, which are in the following terms:

“[7] We think that the term “divided success” is best reserved for cases where the parties have been disputing about distinct issues and where the result cannot readily be reduced to a single outcome such as a bottom line cash figure. In other words, where it is clear from the terms of the interlocutor or order of the court that one side has won on one issue and one on another, it may well be helpful to refer to “divided success” when considering who should bear the cost. In such a case, the Court would have to consider various factors including the relative importance of the issues, the time spent on each, and the weight of each in terms of preparation and anxiety.

[8] The term “divided success” is sometimes used in relation to success on distinct issues of law even where that success has not had a practical outcome. There is some risk of confusion in such usage. The proper measure of success is the decree or order pronounced by the Court rather than the supporting note. Generally speaking, Scottish courts have not been prepared, in the context of expenses, to engage in careful scrutiny of individual arguments and the time spent on them. A party claiming or defending a right in face of challenge is normally given a wide latitude in relation to arguments reasonably advanced to support their position. Unless a distinct and significant chapter of time and effort can be identified as having been wasted on defective argument, all will fall under the broad head of the expenses of the litigation necessitated by the need to overcome the challenge.”

[14] We do not consider that the status of holding 1 was a “distinct issue” from the application to resume it: it was rather a question which arose only because of that application and had to be answered as part of determining it. Because it had to be answered, it cannot be said that the time spent on it was wasted.

[15] In our view, therefore, the raising of this issue was not unreasonable and the outcome did not represent “divided success” in the sense discussed in Oosterhof. No modification of expenses is appropriate in relation to this matter.

The relief road

[16] In light of our decision on reasonable purpose, we found it unnecessary to come to a view on the effect of part of the land in question being earmarked for a proposed relief road but it is not possible for us to say that the matter being raised was unreasonable. So no mitigation of expenses is appropriate.

The likelihood of the development proceeding

[17] That leaves the lack of certainty as to the development proceeding. On that matter what we said in our judgment (at para [80]) was that, had we been satisfied as to reasonable purpose, we would not have refused resumption because of any doubt as to whether the project would actually go ahead. That was because the considerable amount of work and expense which had already been invested in it showed it to be a serious and credible project.

[18] Although that was our conclusion, again it cannot be said that the respondent acted unreasonably in raising the question of the financial credibility of the project, given (a) the lack of clarity (for commercial reasons, as was explained to us) as to how it was to be financed and (b) the Court’s well-known insistence on being satisfied that the project in question is likely to be carried out before authorising resumption (see, for example, Lands Improvement Holdings Landmatch SARL v Cole 2014 SLCR 85). So no mitigation of expenses is appropriate under this head.

The respondent’s compensation claim

[19] Although the application was refused at debate stage, the respondent’s motion for expenses also includes the work done in relation to his claim for compensation in the event of resumption being authorised.

[20] Someone in the position of the respondent would, of course, normally expect to get the expenses of formulating and vouching a compensation claim as part of the whole expenses of the case. However we were informed by the applicants’ agents, that parties attended a day’s mediation funded by the applicants and that the applicants were prepared to fund further mediation but the respondent refused. The respondent’s agents’ submissions said this matter should not be taken into account because mediation involved confidential “without prejudice” discussions.

[21] Since we thought the matter of some significance, we invited further submissions from parties as to the propriety of taking account of refusal to engage in mediation when deciding expenses.

[22] The respondent’s position, when these further submissions were received, was that, as a matter of law, a party’s refusal to take part in mediation cannot be taken into account in relation to expenses. This was founded on the following remarks of the First Division in David Prentice trading as Duns Slaters v Portland Manufacturing Ltd XA161/02, decision of 21 May 2004:

“[35] The final ground of appeal relates to expenses. It proceeds, in the first place, on the basis that the defenders were willing to remit all issues to a man of skill and that the sheriff should have had regard to that factor in disposing of the expenses of the cause. As the case was developed there were potentially very significant issues of law in this case that were never likely to be addressed independently of the investigation of the facts. Even if there were any ground in principle or practice for modifying the liability of a party where a reference to arbitration or mediation had been refused, this would not have been an appropriate case in which to modify the defenders’ liability. However, there is no basis for the application in our law or practice.”

[23] The respondent’s submissions very properly drew attention to criticism made of that passage by Anna Poole, advocate, as she then was, in an article on “Mediation case law: current issues in 2008 SLT 155, saying “the dictum of the First Division is not supported by any reasoning, is open to doubt, and could be regarded as obiter”.

[24] Reliance was also placed, on behalf of the respondent, on the following paragraph of the Report of the Scottish Civil Courts Review (“the Gill Report”):

“35. We do not consider it necessary to make any specific provision in court rules for sanctions in expenses where a party has refused to engage in ADR. Nor do we consider that parties should have to justify to the court why they did not engage in ADR or, if they did, why it did not result in settlement. These, in our view, are not proper matters for the court to raise. There is case law in England and Wales where the conduct of parties in relation to mediation has been found relevant to the awarding of costs. We would regret it if such an approach were to become a feature of litigation in Scotland. There may, however, be exceptional cases where it may be clear to the court that a party’s refusal to consider ADR has been wholly unreasonable. In such exceptional situations we consider that the court’s general discretion at common law in the awarding of expenses is a sufficient safeguard. As a general rule, however, we consider that parties should bear their own expenses in relation to mediation, unless they agree otherwise, and that such expenses should not normally be part of an award of expenses by the court.”

[25] Both parties cited what this Court said in Nevis Estates Ltd & Ors v Cameron SLC/142/99, decision of 15 August 2011:-

“[67] Other relevant factors justifying departure from a finding that expenses should follow success would be any unreasonableness in the conduct of the litigation as such or inefficiency in the way in which it has been presented. In the present case … the main factor founded on by the landlords related to the question of steps taken to negotiate. In this respect, the landlord relied on dicta from McKie v Scottish Ministers …

[68] In McKie the Court said: “In its consideration of the reasonableness of a party’s conduct of an action, the court can take into account all relevant circumstances. Those circumstances include the party’s behaviour before the action commenced, the adequacy of a party’s preparation for the action, the strengths or otherwise of a party’s position on the substantive merits of the action, the use of a court action for an improper purpose, and the way in which a party has used court procedure, for example, to progress or delay the resolution of the dispute”: para [3].

[69] The Court in Mckie did not expressly mention negotiation. Failure to negotiate can be described as conduct but we have some difficulty in seeing the relevance of general assertions of unwillingness to negotiate. … We accept that there may be circumstances where particular aspects of a negotiation are relevant to expenses. For example, where a case can be broken into distinct parts, evidence of an offer to deal with one part which should have been accepted and could have been accepted without affecting his stance on another part may well be relevant. … No question of mediation arises in the present case and it is sufficient to say that we are not yet persuaded that this should, in effect, be made compulsory by being treated as a factor relevant to expenses.”

The submissions for the applicants rely on what is said at para [69] to the effect that failure to negotiate can be described as conduct and, in terms of the quotation from McKie in the previous paragraph, on the fact that a party’s behaviour can be taken into account in relation to expenses, whereas the respondent’s submissions rely heavily on the final sentence.

[26] In addition to arguing that we were not permitted in law to have regard to refusal to take part in mediation, the respondent’s submissions argue that to do so would be contrary to public policy (for the reasons stated in the Gill Report) and unfair, because, given the confidential nature of mediation, the court cannot know the reasons why a party refused to continue with it.

[27] Our Rules give us very wide discretion in dealing with expenses. Rule 88 says simply “The court may award such expenses in a case, or in any part of a case, as it thinks fit”. Modification of expenses is competent in order to mark the court’s dissatisfaction with some aspect of the behaviour of a successful party, either as regards the litigation or in the matter which gave rise to it; MacPhail, Sheriff Court Practice 3rd ed para 19.10 and Shepherd v Elliot, supra.

[28] In the present case the respondent was, of course, perfectly entitled to stand on his rights and oppose resumption tooth and nail. Correspondence produced with the applicants’ supplementary submissions makes clear that that has been his position from the start. It is most succinctly described in a letter to Mr D E N Gibsone dated 29 May 2017 in which he says: “As I have previously stated I remain firm in my conviction that under no circumstances shall I willingly surrender my landhold (sic). Therefore I do not consider mediation on the grounds of my eviction or ending of the landhold to be a productive use of time for either party.”

[29] What was exercising us when we invited further submissions was whether the respondent ought to have been willing to attend mediation on the compensation payable were the Court to authorise resumption. That was, arguably, in terms of what was said in Nevis v Cameron,a distinct part of the case which might have been amenable to settlement without affecting his stance on the main question.

[30] However, we are persuaded, on the authority of the Inner House in Prentice v Portland Manufacturing Ltd and the view advanced in the passage quoted from the Gill Report that we ought not to penalise the respondent for his failure to participate in mediation by modifying the award of expenses he would otherwise expect to get.

[31] As to the reasonableness of the respondent’s behaviour, we can understand why, given the respondent’s root and branch opposition to resumption, he saw no point in negotiating on compensation and there is also the point that, since the case was to be heard in two parts, there was no imperative need to engage in negotiation on the amount of compensation unless and until the Court authorised resumption.

[32] The applicants have a particular objection in respect of work done in relation to an alternative strategy for the remediation of Clippens Yards advanced by the respondent. This involved a waste recycling company with which the applicants had previously had some difficulties. The suggestion of involvement of this company is said to have caused the applicants anxiety and personal offence. However, suggesting another means by which remediation could be effected and resumption avoided seems to us to be a perfectly reasonable thing for someone in the respondent’s position to have done. Had the matter gone to proof, it may be that it would have been found to be devoid of merit but we are unable to come to that conclusion based only on the pleadings. Accordingly we cannot say that the respondent acted unreasonably or improperly in advancing this and employing Mr Hall for that purpose, as well as for the assessment of his compensation claim.

[33] It was also not unreasonable for the respondent to assess the value of the subsidiary or auxiliary use part of his compensation claim and we see no basis for excluding that, albeit that the Court has not ruled on the competency of such a claim.

Certification of the cause as suitable for senior counsel

[34] Paraphrasing, rule 89 of our Rules provides that the court may sanction the employment of senior counsel if it accepts that such employment is justified due to the case being difficult or complex or being of particular importance or value to the party represented. The applicants’ agents do not oppose sanction for junior counsel but oppose sanction for senior. The respondent’s agents say the employment of senior counsel was justified by (i) the fact that the law on smallholdings is not well known, (ii) the fact that the meaning of the phrase “the good of the estate” was not an easy point of law, (iii) the existence of complex and difficult legal and factual issues in relation to whether the potential use of the land for auxiliary and subsidiary occupations could be taken into account and (iv) the importance of the matter to their client.

[35] It is true that the law on smallholdings is not well known, but even junior counsel are to be taken to be capable of mastering new areas of law. Although, as this case shows, there are important points of difference, the law on smallholdings is not that far removed from crofting law and there are certainly junior counsel at the bar who are familiar with that body of law.

[36] It is also true that the meaning of “the good of the estate” was not an easy point: in fact the Court found it extremely difficult notwithstanding the helpful submissions of both parties on who could benefit from a resumption and resumption for the sole benefit of the landowner being impermissible.

[37] As to complex and difficult questions arising in relation to the potential use of the land for auxiliary or subsidiary occupations, although we did not require to opine on the matter, we do accept that this was a complex and novel point. It was part of a larger compensation claim which would, we are satisfied, have given rise to complex factual and legal questions had it gone to proof.

[38] As to the importance of the matter to the respondent, that can hardly be overstated since it involved his home and livelihood. Although no longer a young man himself, he has family coming after him to whom he may wish to bequeath the tenancy of land which has been held in his family for the best part of a century. It was also important to him that, should resumption be authorised, he be fully compensated for his loss. That loss was estimated, in terms of Mr Hall’s report, production 31, at £1,855,504. Whilst that figure has not been tested in evidence, it is an indication of the value of the claim to the respondent. The matter was, therefore, “of particular importance or value to the party represented”, in terms of sub-paragraph (1)(b) of Rule 89 of our Rules.

[39] On the whole matter, therefore, we are satisfied that a combination of (a) the complexity of the reasonable purpose argument, (b) the complexity and novelty of the potential auxiliary or subsidiary use claim and (c) the importance of the matter to the respondent justified the employment of senior counsel and we have so certified.

Certification of Mr Hall FRICS as an expert witness

[40] For the reasons already given, we are satisfied that Mr Hall should be certified as a skilled witness for the respondent in respect of his whole involvement.