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
1 October 2018

INTRODUCTION

[1] This is an application under sec 2 of the Crofters Holdings (Scotland) Act 1886 (“the 1886 Act”) for authority to resume two smallholdings known as Smallholding Number 1 and Smallholding Number 2, Pentland Mains (otherwise “Old Pentland”), Midlothian for the purpose of the creation of a film studio.

The holdings

[2] Before describing the holdings with which this application is concerned it is, perhaps, appropriate to say an explanatory word about smallholdings and small landholder tenure generally.

[3] The origins of crofting law, from which small landholder tenure is derived, are to be found in the 1886 Act. That is the Act which, in response to agrarian unrest in the Highlands and Islands of Scotland, introduced a unique form of tenure which guaranteed (a) security of tenure subject to compliance with specific statutory conditions, (b) fair rents for crofts and (c) payment of compensation for a crofter’s improvements at the end of the tenancy. “Croft” was not explicitly defined in the Act but “crofter” was defined as meaning any person who at 25 June 1886 was a tenant of a holding from year to year and whose rent did not exceed £30, whatever the size of the holding. It applied only to crofting parishes within the counties of Argyll, Inverness, Ross and Cromarty, Sutherland, Caithness, Orkney and Shetland.

[4] In 1911 the Liberal government of the day thought it a good idea to extend this form of tenure throughout Scotland so the Small Landholders (Scotland) Act 1911 (“the 1911 Act”) was passed. Its long title described it as “an Act to encourage the formation of small agricultural holdings in Scotland and to amend the law relating to the tenure of such holdings (including crofters’ holdings); to establish a Board of Agriculture for Scotland, and for other purposes connected therewith”. Instead of “croft” and “crofter” the 1911 Act used the terms “holding” and “landholder”. The Act applied to all holdings (a) whose rent did not exceed £50 per annum, whatever their area, or, alternatively, whose area did not exceed 50 acres, whatever the rent and (b) the permanent improvements on which had been provided by the landholder or his predecessors without payment or fair consideration therefor from the landlord.

[5] The 1911 Act was passed at a time of clamant demand for land to be made available for new holdings so it included a power to the newly created Board of Agriculture to acquire land for that purpose and holdings were created by order of the, also newly created, Scottish Land Court.

[6] It was in exercise of these powers that Pentland Mains Farm was taken over by the new Board in its early days and broken up into 16 smallholdings as shown in a Schedule attached to an order of this Court dated 11 May 1918. Notwithstanding the date of that order, the holdings were in fact occupied in 1915. No written leases were necessary for their constitution and, so far as is known, none was entered into. Instead they were governed by the statutory code contained in the 1886 and 1911 Acts.

[7] However, in the case of holding Number 1 that changed in 1964 when a written lease (“the 1964 lease”) was entered into between the present applicants’ predecessor in title, Miss Jean Mary Hope Gibsone, and the present respondent’s late brother, William Telfer. It is dated 7 and 13 January 1964 but specifies a date of entry of Whitsunday 1962. It was lodged by the applicants, as production 19, on 17 November 2017 and it was only then that it came to the attention of the respondent’s present advisers. However, further productions lodged by the applicants show that previous agents acting for the respondent had it in their possession as long ago as 1989. The effect of that lease is one of the issues in this case.

[8] In 1955 this uniform pan-Scotland small landholder regime was brought to an end with the passage of the Crofters (Scotland) Act 1955 (“the 1955 Act”). It restored the previous nomenclature and once again enacted separate provisions for the crofting counties. Subsequent crofting law reform has had to do with crofts and crofters in these counties. However the 1955 Act did not end smallholding tenure elsewhere in Scotland. No new holdings could be created but existing holdings were left untouched and continued to be governed by the 1886 and 1911 Acts together with more minor pieces of legislation, collectively known as “The Small Landholders Acts 1886 to 1931”. Thus it is that smallholdings, governed by their own statutory code, remain in various parts of Scotland although many have fallen out of that code by becoming vacant and owner-occupied. The fact that these holdings are governed by the Small Landholders Acts and not by the 1955 Act and subsequent pieces of crofting law reform is, as we shall see, a matter of some importance in this case.

The parties

[9] The applicant landlords are the Trustees of Miss J M H Gibsone of Pentland’s Trust. They are the owners of Pentland Estate (“the Estate”) but Pentland Estate is not a large one, extending only to 106.69 acres, of which said holdings comprise 56.30 acres (approximately 53%).

[10] The respondent is James Telfer. The Telfer family have been tenants of these two holdings almost continuously since 1915. The present respondent became tenant of Number 1 in succession to his deceased brother William in 1989 and tenant of Number 2, in succession to his sister, Mrs Jemima Walker, in 2001. He runs the holdings as a single unit but pays their rents by two separate cheques. He and members of his immediate family are the only people living on the estate.

The purpose of the resumption

[11] It is not the applicants’ intention to develop the film studio themselves; instead they intend to dispone their whole estate to a company called Clippens Developments Limited (“Clippens”) who in turn intend to sell the land required for the film studio (which includes the holdings in their entirety) to a company called PSL Land Limited (“PSLL”), who will develop the studio although it may eventually be operated by a third company, Pentland Studios Limited, under lease from PSLL. Missives have been entered into between the applicants and Clippens and between Clippens and PSLL (originally between Clippens and Pentland Studios Limited but subsequently assigned to PSLL) which are conditional only on the land comprised in the holdings being resumed. If these transactions go ahead PSLL will end up with the land on which the studio is to be built and Clippens will own the balance of the estate comprising areas known as “Clippens Yards”, “the Clippens Field”, four other fields to the north of Old Pentland Road and the Old Pentland Graveyard.

[12] Planning consent for the development has been granted by Scottish Ministers in terms of a notice of Intention Letter dated 3 April 2017 (production 7) and a Planning Permission in Principle dated 21 December 2017 (production 41), the application having been called in by them “because [they] recognised the potential economic and cultural benefits associated with the proposal to be of national importance” (said letter of 3 April 2017).

Inspection

[13] Although the hearing which has led to this decision took the form of a debate rather than a proof, it was agreed all round that it would be of benefit for us to see the holdings and the rest of the estate for ourselves so we carried out an inspection on 8 August 2018.

[14] So far as the holdings are concerned, we found two attractive holdings which are actively farmed (as one unit) and adequately, though not heavily, stocked with good quality stock, both cattle and sheep. The holdings comprise good quality land, capable of producing arable crops, though presently used only for taking hay and grazing. Holding 1 is fenced, with stock-proof fencing, into five fields, from two of which a crop of hay seems to have been taken this summer, while number 2 is fenced into seven fields with, again, a crop of hay having recently been taken from two of them. The topography of the land is kindly, with only gentle slopes, making it easy to access and work. We also saw three separate fields on the other side of Pentland Road of which Mr Telfer had been given the use some time ago on an informal basis. No use appears to have been made of these since Mr Telfer’s occupancy was terminated and they are now overgrown.

[15] So far as the rest of the estate is concerned, we viewed said three fields and what was referred to at the hearing as the “L shaped field” unaccompanied. The “L-shaped field” is also neglected and overgrown.

[16] We were shown Clippens Yards by Mr Nicholas Gibsone, one of the trustees, and his wife. These yards were originally the scene of shale oil production but in more recent years, during the ownership of the Gibsone Trust, they have been used by a tenant running a waste disposal operation, originally as a waste transfer site for the temporary storage of waste on its way to final disposal whether for recycling or to landfill. However, Mr & Mrs Gibsone described an incremental process by which more and more material was amassed in what became tantamount to bings on the site and was never moved on to its intended, or supposed, final destination. Eventually, as the pleadings disclose, the contractor went out of business or otherwise abandoned the site, leaving the trustees to face proceedings by Midlothian Council in terms of the enforcement notices aftermentioned. He has since died. The result is that Clippens Yards now comprise a number of mounds of spoil comprising tens of thousands of tons of mixed material. These “bings” have changed the topography of the yards completely and, although nature is exerting a benign influence in terms of the mounds becoming overgrown with grass and the area attracting wildlife in the form of birds and deer, the whole area remains unsightly. The exact amount and nature of waste remaining on the site cannot be known until excavation begins, making the cost of remediation likewise unknowable at this stage, save that it is reckoned to be in excess of £1m and may be a great deal more.

Enforcement notices

[17] Because of the state of Clippens Yards, on 17 November 2011 Midlothian Council served enforcement notices on the applicants under the Town and Country Planning (Scotland) Act 1997 as amended by the Planning etc (Scotland) Act 2006, requiring them to cease the import of waste and remove what was already there (production 52 and 53). As we have said, removing what is already there is going to be an onerous and expensive business and it is unsurprising that the enforcement notices have yet to be complied with. Instead what has happened is that successive extensions have been granted by Midlothian Council, the latest of them, as at the time of the hearing, being in terms of a letter by their Ms Erika Pryde, Planning Enforcement Officer, dated 29 March 2018, extending the time for compliance until 1 August 2018 (production 55). The notices transmit with ownership of the land and will therefore transmit to Clippens if the intended sale of the estate to them goes ahead. Moreover the missives entered into between the applicants and Clippens transfer all liability for the remediation of Clippens Yards to Clippens and contain an undertaking by them to carry out the necessary remediation work. The purchase price to be paid by PSLL to Clippens includes a “remediation amount” intended to cover the cost of the work, so the ultimate funders of the remediation are to be PSLL. The relevance of all of this is that the remediation of Clippens Yards is the main way in which it is said resumption of the holdings will be for the good of the estate.

The grounds of opposition to the application

[18] The application is opposed by the respondent on the following grounds:

(a) That holding Number 1 is no longer held on statutory smallholder tenure but on a lease now governed by the Agricultural Holdings (Scotland) Act 1991 (“the 1991 Act”), so that the application in respect of it is incompetent;

(b) The absence of a reasonable purpose in relation to the good of the estate;

(c) That part of the land forming Number 1 is earmarked by Midlothian Council for a relief road and cannot therefore be the subject of resumption and this renders the whole application incompetent.

(d) That there is no certainty that the film studio project will go ahead.

[19] Parties being agreed that these issues could be dealt with by way of debate, we heard Mrs Heather Bruce, solicitor, for the applicants and Sir Crispin Agnew of Lochnaw QC, on behalf of the respondent, at a hearing in Edinburgh on 13 June 2018.

LEGISLATION

Crofters Holdings (Scotland) Act 1886 (as amended by the 1911 Act)

“2. Provision for resumption by landlord

Notwithstanding the provisions contained in the preceding section, the Crofters Commission may, on the application of the landlord, and upon being satisfied that he desires to resume the holding or part thereof, for some reasonable purpose, having relation to the good of the holding or of the estate, including the using, letting, or feuing the land proposed to be resumed, for the building of dwellings, or for small allotments or for harbours, piers, boat shelters, or other buildings or for churches or other places of religious worship, or for schools, or for planting, or for roads practicable for carriages from the croft or crofts to the high road or the sea shore, authorise the resumption thereof by the landlord upon such terms and conditions as the Crofters Commission shall think fit, and may require the crofter to surrender his holding, in whole or in such part, to the landlord, upon the landlord making adequate compensation to the crofter, either by letting to him other land of equivalent value in the neighbourhood, or by reduction of rent, or by compensation in money, or otherwise as the Crofters Commission shall determine.” {By sec 28 of the 1911 Act the functions of the then Crofters Commission were transferred to this court.}

Small Landholders (Scotland) Act 1911 (as at 1964)

“17. Amendment of law as to vacant holdings

(1) Where, by reason of renunciation, removal, failure of a statutory successor, or otherwise, a holding has at any time ceased or is about to cease to be held by a landholder, the landlords shall forthwith intimate the fact in writing to the Board [of Agriculture], and shall not be entitled without the consent of the Board to let the holding otherwise than to a neighbouring landholder for the enlargement of his holding, or to a new holder and the Board shall have in regard to any such holding the like powers as if the holding had been included in a scheme made and confirmed under section seven of the Act of 1911, as amended by section nine of the Act of 1919, at such rent as the Board may fix, provided that the Board shall pay to the landlord, in lieu of compensation provided by the said section as so amended, compensation to such amount as, failing agreement, may be determined by the Land Court in respect of any damage or injury arising out of any alteration as regards the rent payable for or the terms and conditions of occupancy of the holding: … Provided further that, where a landlord lets a holding otherwise than in compliance with the provisions of this section, the Board shall be entitled to declare the let null and void and without payment of any compensation to treat the holding as if it had been duly constituted a new holding under this Act, or assign the same for the enlargement of a neighbouring holding or holdings.”

Small Landholders and Agriculture Holdings (Scotland) Act 1931

“25. Avoidance of agreement inconsistent with the Landholders Acts

Any contract or agreement made by a landholder by virtue of which he is deprived of any right conferred on him by any provision of the Landholders Acts shall to that extent be void unless the contract or agreement is approved by the Land Court.”

Cases

Board of Agriculture for Scotland v Trustees of the Late Countess Dowager of Seafield 1916 SLCR 63
Board of Agriculture v Maclean (1929) 17 SLCT 71
Buckworth v Ross 1925 SLCR 94
Duke of Sutherland v Matheson & Ors 1917 SLCR 13
Fountain International Ltd v Macdonald 1991 SLCR 84
A C Greg v Macdonald 1991 SLCR 135
Grimersta Estate Ltd v MacLeod 1972 SLCR App 128
Kennedy v Johnston 1959 SC 39
Korner v Shennan 1950 SC 285
Laird Applicant 1973 SLT (Land Ct) 5
Lands Improvement Holdings Landmatch S.A.R.L. v Cole 2014 SLCR 5
Lewis & Harris Welfare & Development Co Ltd v Angus Macdonald and Ors 1921 SLCR 96
Lewis Island Crofters Ltd v Mackay (1940) 28 SLCR 69
Loudon v Hamilton & Ors [2010] CSIH 36
Macdonald v Prentice’s Testamentary Trust & Ors 1993 SLCR 97
Macleod of Macleod v Mackenzie 1991 SLCR 95
Martin v Shareholders in Luib Common Grazings 1973 SLT (Land Court) 9
McColl v Beresford’s Trustees 1921 SLCR 3
Manson v Keith 1929 SLCR 19
McGavin v Sir Claud Alexander’s Trustees 1939 SLCR 3
Morrison-Low v Paterson 1985 SC (HL) 49
National Coal Board v Naylor [1972] 1 WLR 908
North Berwick Trust v James B Miller & Co 2009 SC 305
Portman Trustees v MacRae 1971 SLT (Land Ct) 6
Secretary of State for Scotland v Sutherland 1984 SLCR 53
Stornoway Trust v Landholders of Melbost and Branahuie 1950 SLCR 135
Trustees of Caroline, Countess-dowager of Seafield v Sutherland 1935 SLCR 53
Walker v MacEwan (1946) 24 SLCR 14
Whyte v Garden’s Trustees 1925 SLCR 99

DECISION

[20] In light of the conclusion we have come to it is necessary for us to deal with only the first two grounds of opposition to the application.

Whether Holding Number 1 is on a 1991 Act tenancy

[21] The respondent argues that the 1964 lease changed the tenure on which holding Number 1 is held from the statutory smallholding code to a lease governed by the Agricultural Holdings (Scotland) Act 1949 (“the 1949 Act”), the then equivalent of today’s 1991 Act. That lease is a most unsatisfactory document since it does not make clear what kind of tenancy was being created, an omission which leaves the applicants in this case able to claim that, at the very least, it is not inconsistent with continued smallholding tenure and the respondent able to argue that it has much more in common with a 1949/1991 Act tenancy.

[22] We deal with this part of the case by asking three questions: (1) is it possible, in principle, to let a smallholding which has become vacant on anything other than smallholder tenure?; (2) If so, is it possible on the facts of this case?; and (3) on its terms, was the 1964 lease a lease under smallholder tenure or under the 1949 Act?

Is it possible to let a smallholding which has become vacant on anything other than smallholder tenure?

[23] The governing provision here is sec 17(1) of the 1911 Act, as amended, whose terms are set out above. Paraphrasing, since 1911 the landlord of a smallholding which has become vacant has been obliged to intimate that fact to the Board of Agriculture (or its successors for the time being) and the holding could be re-let otherwise than on smallholder tenure only with their consent.

[24] In the present case holding number 1 became vacant sometime before Whitsunday 1962, when the tenant, a Mr Traquair, renounced his tenancy. There is no suggestion that the then landlord, Miss Jean Mary Hope Gibsone, intimated that fact to the Department of Agriculture (as the Board had by then become) or obtained their consent to letting the holding to William Telfer in terms of the 1964 lease. Assuming, for present purposes, that she was intending to let the holding to William Telfer otherwise than on small landholder tenure, would that have been competent?

[25] Mrs Bruce and Sir Crispin referred to case law on this. Mrs Bruce’s starting point was to pray in aid authority for the proposition that parties cannot contract out of statutory rights conferred by crofting or small landholder legislation. She referred to Macdonald v Prentice’s Testamentary Trust & Ors at pp 121-122, approving Whyte v Garden’s Trustees. The import of the dicta relied upon from these cases can be summarised in the words of the Full Court in the latter (at pp 103-104):

“In fact the operation of the provisions of [the 1911 Act] is twofold. It confers upon the present occupant of a statutory holding certain rights and obligations, and it also impresses upon the holding itself a certain character which cannot be altered by the mere will of the occupant. He may renounce his statutory rights, but he does not thereby destroy the attributes of the holding, nor can he deprive the next occupant of his right to succeed him in the holding as a statutory tenant, unless the necessary steps to effect that object are taken by the landlord. The result, therefore, of the statutory provisions is that once a holding is declared to be within the limits of our jurisdiction, the State, in virtue of its legislative power, has conferred upon that holding, even when vacant, certain attributes of which it cannot be deprived except by the due observance of the statutory requirements of relief.”

[26] Applying that to the present case, its effect is that holding number 1 did not cease to be a smallholding governed by the Small Landholders (Scotland) Acts when Mr Traquair renounced his tenancy. It could only cease to be a smallholding by operation of sec 17.

[27] Building on that foundation, Mrs Bruce relied heavily on the case of Manson v Keith in which a holding in Caithness had been re-let, it having become vacant, without the consent of the Board. There was no written lease. In the context of an application for the fixing of a fair rent for the holding, the tenant argued that he was a landholder while the landlord’s position was that the holding had been let outwith the Small Landholders Acts. On an appeal from the decision of the Divisional Court in favour of the tenant, the Full Court held that the natural, if not the only, inference to be taken from the failure of the landlord to intimate to the Board that the holding had become, or was about to become, vacant was that he had “no occasion to invoke the provisions of sec 17, for the simple reason that he had no intention of letting the holding otherwise than on the previous tenure”. To allow the landlord to take advantage of his own failure to intimate the vacancy to the Board so as to let the holding outwith the Small Landholders Acts would be “an illegal evasion of the statute”.

[28] Manson v Keith was followed 10 years later in McGavin v Sir Claud Alexander’s Trustees where the Full Court held, under reference to Manson,that there was a presumption in favour of the continuation of landholder tenure where a holding had been let “without any express stipulation as to change of tenure and without the consent of the Department of Agriculture under sec 17 of the 1911 Act” (page 6).

[29] In neither of these cases was there a written lease nor any other “express stipulation as to change of tenure”. Two cases cited by Sir Crispin were different in this respect. In both Board of Agriculture for Scotland v Trustees of the Late Countess Dowager of Seafield and Trustees of Caroline, Countess-dowager of Seafield v Sutherland there were written leases purporting to let what had been smallholdings outwith landholders’ tenure.

[30] In the first of these, intimation of the vacancy was made by the landlords to the Board of Agriculture under sec 17 and the Board made clear that they would not consent to the holding being let outwith the scope of the 1911 Act. Notwithstanding this the landlords entered into missives of let with a tenant on terms clearly outwith the Act and the application to the Court took the form of an application by the Board craving the registration of the tenant as a landholder under the Act. It was opposed by the landlords and refused by the Full Court on the ground that the Board had taken too long to exercise their statutory rights. The result was that the holding came to be let outwith the Landholders Acts.

[31] A similar result was arrived at in the Trustees of Caroline case, although there was in that case no intimation of the vacancy to the Department of Agriculture. In that situation the Court intimated the application to the Department, who responded only to say that they would await the outcome of the case. Having reviewed the terms of sec 17, what the Full Court made of that situation was this;

“It seems to us, therefore, that the Department’s power to declare the let null and void implies that a let may have been agreed upon which is outside the Act and, further, that until the Department declare the lease to be null and void, it and not the Small Landholders Acts will regulate the rights and liabilities of the parties.” [page 56]

[32] Sir Crispin also cited the case of A C Greg v Macdonald in which a Division of the Court accepted, on an esto basis, that a holding could fall out of the scope of the Small Landholders Acts, the primary conclusion having been that the land in question had probably never been a croft or smallholding in the first place (see page 147). In taking that approach the Divisional Court expressed the view that the decision in Laird Applicant, another Divisional decision, was wrong and it preferred, instead, to follow what had been said by the Full Court in McColl v Beresford’s Trustees to the effect that “abandonment of potential statutory rights may also be effected by the actings of the parties as well as by voluntary agreement” (page 16). Again in McColl, however, the “holdings” – houses and gardens provided by the Ballachullish Slate Quarries Company for their workers – were found never to have been holdings within the Landholders Acts and the Court’s remark was therefore obiter. So we have not found Greg v Macdonald and the cases referred to therein particularly helpful.

Decision on this question

[33] It seems to us that the position which emerges from the principal cases referred to is this:

(1) Where there is no written lease nor any other “express stipulation as to change of tenure” and no consent from the Department under sec 17, the presumption is that the holding has been let on smallholder tenure; Manson v Keith and McGavin v Sir Claud Alexander’s Trustees.

(2) Where there is a written lease or some other express stipulation as to change of tenure but no consent from the Department, a holding may competently be let on terms inconsistent with the smallholders’ code and such a lease will be valid unless and until it is declared null and void by the Department; Board of Agriculture v Trustees of the Countess Dowager of Seafield, Trustees of Caroline, Countess-dowager of Seafield v Sutherland.

Is that possible on the facts of this case?

[34] While the case was at avizandum it occurred to us that there might be some significance in the gap between the date of the entry stated in the lease, Whitsunday 1962, and the date of execution, January 1964. We thought it arguable, on the basis of the reasoning in Manson v Keith, that since there was, as at the date of entry, no written lease nor any other “express stipulation as to change of tenure”, the letting could only have been on smallholding tenure. This would, of course, only matter if we thought Sir Crispin’s submissions on the 1964 lease were correct. Since that is the conclusion we have come to, this gap does matter and we invited and received written submissions on the point.

[35] This invitation prompted some research by parties as to what had happened between Mr Traquair’s surrender of his lease and William Telfer taking entry. This resulted in additional productions being tendered. Both parties found the newspaper advertisement of the tenancy, in The Scotsman of 31 May 1962, and the applicants also tendered a copy of sale particulars prepared by Messrs J & F Anderson WS, for the intended sale of the smallholdings in 1922. Both parties invited us to decide this matter on the basis of their written submissions, supported by these additional productions.

[36] So far as relevant, the advertisement reads:

Midlothian, Pentland Estate

To let with immediate entry –

No. 1 SMALLHOLDING, PENTLAND MAINS

As at present possessed by Mr Alex Traquair, who is giving up the tenancy.

The holding extends to 30 acres or thereby and the present rent is £34 4s. The buildings are the property of Mr Traquair and will require to be taken over from him.

[37] In the applicants’ submission this showed that the subjects were being let as a smallholding on the same basis as held by Alex Traquair. This would be consistent with sec 17 of the 1911 Act. In these circumstances it was unnecessary for the landlords to intimate the vacancy and any intention to let otherwise than as a smallholding to the Department of Agriculture. Both parties accepted that there was no evidence of any such intimation. In 1962 William Telfer was already tenant of holding number 2, so the letting to him of number 1 would, in effect, be an enlargement of his existing holding, something which did not require the consent of the Department.

[38] The provision about the buildings belonging to the tenant and having to be taken over from him by the incoming tenant, was consistent with small landholder tenure rather than a 1949 tenancy, which would have required payment of compensation by the landlords to Mr Traquair at waygo.

[39] The 1922 sale particulars include a table showing the tenants, extent and rent of the various holdings. There is a handwritten amendment to this table, scoring out the name of Miss Alison Moodie (presumably the daughter of Mrs Marion Moodie, referred to below) as tenant of No. 1, and substituting Mr Traquair. There is no mention of a change in the tenure on which the holding was held.

[40] An extract from the estate’s accounts for 1939 was also produced which showed the smallholdings separately identified from the other agricultural land of the estate, comprising Pentland Farm.

[41] For the respondent it was argued that no significance fell to be attached to this gap, there being a presumption, in the absence of averments to the contrary, that where a formal lease was executed after the date of entry the formal lease reflected the terms of the informal agreement which preceded it. Authority for this was Korner v Shennan, an Inner House decision in which Lord Jamieson posed and answered the following question:

“Can a party to a lease be held to be in breach of an obligation contained therein alleged to have been committed subsequent to possession being given but before he lease has been executed? In most cases the answer I think may be ‘yes’, because the formal document will usually embody the terms previously agreed to by the parties and on the strength of which possession has been given, and in the absence of express averment that possession was given on other terms, which were altered by the formal document, it may be assumed to do so. In that sense the formal lease may be read retrospectively. On the other hand, where there are such averments, the position, I think, is different. It would be inequitable that one party to a lease should be held in breach of an obligation before it was entered into, because it was embodied in a formal lease innovating on the agreed terms on which possession was given.”

[42] In Korner the Second Division upheld an appeal against a decision of the sheriff to exclude from probation averments about a different agreement said to obtain between parties to a lease in the period between entry being taken and a formal lease being executed.

[43] It was also submitted that we could not be sure that Mr Traquair had held the tenancy on a 1911 Act lease. He was not a successor to Mrs Marion Moodie (the respondent’s grandmother) who had been the original, 1915, tenant and it was, therefore, possible that what he had been given was the lease of an agricultural holding.

[44] William Telfer had been represented by solicitors at that time and a letter was produced from them (Messrs Bowie & Pinkerton) to him dated 23 December 1963 enclosing a copy of the lease for signature. It was unlikely, in the respondent’s submission, that if his tenancy had started as a smallholding tenancy, solicitors would have advised him to enter into a lease on less favourable terms. The inference, therefore, was that this had been an agricultural holdings tenancy from the start.

Decision on this question

[45] There is no reason to hold that what Alex Traquair held was not the lease of a smallholding. He is listed as a smallholder in place of Miss Alison Moodie in the Schedule attached to the Sale Particulars of 1922. When he surrendered his lease the tenancy was advertised for sale under the name “No. 1 Smallholding, Pentland Mains” without any suggestion that, despite the name, what was being offered was not the tenancy of a smallholding but something else. On the contrary what was offered was a tenancy of the subjects “as at present possessed by Mr Alex Traquair who is giving up the tenancy” (our emphasis). The use of the expression “the tenancy”, rather than “his tenancy”, is a clear indication that what was being offered was the tenancy which he had held, or, at any rate, the same kind of tenancy. Not a word is said about any other kind of tenancy.

[46] When William Telfer took entry, shortly after Whitsunday 1962, absent any indication to the contrary, what he was taking entry to was the lease of a smallholding. He remained in possession without any contrary indication for almost two years. That being the case, the presumption on which Manson v Keith was decided (that sec 17 of the 1911 Act not having being invoked, there was no intention to let the holding otherwise than on the previous tenure) applies. He was, therefore, a smallholder.

[47] Korner v Shennan has, we think, no application to what happened in this case. What distinguishes this case is that the position is governed by a statutory provision. There was nothing like that in Korner, which was simply a dispute between the parties to the contract.

[48] If this analysis is correct, the result is that anything contained in the 1964 lease which deprived him of any of his rights as a smallholder was of no effect without the consent of this court; sec 25 of the Small Landholders and Agriculture Holdings (Scotland) Act 1931. One such right was the right to have any question of resumption regulated by sec 2 of the 1886 Act.

[49] Our conclusion is, therefore, that William Telfer held Smallholding No 1 on a smallholding tenancy, to which tenancy the present respondent succeeded in 1989.

On its terms, was the 1964 lease a lease under smallholder tenure or under the Agricultural Holdings (Scotland) Act 1949?

[50] Lest we are wrong about the terms on which William Telfer held the holding, however, and, in any event, out of deference to the full submissions we heard on the issue, it is right that we give our view as to what sort of lease the 1964 lease was. On that matter, parties’ submissions were as follows.

[51] Sir Crispin argued that it was inconsistent with smallholding tenure in the following respects:

(i) It excluded assignees whereas sec 21 of the 1911 Act allowed assignation by old and infirm landholders with the consent of the Land Court.

(ii) Such a general exclusion of assignees has the effect of excluding the right to bequeath the tenancy (Kennedy v Johnston), whereas sec 16 of the 1886 Act gave the tenant a right to bequeath the tenancy to a member of his family.

(iii) It sought to exclude the right to compensation for permanent improvements at waygo, contrary to sec 8 of the 1886 Act.

(iv) It contained express reference to arbitration under the Agricultural Holdings (Scotland) Acts 1923 to 1949 for the purpose of resolving disputes as to compensation for the working of minerals whereas under sec 25(2) of the 1911 Act all disputes are to be resolved by the Land Court.

(v) It contained a power of resumption, again with disputes to be resolved by arbitration under the 1923 to 1949 Acts, whereas under the 1886 Act, as amended by the 1911 Act, resumption is a statutory, not contractual, matter and depends upon the consent of this Court.

(vi) The obligations for repair and maintenance of fixed equipment contained in the lease were different from the statutory code.

(vii) It purported to oblige the tenant to flit and remove from the subjects at the expiry of the lease, whereas a landholder under the 1886 and 1911 Acts can only be removed for breach of the statutory conditions of tenancy.

[52] Mrs Bruce, for her part, argued that none of the foregoing matters was really inconsistent with landholder tenure. The arbitration provisions had never been utilised. In any event sec 30 of the 1886 Act, which remains in force in respect of smallholdings, allows crofters and landlords to use arbitration in place of litigation. Some of the provisions, such as the clause dealing with compensation for permanent improvements, were positively more consistent with landholder tenure than the lease of an agricultural holding. The provisions excluding assignation and, therefore, the right to bequeath the tenancy were neutral since the problem could, Mrs Bruce submitted, be circumvented by resort to sec 29(1) of the Succession (Scotland) Act 1964 which applies equally to smallholdings and 1991 Act tenancies.

[53] In these circumstances, there being no fundamental repugnancy between the 1964 lease and landholder tenure, it could not be said that by entering the lease William Telfer had divested himself of his status as a smallholder.

Decision on this question

[54] On this matter we find in favour of the respondent for the following reasons. Firstly, there was absolutely no need for a written lease if the intention was continued letting as a smallholding. The likelihood, therefore, is that something different was being attempted. Secondly, the various discrepancies identified by Sir Crispin clearly point away from smallholder tenure. Thirdly, although it contains no express provision to the effect that the tenancy was to be governed by the 1949 Act, the lease’s repeated references to arbitration in terms of the Agricultural Holdings Act are consistent only with an intention that what was being dealt with was the lease of an agricultural holding, as that term is understood in the agricultural law of Scotland. In our view, therefore, this was an attempt to lease the land on a 1949 Act tenancy and had it been entered into contemporaneously, or more or less contemporaneously, with the declared date of entry it would, in the absence of a declarator of nullity by the Department of Agriculture, have succeeded. As it is, however, for the reasons already given we find that holding No 1 remains a smallholding, held on small landholder tenure.

Personal bar

[55] Mrs Bruce had an argument that the respondent was barred, by his long insistence that he held holding No 1 on smallholding tenure, from arguing that it was held on anything else but, given that we have found in her favour on the principal issue, it is not necessary for us to deal with that argument in detail. Suffice to say that we thought it untenable in light of the fact that the applicants themselves were at all times in possession of the 1964 lease and in a position to form their own judgement as to what sort of lease it was, without any reliance on representations made by the respondent.

Is the proposed resumption for a reasonable purpose, having relation to the good of the estate?

Applicants’ submissions

[56] Mrs Bruce submitted that the phrase “having relation to the good of … the estate” was extensive, not restrictive; Grimersta Estate Ltd v MacLeod. It could include elements of public interest and financial benefit to the estate owners. As to the former, although “public interest” as a criterion for resumption had only been introduced by sec 12 of the Crofters (Scotland) Act 1955, and then only in relation to crofts (as opposed to smallholdings), Mrs Bruce was able to point to pre-1955 cases in which account had been taken of public interest and in which, indeed, the public interest element was far more obvious than any good to the estate or holding. Thus in Lewis & Harris Welfare & Development Co Ltd v Angus Macdonald and Ors resumption of 131.4 acres of common pasture was authorised for use as building sites and allotments for the relief of congestion with the Court candidly acknowledging that it was being done “for what is really a public purpose which is designed to benefit all concerned” (page 97).

[57] Stornoway Trust v Landholders of Melbost and Branahuie was a similar case in which resumption of 2.18 acres of common pasture was authorised for the purpose of the erection of houses in the face of “a clamant need for sites for new houses in the neighbourhood of Stornoway”. Although the Court had no difficulty in holding that the resumption was for the good of the estate, clearly the prime beneficiaries were not the estate as such but individuals looking for house sites in the vicinity of Stornoway. The public good was more obvious than the good to the estate itself.

[58] Mrs Bruce did not go as far as to say that these cases showed that public interest alone was sufficient to justify resumption pre-1955. What she said was that they showed that public interest was not irrelevant and that even where public interest considerations were paramount resumption could be ordered provided that there was some benefit to the estate also.

[59] So far as financial benefit to the present landowners was concerned, that was, she submitted, a relevant consideration which the Court should take into account particularly where significant financial hardship would befall the applicants if the application was not granted. Its relevance was as one of the factors to be taken into account in deciding whether resumption was reasonable in all the circumstances of the case.

[60] The applicants’ view of the scope of “the good of the estate” was too narrow. The benefit could be indirect and incidental. Duke of Sutherland v Matheson & Ors involved an application for resumption of part of Brora golf course which was also part of a common grazings. The immediate beneficiaries would be the members of Brora Golf Club but the estate would benefit, said the Court, by “an increase in feuing and by an extension of the town of Brora which may be expected to follow the acquisition and development of a first-class golf course”.

[61] The benefits to the estate in the present case would be (a) the remediation of the Clippens Yard and (b) the economic benefits which would flow to the balance of the estate from having a film studio in such close proximity.

Respondent’s submissions

[62] Sir Crispin identified the following seven principles as applicable to the resumption of land from crofts and smallholdings:

1. The fact that a purpose might be a reasonable purpose is not sufficient to justify resumption; Portman Trustees v MacRae.

2. The proposed purpose must not only be reasonable in principle but reasonable having relation to the good of the holding or of the estate; Martin v Shareholders in Luib Common Grazings at 10, Grimersta Estate Ltd v MacLeod at 132.

3. This is something different from financial benefit to the landholder or the estate owner and mere benefit of that kind is not sufficient; dictum in Portman Trustees v MacRae at 8.

4. The Court must be satisfied that resumption is reasonable in all the circumstances; Fountain International Ltd v Macdonald.

5. Even where resumption might be good in relation to the estate, the Court still takes account of its effect on the holding; Secretary of State for Scotland v Sutherland.

6. The Court has to be satisfied that the purpose will actually be carried out; Lands Improvement Holdings Landmatch S.A.R.L. v Cole.

7. The Court retains a general discretion in making its decision on whether or not to grant the application; Walker v MacEwan, Portman Trustees v MacRae.

[63] Having set that context, Sir Crispin took as the as the starting point of his argument that, although competent, it was very unusual for the Court to authorise the resumption of an entire holding. Macleod of Macleod v Mackenzie was an example of a whole-holding resumption but the purpose (providing facilities to support the estate’s expanding tourism business) was clearly for the good of the estate and in the public interest (in the way of providing additional jobs). In the present case we were talking about the resumption of two entire holdings.

[64] It was important to bear in mind that, for the reasons set out by Mrs Bruce, in the resumption of land from smallholdings, as distinct from crofts, there was no public interest criterion. So, in resumptions from smallholdings it was not enough for these to be in the public interest: they had to have relation to the good of the holding or the good of the estate; Board of Agriculture v Maclean at 77. Where land was required from smallholdings in the public interest the appropriate procedure was compulsory purchase.

[65] In each of the cases founded upon by the applicants as examples of cases in which the Court had given effect to public interest considerations the Court had also found the resumption to be for the good of the estate: Stornoway Trust v Landholders of Melbost and Branahuie (“There is no doubt that the feuing of the area in question will be for the good of the Estate and it is equally certain that there is a clamant need for sites for new houses in the neighbourhood of Stornoway and great difficulty in meeting it” p 135); Lewis & Harris Welfare & Development Company v MacDonald and Ors (“In these circumstances we have no option, as it is proved that the object of this resumption is a reasonable purpose for the good of the Estate, but to authorise the proprietors to resume …” p 97).

[66] Sir Crispin submitted that there was no benefit to the estate here. Instead the benefit was (i) to the applicants, in that it would make them money and relieve them of the obligation to comply with the enforcement notices, (ii) to PSLL as the developers of the film studio and (iii) to Clippens as owners of the rump of the estate which would no doubt also be developed in due course. He posed the question whether, if the whole estate had been sold to PSLL and they had applied for resumption of these holdings, it could possibly be said that the purpose of resumption was in relation to the good of the estate. The transaction was being “dressed up” as part of a wider transaction to disguise its true nature as a resumption for the benefit of PSLL.

[67] Walker v MacEwan and Lewis Island Crofters Ltd v Mackay were examples of cases where resumption was refused because the purpose was to sell the land with the only benefit being to the acquirer.

[68] The fact that the applicants here were in a situation of financial hardship was not a relevant consideration. Their difficulties were of their own making and they were now seeking to pass on their liability in terms of the enforcement notices at the expense of the respondent. Duke of Sutherland v Matheson was distinguishable because the resumption there was clearly in the interests of the rest of the estate remaining in the hands of the landlords, in terms of increased feuing to accommodate the anticipated expansion of the town of Brora.

[69] Resumption followed by a sale of the whole estate could not be for the good of the estate because no estate would remain in the hands of the landlords. An analogy was drawn with the case of North Berwick Trust v James B Miller & Co,a case involving a notice to quit served so as to be able to sell land for development with vacant possession. Such a notice, if met by the service of a counter-notice by the tenant under sec 22(1) of the 1991 Act, requires the consent of this court and sec 24(1) lists the situations in which consent can be given, including, at para (b), that the carrying out thereof is desirable in the interests of sound management of the estate of which the land forms part. The Land Court having dismissed the application as irrelevant, the Court of Session refused the appeal on the ground that the reference to “the interests of sound management of the estate” envisaged the rest of the estate remaining in the hands of the landlords, otherwise they would no longer have an estate to manage; see Lord Justice-Clerk Gill (as he then was) at page 308. In the present case there would be no estate left in the hands of the applicants which could benefit from the resumption. Reference was also made to the English notice to quit case of National Coal Board v Naylor in which consent to the notice was refused by the Agricultural Land Tribunal (upheld by the Court of Appeal) because the reason for the notice (financial benefit to the landlords) had nothing to do with the management of the land.

Decision on this issue

[70] This is, of course, the critical and determinative issue in the case. The purpose of the resumption is the creation of a film studio. That is the use to which the land is to be put. We make that point in order to make another point: that the purpose of the resumption is not the amelioration of the estate by the remediation of Clippens Yards. That amelioration is an incidental benefit which, it is promised, will flow from the resumption but it is not its purpose. So what one has to ask is whether the creation of a film studio is a reasonable purpose in relation to the good of the estate.

[71] Although the list of purposes given in sec 2 of the 1886 Act is not exhaustive and although film studios were unheard of in 1886, we cannot help but notice how different the present proposal is to the kinds of purposes which appear on that list. The examples in sec 2 – the building of dwellings, creation of allotments and the provision of harbours, piers, boat shelters, churches, schools and roads - are all things which a developing or expanding crofting or smallholding community might need. The building of a film studio is very different. To borrow the words of Lord St Vigeans in Buckworth v Ross (a case involving resumption so that the land could be used to winter the landlord’s sheep) “It raises an entirely different class of consideration, which has no affinity to any of the legal grounds of resumption”. This estate does not need a film studio nor is there a community on the estate which would benefit from one. On the contrary, for it to go ahead, the only residents on the estate will have to leave. Moreover the estate itself is to be broken up as a direct result of this development. The estate as presently constituted will simply not exist if this project goes ahead. It will have lost more than half its area. So, viewed in that way, it is hard to see how the purpose is reasonable in relation to the good of the estate.

[72] The word “estate” is not defined in the Small Landholders Acts, nor in later crofting legislation. Although the owners of landed estates are sometimes referred to as “the Estate”, the word “estate” obviously comprehends something more than the owners of the land. Although one of the meanings of “estate” given in the Shorter Oxford English Dictionary is “(A piece of) land; property”, to our minds the word in the present context denotes something wider than the land itself. In particular we think it is to be taken to include the community living on the estate. That much is clear from the nature of the purposes listed in sec 2: they are things which will benefit the people living on the estate. The purpose of resumption may also benefit other people, of course – indeed other people may be the primary beneficiaries as, for example, in the cases to do with relief of congestion and demand for housing on the Island of Lewis (Lewis & Harris Welfare & Development Co Ltd v Angus Macdonald and Ors and Stornoway Trust v Landholders of Melbost and Branahuie) – but it must in our view also benefit, however indirectly, incidentally or even minimally, the community living on the estate.

[73] In the present case the fact that one can hardly speak of a community when there is only one family living on the estate does not mean that that family’s interests are to be overlooked. On the contrary, the effect of the resumption on them has to be taken into account when the court asks whether the resumption is for a reasonable purpose having relation to the good of the estate. That effect would be to dispossess them of all of their land, including their home and means of livelihood, and, although they would be compensated financially for that to the full extent required by law, it remains a negative effect since they would be leaving against their will.

[74] So far as the applicants’ interests are concerned, it is perfectly legitimate for a landlord to benefit from a resumption. The landlord may even be the principal beneficiary, as was arguably the case in Duke of Sutherland v Matheson and Macleod of Macleod v MacKenzie, but the law is clear that a resumption which will benefit only the landlord or a third party, such as a feuar, is not for a reasonable purpose in relation to the good of the estate; Walker v MacEwan, Buckworth v Ross and Lewis Island Crofters v Mackay.

[75] The present case is different from any of the cases cited in that the applicants are not carrying out any economic activity on the estate which would benefit from the investment to be generated by the film studio. In these circumstances it seems to us that Sir Crispin was right in saying that the true purpose of the resumption is to enable the estate to be sold with vacant possession for the purpose of building a film studio, with the only beneficiaries (in terms of anyone having to do with the estate) being the applicants, Clippens and PSLL.

[76] Our decision is, therefore, that the application should be refused for want of a reasonable purpose in relation to the good of the estate. We recognise that deciding the case in such a way that a project said to be of national importance does not go ahead is a serious matter. However this is not the only place in Scotland on which such a development can take place. The applicants’ pleadings tell us that 28 sites were considered (by whom is not clear), then the list shortened to two, of which the Pentland site was preferred.

[77] We also acknowledge that a huge amount of work, with no doubt commensurate expense, has been invested in taking the project this far, no doubt partly because of this court’s insistence on being satisfied that there is a reasonable likelihood of the stated purpose of resumption going ahead; see, for example, Lands Improvement Holdings Landmatch S.A.R.L. v Cole. But the Court’s assessment of reasonable purpose cannot be circumscribed or restricted by awareness of such investment.

[78] Had there been a “public interest” criterion in sec 2, that would have been a different matter. The project obviously has considerable potential to bring employment and all sorts of economic activity in its wake. But there is no such criterion and we have had to decide the case on our understanding of the law as it stands.

[79] We also sympathise with the landlords who will continue to be liable for the remediation of Clippens Yards with no means of discharging that liability. They are in an impossibly difficult position but it is not apparent that the removal of a tenant on a secure tenancy from his holdings is a reasonable answer to that difficulty.

Disposal

[80] Given the decision we have come to on reasonable purpose it is not necessary for us to deal with Sir Crispin’s remaining grounds of opposition. We would just say 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. The considerable amount of work and expense which has been invested in it thus far shows that this is a serious and credible proposal. However it has come up against statutory protections on which the respondent is entitled to rely and which have compelled us to refuse the application.

[81] As is customary we have allowed 21 days for motions and submissions on expenses.