EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Nimmo Smith

Lord Kingarth

Lord Marnoch

[2007] CSIH 24

XA18/06; XA13/06; XA14/06;

XA12/06; XA11/06 and XA16/06

OPINION OF THE COURT

delivered by LORD NIMMO SMITH

in the Appeal

under Section 11(1) and (7) of the Tribunals and Inquiries Act 1992

WILLIAM ALLEN AND ANN ALLEN AND OTHERS

Applicants and Appellants;

against

THOMAS MATTHEW MACTAGGART AND FIONA MARY HENDRY or MACTAGGART

Respondents:

_______

Act: Delibegović-Broome; Balfour & Manson (for Primrose & Gordon, Dumfries)

(Applicants and Appellants)

Alt: Upton; Lindsays, W.S. (Respondents)

30 March 2007

Introduction

[1] Rascarrel Bay lies on the Scottish coast of the Solway Firth, in the old Stewartry of Kirkcudbright. Above it lies Rascarrel Farm, of which the respondents have been heritable proprietors since 1997. The nearest settlement of any size is Auchencairn, while the nearest towns are Kirkcudbright, Castle Douglas and Dalbeattie. Dumfries is situated further afield. Next to the shoreline at the west end of Rascarrel Bay stand eight huts, four to the west and four to the east of the Rascarrel Burn, numbered 1 - 8. A vehicle access track leads to huts Nos. 5, 6, 7 and 8. A footpath leads across the Rascarrel Burn by a bridge to huts Nos. 1, 2, 3 and 4.

[2 ] The present appeals relate to six of these huts, Nos.2 - 7 inclusive. All eight huts were the subject of applications to the Lands Tribunal for Scotland ("the Tribunal") under section 21(1) of the Land Registration (Scotland) Act 1979 ("the 1979 Act"), in which the applicants claimed to be the tenants-at-will of the huts, and as such entitled under section 20(1) of the 1979 Act, in accordance with that section, to acquire the landlords' interest as such in the land which was subject to the tenancies-at-will. The respondents as landlords lodged answers to the applications. By interlocutor dated 9 December 2005 in all eight processes the Tribunal, having heard counsel for the parties in debate, sustained the respondents' first pleas-in-law, being pleas to the relevancy of the applicants' averments, and dismissed the applications. The application relating to hut No.1 was made by Patrick Harbinson, so the opinion of the Tribunal was issued sub nom. Patrick Harbinson and Others v Mr and Mrs Thomas Mactaggart. The present appeals are brought under section 11(1) and (7) of the Tribunals and Inquiries Act 1992 by William and Ann Allen (hut No.6), McDonald Boyes and Irvine Boyes (hut No.2), Kathleen Downes (hut No.7), Thomas McDougall (hut No.5), Norman Milligan and Christine Milligan (hut No.4) and Samuel Walker (hut No.3) ("the appellants").

The legislation
[3] The 1979 Act is, according to its long title:

"An act to provide a system of registration of interests in land in Scotland in place of the recording of deeds in the Register of Sasines; ... to enable tenants-at-will to acquire their landlords' interests in the tenancies; ...".

Part IV, "Miscellaneous and General", starts with provisions in sections 20 - 22 relating to tenants-at-will. Section 20 provides by sub-section (1):

"A tenant-at-will shall be entitled, in accordance with this section, to acquire his landlord's interest as such in the land which is subject to the tenancy-at-will (hereinafter referred to as the 'tenancy land')."

The following sub-sections enable a tenant-at-will who wishes to acquire his landlord's interest under section 20 to serve notice on him and to pay compensation and expenses to him, in exchange for which the landlord is obliged to convey his interest in the tenancy land to his tenant-at-will, free of all heritable securities. By sub-section (8), as originally enacted, the expression "tenant-at-will" was defined as meaning a person:

"(a) who, not being -

(i) a tenant under a lease;

(ii) a kindly tenant; or

(iii) a tenant or occupier by virtue of any enactment,

is by custom and usage the occupier (actual or constructive) of land on which there is a building or buildings erected or acquired for value by him or any predecessor of his;

(b) who is under an obligation to pay a ground rent to the owner of the land in respect of the said land but not in respect of the building or buildings on it, or would have been under such an obligation if the ground rent had not been redeemed; and

Paragraph (a)(ii) ceased to have effect and was repealed by the Abolition of Feudal Tenure etc. (Scotland) Act 2000 "the 2000 Act", section 76, schedule 12 para.6 and schedule 13, with effect from 28 November 2004. We refer below to the effect of section 64 of the 2000 Act.

[4 ] The meaning of the word "redeemed" in section 20(8)(b) of the 1979 Act may be discovered by reference to the Land Tenure Reform (Scotland) Act 1974 ("the 1974 Act"), sections 4 and 5 (which were repealed by schedule 13 to the 2000 Act with effect from 28 November 2004). Section 4 inter alia conferred upon a proprietor of land which was burdened by a feu duty the right to redeem it by serving notice of redemption upon the superior. Section 5 inter alia made redemption of an allocated feu duty obligatory upon the date when entry was taken under a conveyance of the feu for valuable consideration (as on a sale of the dominium utile) or under an obligation to grant such a conveyance. By section 4(7) the expression "feu duty" was defined as including inter alia any perpetual periodical payment in respect of the tenure, occupancy or use of land or under a land obligation, and by section 5(12) that definition applied in relation to section 5 with certain modifications which did not affect the words just quoted.

[5 ] By section 21 of the 1979 Act any question arising under section 20 as to inter alia whether a person is a tenant-at-will is to be determined by the Tribunal. Section 22, which is not relevant for present purposes, relates to the position of heritable creditors.

Tenancies-at-will
[6 ] The expressions "tenant-at-will" and "tenancy-at-will" are not defined in section 20 of the 1979 Act, beyond the provisions of sub-section (8) which, partly by exclusion and partly by inclusion, set out some indicia but not an exhaustive definition. Parliament clearly intended these expressions to be understood as terms of art, so it is necessary to consider how lawyers experienced in land tenure would have understood them at the time that the 1979 Act was passed. This in turn requires an examination of their history, so far as the relatively limited materials permit.

[7 ] It is convenient at this point, because its position is clearer, to refer to the customary "system of land tenure whereby the persons known as the Kindly Tenants of Lochmaben hold land on perpetual tenure without meaning to procure infeftment": see section 64(1) of the 2000 Act. Such persons, most fully named the King's (or Crown's) Kindly Tenants of the Four Towns of Lochmaben, traced their system of tenure to the days of Robert I. "Kindly" in this context meant hereditary. The kindly tenancy was held of the Crown, and was vouched by entry in the Rent Roll kept by the Chamberlain of the Earl of Mansfield, the Crown Steward: see Gretton, "The Feudal System", para.72, in Reid, The Law of Property in Scotland (1996); and Gordon, Scottish Land Law, 2^nd ed. (1999), paras.19-15. Their tenure was described as "not feudal and yet not truly allodial", but "a right which amounts to full proprietorship": Royal Four Towns Fishing Association v Assessor for Dumfriesshire 1956 SC 379, following Marquis of Queensberry v Wright (1838) 16 S. 439. In the Scottish Law Commission Report on Abolition of the Feudal System (Scot Law Com. No.168) (1999) it was recommended that kindly tenancies be abolished and converted to ownership as part of the scheme of abolition of the feudal system. This recommendation was implemented by section 64 of the 2000 Act, with effect from 28 November 2004. As has been seen, kindly tenants were distinguished from tenants-at-will by section 20(8)(a)(ii) of the 1979 Act; but the two forms of tenure may be seen from the provisions of that sub-section to have had certain features in common, and it is noteworthy that kindly tenants were regarded as being the equivalent of owners of the land occupied by them, albeit without infeftment.

[8] There is much less authority relating to tenants-at-will than there is about kindly tenants. No mention of the former is to be found in the institutional writers, though it would seem likely that they were synonymous with rental-rights, in respect of which Bell, Principles, para.1279 states:

"They were enrolled in the rental book of the King's stewart, or in that of their lord; and this, or a copy of the entry, was their sole title. They came to be admitted to a sort of hereditary right; their widows being permitted to continue their possession, and their sons to succeed. Rental-rights had no ish, or term of expiration; ..."

Rental-rights were described in Rankine, Leases, 3^rd ed. (1916) in historical rather than current terms. Prior to this, however, the existence of tenancies-at-will was recognised in the Report from the Select Committee on Feus and Building Leases (Scotland) (1894), pages ix - x. The committee advised that "provision should be made by legislation for the enfranchisement of building leases in Scotland, whether these leases are for a term of years or upon a tenancy-at-will" but no legislation ensued. In Chapter XXIII of the Report of the Royal Commission on the Housing of the Industrial Population of Scotland Rural and Urban (Cd. 8731, 1917) tenancies-at-will received a fuller treatment than in the earlier report, and a similar recommendation was made. Again, no legislation followed, though attempts were made by Bills introduced into the House of Commons in 1927 and 1935 to provide for the conversion of long leases into feus.

[9 ] The fullest treatment of tenancies-at-will is to be found in the Report of the Scottish Leases Committee (Cmd. 8656, 1952), paras.70 - 81. In this passage, the committee stated:

"Mainly on the north-east of Scotland and in various parts of the Highlands and Islands, an appreciable number of houses and some other premises have been erected, we are told, on land held under the precarious tenure known as tenancy at will. In these villages the builder of a house rents from the landowner the piece of ground on which he builds it and his name and the area of the land are entered in the Estate Rental. An informal acknowledgement of the position may or may not be issued to him at that stage. If a tenant sells his house an agreed sum passes direct to him from the purchaser on a simple receipt, no formal conveyance being entered into. The purchaser and seller attend the Estate rent collector and simply intimate the sale, when the new 'owner's' name is substituted for that of his predecessor in the Estate Rental Book. Where a tenant dies, the beneficiary of the lease under his will, or in the case of intestacy the heir-at-law, is entered as the new owner after he has been identified to the satisfaction of the landowner's agents. If the family of a deceased tenant wish a particular succession the landowner registers the nominated tenant on production of a legal agreement setting out the family's wishes. Where, occasionally, a tenant fails to pay his rent, the house reverts to the landowner who sells it and so recovers the arrears of rent. Generally the custom is for a landowner to treat the ground rents received from his tenants at will as feu-duties ... This unusual system is said to operate satisfactorily but it is understood that most tenancies at will were granted many years ago ... Our information about tenancies at will suggests ... that even when a house passes to one who is not the descendant of the tenant at will, the purchaser is likely to be a local resident. Tenancies at will seem to occur mostly in closely self-contained communities. ... [W]e have come to the conclusion that we do not recommend any interference with this informal system which works so well in practice."

It appears from this passage that by the word "precarious" the committee meant that a tenant-at-will had no contractual right to demand a formal title capable of being recorded in the Register of Sasines and thus good against all the world, so that there was a risk that a new owner of the land might dispute his claim to be recognised as a tenant-at-will (although at an earlier point it was said that the tenure "was generally regarded as giving the occupant possession during the lifetime of the premises"). No doubt it was these considerations among others which led to the inclusion in sections 20 - 22 of the 1979 Act of provisions designed to confer protection on tenants-at-will.

[10 ] For completeness, we would add that reference was made to the following textbooks: Paton and Cameron, Landlord and Tenant (1967) pp.68-9; Joint Consultative Committee of the Law Society of Scotland and the Registers of Scotland, Registration of Title Practice Book (1981); The Laws of Scotland: Stair Memorial Encyclopaedia (1992), vol.13, paras.211 and 334; Gordon, Scottish Land Law (1999), paras.19-15 to 19-16; Gloag and Henderson, The Law of Scotland, 11^th ed. (2001), para.41.06; McAllister, Scottish Law of Leases, 3^rd ed. (2002), para.1.20; and The Conveyancing Opinions of Professor J M Halliday, ed. Cusine (1992) 375-6. None of these appears to us to add anything of significance to the materials we have already quoted, although it is to be noted that most emphasise the apparent permanence of the tenant's right to security of tenure so long as the ground rent is paid. The only passage requiring further comment is an observation by Professor Halliday, in an opinion dated 23 March 1981, in the cited work at p.376:

"I tend to the view that 'lease' as used in [section 20(8)(a)(i) of the 1979 Act] means a written lease."

We are unable to agree with this, as the statutory provision is unqualified, and a lease may be constituted without writing; for example it may be a lease for not more than a year, followed by tacit relocation.

[11 ] While we would regard reference to the above materials, and in particular the 1952 Report, as a legitimate aid to construction of the 1979 Act, as casting light on the meanings of the terms of art used in it, we do not find any ambiguity in the Act. It is, accordingly, in our view, inappropriate to refer, as counsel for the appellants invited us to do, to passages in Hansard showing comments made on behalf of the Government as the Bill passed through both Houses of Parliament in 1979 (see Pepper v Hart [1993] AC 593).

[12] The 1979 Act has been applied in a number of decisions of the Tribunal. In McCann v Anderson 1981 S.L.T. (Lands Tr.) 13 the Tribunal held that two prefabricated timber garages erected on a gap site in the village of Hopeman, Morayshire were not held under tenancies-at-will. The Tribunal said, at p.15:

"[W]e accept that the Act cannot have been intended to cover all types of structure which might fall within the term 'building'. Were this so the Act would, in effect, enfranchise all kinds of informal arrangements where permission had been given to put up say a henhouse, a garden shed or a greenhouse or even to site a static caravan. Lacking as it does any definition of building, we are entitled to consider the mischief which Parliament intended the Act to remedy. As we understand it, the Act was intended to assist persons who have, with permission and in return for a ground rent, built some permanent structure on ground belonging to another in respect of which no title was to be granted, or have subsequently become 'owner' of that permanent building. ... In other words, in seeking a definition of 'buildings' one must, in our view, look to a substantial structure erected on ground held on an informal arrangement but nonetheless an arrangement which was intended to be more or less permanent. There is, of course, a further important element ..., namely that the permanency should arise from 'custom and usage'. We do not think that permission to erect a structure which the landlord intends should be removed - and is readily removable - can ever by itself be the subject of a tenancy-at-will."

[13 ] The importance of custom and usage in establishing a tenancy-at-will was emphasised by the Tribunal in Ferguson v Gibbs 1987 S.L.T. (Lands Tr.) 32 at p.33. In Conochie v Watt, 7 September 1993, unreported, the Tribunal held that a boat shed in the village of Pennan, near Fraserburgh, was held under a tenancy-at-will. Again, the Tribunal emphasised the importance of custom and usage. At page 21 they said:

"As to the matter of 'custom and usage', it is in our opinion clear that for the applicant to succeed she must first be able to prove that Pennan is one of those few places in Scotland where tenancies-at-will have 'by custom and usage' been recognised to exist. That that is so was ... conceded by the respondent."

At page 23 they said:

"It would be strange indeed if ... Parliament had intended to allow new tenancies-at-will to be created or to be recognised in areas where they had not previously been recognised to exist. It is thus in our view clear that the reference in the Act to 'custom and usage' is, whatever else, intended to confine the incidence of tenancies-at-will to those few parts of Scotland where it has been acknowledged that from time immemorial this very unusual type of tenure has existed."

On another point, the Tribunal said, at p.9:

"It would be inconsistent with a tenancy-at-will for the ground rent to be subject to increase. On the other hand an increase in rent would be consistent with a tenancy."

The rarity of tenancies-at-will was again referred to in Maclean v Kershaw, 17 November 1993, unreported. Reference was also made to Duthie v Watson 1997 Hous L.R. 123.

[14 ] The importance of custom and usage requires no further emphasis. The expression "custom", in the legal sense, is defined in the Oxford English Dictionary as:

"An established usage which by long continuance has acquired the force of a law or right, esp. the established usage of a particular locality, trade, society, or the like."

Similar definitions may be found in the authorities cited in Stroud's Judicial Dictionary of Words and Phrases, 7^th ed. (2006) and Words and Phrases Legally Defined, 3^rd ed. (1988). As is specifically recognised by the 1979 Act, custom may be accorded the force of law in the locality in which it is recognised and practised. It follows from this that, for the purposes of the statute, it must be possible to identify and delineate, with adequate precision, the locality in question, and to describe, in sufficient detail, the nature and terms of the "custom and usage" which the inhabitants of that locality generally recognise as having the force of law in place of the system of land tenure applying elsewhere in Scotland.

[15 ] The reports and cases to which reference has been made serve to establish that tenancies-at-will have been recognised in particular in fishing communities on the Seafield Estate and other estates in north east Scotland, and in the mining village of Leadhills on the Hopetoun Estate in south Lanarkshire. Apart from the Kindly Tenants of Lochmaben, which were recognised as constituting a separate category, no informal system of land tenure has hitherto been recognised in south west Scotland. It would therefore be necessary to examine with particular care any claim that tenancies-at-will had come into existence on the Solway coast as recently as the twentieth century.

[16 ] What the tenancies-at-will which have hitherto been recognised appear to us to have in common is that they have been established in places where there has been a pressing social need for housing adjacent to a place of work (such as fishing or mining), where the residents have required security of tenure for themselves and their families but have been unable to afford the expense of formal conveyancing, and where landlords, no doubt of large estates and with a paternalist disposition, have been trusted to provide security of tenure in accordance with informal, but well-recognised, conventions.

[17 ] Section 20(8) of the 1979 Act, set forth above, sets forth the conditions which must be satisfied if a tenancy-at-will is to be recognised. These include the requirement that the occupier must not be a tenant under a lease. If, therefore, the land is occupied on terms sufficient to establish the existence of a lease, the occupation is not under a tenancy-at-will. There must be an obligation to pay a ground rent to the owner of the land in respect of the land but not in respect of the building or buildings on it, or would have been under such an obligation if the ground rent had not been redeemed. The concept of redemption connotes an unvarying amount: cf. section 4 of the 1974 Act, referred to above. The right of occupancy of the land must be without ish, i.e. without any fixed term. It follows from this that (subject to possible local customary variation) the ground rent payable under a tenancy-at-will, like feu duty, is fixed for all time. Changes in the amount of ground rent point to the existence of a lease rather than a tenancy-at-will. We have already emphasised the importance of the need to establish the existence of the necessary custom and usage in the locality in question.

The appellants' pleadings
[18 ] Against the background of the foregoing discussion of the law relating to tenancies-at-will, it is possible for us to discuss the pleadings for the appellants relatively briefly. It is necessary first to explain something of the procedural context in which they came before us. The Lands Tribunal for Scotland Rules 2003 (SSI 2003/452) contain the formal requirements as to pleadings. These are supplemented by the "Guidance Note for Hearings" published by the Tribunal, which makes clear, at page 8, as might be expected, that the normal rule is that formal pleadings should make clear what is in dispute and give proper notice of what it is that an applicant relies on to justify a finding in his favour. Reference is made to the concept of fair notice. The basic requirement of relevancy thus applies as much to pleadings in applications to the Tribunal as it does in any other court. Moreover, in the present case, the Tribunal, as they record, afforded the appellants an opportunity to reconsider their pleadings and to propose an amendment. Notwithstanding this, the Tribunal found that the appellants' pleadings were irrelevant. Although many months passed after the appellants appealed to this court against the Tribunal's decision, no attempt was made by them to amend their pleadings. Counsel who appeared before us on their behalf had evidently only recently been instructed for the first time. She explained to us that on being instructed she had requested information on a number of points with a view to possible amendment. By the time that the appeal was heard before us, that information had not been provided, and counsel was not in a position on the day to propose, on instruction, any specific amendment. We allowed an adjournment so that those acting for the appellants could consider whether to move us to discharge the diet and continue the appeal, with a view to amendment, but at the conclusion of the adjournment counsel informed us that her instructions were to proceed to argue the appeal on the basis of the pleadings as they stood before the Tribunal and again before us. Counsel was thus placed in a very difficult position and, whilst she commendably made the best of a bad job, she could not save the appellants' pleadings from being subjected to appropriate scrutiny.

[19 ] The appellants William and Ann Allen aver:

"Hut No.6 was erected in or around 1936. The original owner was Mr Allen, Senior, father of one of the applicants. The applicants inherited it from Mr Allen in 1980. Since 1980 the applicants have owned and occupied the hut as their weekend and holiday home. Historically the eight huts have been owned and passed on to local Dumfries and Dalbeattie residents. The applicants are by custom and usage the occupiers of the land on which hut 6 was erected by their predecessors. The applicants are liable and have paid rates annually since they acquired the hut and continue to do so. The hut is of sufficient size and has appropriate fittings and fixtures to permit overnight and holiday residence. ... There is and has been no written agreement [between the] applicants or their predecessors and the respondents regulating payment of a ground rent."

There are similar averments for the other appellants. The appellants McDonald Boyes and Irvine Boyes aver that hut No.2 was erected in or around 1935 and extended in 1946. The original owner was William Boyes, father of these appellants, who owned and occupied it from 1935 until 1992, when they inherited it and have since then owned and occupied it as their weekend and holiday home. The appellant Kathleen Downes avers that hut No.7 was erected in or around 1940 and remained in position until it was rebuilt in or around 1960. Subsequently, in or around 1978, it burnt down and was rebuilt on the same site. It was originally a roadman's caravan without wheels, resting on blocks. The original owners were Mr and Mrs George Kerr, grandparents of this appellant, who inherited it after the death of her grandmother Mrs Mildred Kerr in 1986, since when she has owned and occupied it as her weekend and holiday home. The appellant Thomas McDougall avers that hut No.5 was erected in or around the 1940s. The original owner was Mrs Brodie from whom this appellant acquired it in 1959, since when he has owned and occupied it as his weekend and holiday home. The applicants Norman and Christine Milligan aver that hut No.4 was erected in or around the 1940s. The original owner was Alex Welsh. In or around 1965 the owner was Alexander Clark. Thereafter John Derby acquired it. In 1987 these appellants paid £150 to John Derby for the hut, and since then they have owned and occupied it as their weekend and holiday home. The appellant Samuel Walker avers that hut No.3 was erected in or around 1946. The original owner was Mrs F Little, from whom he acquired it in 1998. This appellant has owned and occupied the hut as his weekend and holiday home. The pleadings for all of the appellants contain admissions that the respondents and their predecessors in title have demanded, and the appellants have accepted without protest, until recently, increases in the ground rent from as little as £5 for each hut in the 1960s to £500 in 2004.

[20 ] The Tribunal decided that the appellants' pleadings were irrelevant. The Tribunal held, in summary, on consideration of section 20(8) of the 1979 Act, that for the existence of a tenancy-at-will there required to be an established tenure which was permanent in its nature. The appellants accepted that the rents had changed from time to time and, in the absence of explanation, this appeared inconsistent with a permanent tenure. The Tribunal considered it to be fatal to the applications. The Tribunal also considered whether it would be appropriate to give the appellants a further opportunity to amend on this matter, but, in the circumstances, decided against that.

Discussion

[21 ] As has been seen, we were given the opportunity to examine the statutory requirements in some detail. We are entirely satisfied that the appellants' pleadings (imperfect as their counsel recognised them to be) do not meet these requirements. While there is no need to assume that Parliament intended that "custom and usage" should have existed from time immemorial, or even for a very long time, and they might, for the purposes of the 1979 Act, have been established in a particular locality as recently as the 1930s and the 1940s, nevertheless it is clear from the statute that, at the date at which a tenancy-at-will is claimed by an applicant to exist, it must be possible to prove that the necessary custom and usage have become established in the locality. The averments for the appellants pay no more than lip-service to the concept of custom and usage. They make no attempt to define the locality in which, the inhabitants among whom or the terms and conditions on which the custom and usage are alleged to operate. The averments go no further than to establish that there has been an arrangement under which the respondents and their predecessors in title have permitted the occupiers of the eight huts to occupy them in exchange for payment of a ground rent which has varied from time to time. There is no averment which would serve to establish who was responsible for the erection of any of the huts in the first place. The facts, so far as averred, would indicate the existence of informal leases from year to year, not tenancies-at-will without ish. The absence of any averments sufficient to establish the necessary custom and usage, and the admissions about rent increases, therefore appear to us, as the latter did to the Tribunal, to render the applicants' pleadings fundamentally irrelevant.

Decision
[22 ] For these reasons these appeals must be refused.