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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Justice Clerk
Lord Nimmo Smith
Lord Kingarth
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[2007] CSIH 62
XA132/05
OPINION OF THE LORD JUSTICE
CLERK
In the Appeal by
ROBERT L DOWNIE (AP)
Tenant and Appellant;
against
THE TRUSTEES OF THE EARL
OF STAIR'S 1970 TRUST
Landlords and Respondents:
_______
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For the appellant: Sutherland; Wright, Johnston
& Mackenzie LLP
For the respondents: Sir Crispin
Agnew of Lochnaw, QC; Turcan Connell
26 July 2007
I Introduction
[1] This
is an appeal by the tenant of Knock Farm, Leswalt, Wigtownshire
against an Order of the Scottish Land Court dated 24 November 2005 in an
application by the landlords for declarator of irritancy of the lease.
[2] The
lease was entered into in 1994. Clause
19 provides, inter alia, as follows:
"If during this lease the tenant ... allows one half
year's rent to remain unpaid for one month after it has become due ... it will be
in the power of the landlord by written intimation addressed to the tenant
forthwith to put an end to this lease ... "
[3] The
tenant was late in paying the rent due at Whitsunday 2004. On 30 September 2004 the landlords notified him that if
the rent was not paid timeously in future, they would irritate the lease. By 28 December 2004 the rent due at Martinmas 2004
remained unpaid. On 29 December 2004 the
landlords terminated the lease by notice of irritancy under clause 19 and
required the tenant to remove within two months.
[4] The
tenant refused to remove. He contended
that clause 19 was void ab initio because,
by entitling the landlords to terminate the lease with immediate effect, it infringed
his right to compensation for high farming under section 44 of the Agricultural
Holdings (Scotland) Act 1991 (the 1991 Act), which was conditional on his
giving notice of intention to claim not later than one month before the
termination of the tenancy (s 44(2)(a)). The landlords pled that there was no reason
why the notice of irritancy should not have effect since the tenant had no
claim that was being impeded by it.
[5] The
Land Court decided
that since the irritancy clause did not in the event limit any of the tenant's
claims for compensation, it was valid and effective. It repelled the tenant's plea in law on the
point and continued the case for consideration of the
landlords' crave for declarator.
That is the decision appealed against.
II The
history of the legislation
[6] The
primary objective of the Agricultural Holdings (Scotland) Act 1883 (the
1883 Act) was to confer on the agricultural tenant a right to compensation at
waygoing for his improvements where at common law he had none. To secure the tenant's position, the 1883 Act
prohibited contracting out of the tenant's claims for compensation. Section 36 provided as follows:
"Any contract or agreement made by a tenant by
virtue of which he is deprived of his right to claim
compensation under this Act in respect of any improvement specified in the
schedule hereto ... shall, so far as it deprives him of such right, be void."
[7] Section
2(2) of the Agricultural Holdings Act 1900 (the 1900 Act) provided that any
claim by a tenant under the 1883 Act or that Act for compensation for
improvements could not be made after the determination of the tenancy. In Cathcart
v Chalmers (1911 SC (HL) 38; 1911
SC 292 (IH)) it was held that a clause that required the tenant to make his
claim for compensation for improvements not later than one month before the termination
of the tenancy had the effect of depriving him of his right under the 1900 Act
to claim compensation at any time before the determination of the tenancy, and
was therefore void by virtue of section 36 of the 1883 Act.
[8] Section
36 of the 1883 Act was re-enacted in substantially the same form in section 5
of the consolidating Agricultural Holdings (Scotland) Act
1908.
[9] Section
45 of the Agricultural Holdings (Scotland) Act 1923
(the 1923 Act) extended the scope of that provision. It provided that any contract or agreement
was void not only to the extent that it deprived the tenant of his right to
claim compensation under that Act, but also to the extent that it limited it;
and by providing that it extended to compensation claims of all kinds. Section 45 was in the following terms.
"Subject to the provisions of this Act, any
contract or agreement made by a tenant of a holding by virtue of which his
right to claim compensation under this Act is taken away or limited shall to
that extent be void."
[10] The Agriculture (Scotland) Act 1948
(the 1948 Act) effected major reforms, not least by conferring on the tenant
security of tenure. Sections 9 and 10 of
the Act provided inter alia as
follows:
"9 (1) Save
as expressly provided in the provisions of the Act of 1923, of this Part of
this Act and of the Schedules therein referred to, in any case for which apart
from this section those provisions provide for compensation a tenant or a
landlord shall be entitled to compensation in accordance with those provisions
and not otherwise, and shall be so entitled notwithstanding any agreement to
the contrary ...
(3) Section
forty-five of the Act of 1923 (which provides that certain contracts not in
accordance with the provisions of that Act shall be void) shall cease to have
effect ...
10 (1) The
provisions relating to compensation of this Part of this Act [sc Part 1 (Agricultural Holdings)] and
the Schedules therein referred to, other than this section, shall not have
effect where the tenant of a holding quits the holding in consequence of a
notice to quit given (whether by the landlord or the tenant) before the
commencement of this Part of this Act, or in consequence of a renunciation of
the tenancy in pursuance of an agreement in writing made before the commencement
of this Part of this Act.
(2) Subject
to the last foregoing subsection, the said provisions shall apply whether the
tenant entered in to occupation of the holding before or after the commencement
of this Part of this Act, except that the said provisions shall not apply in
relation to any improvements specified in the First Schedule to the Act of 1923
begun before the commencement of this Part of this Act ... "
Section 45 of the 1923 Act was
repealed in the Tenth Schedule to the 1948 Act.
[11] Section 9(1) of the 1948 Act was repeated in virtually
identical terms in section 64(1) of the consolidating Agricultural Holdings (Scotland) Act 1949
(the 1949 Act), which I need not quote.
Section 64(1) of the 1949 Act was re-enacted in slightly different
wording in section 53(1) of the consolidating 1991 Act as follows:
"(1) Unless this Act makes express
provision to the contrary, where provision is made in this Act for compensation
to be paid to a landlord or tenant-
(a) he shall be so entitled notwithstanding any agreement, and
(b) he shall not be entitled to compensation except under that
provision ... "
Section 53(1) applied at the date
of the lease.
III Palmer's Exrs v Shaw, 2004 SC 408
[12] In
this case an irritancy clause in a lease entered into in 1939, and therefore
governed by the 1923 Act, provided that if the tenant allowed rent to remain
unpaid for three months the landlord could by notice terminate the lease
without prior warning. The parties were
agreed that the question whether the clause was unenforceable, because it took
away or limited any right of the tenant to claim compensation at waygoing,
depended on the law as it stood at the date of the lease (ibid, at para [6]). The
issue was therefore whether the irritancy clause contravened section 45 of the
1923 Act by providing that the landlord could in certain circumstances
terminate the lease "forthwith," since in that event the tenant would be
deprived of the opportunity to give notice before the termination of the
tenancy of his intention to claim compensation for high farming. The essential question was whether the effect
of the clause was to exclude any potential high farming claim, however
improbable it was that the tenant would make one (ibid, at para [13]). In view
of the provision that an irritancy could be enforced
only after a period of three months default, the court held that the clause did
not contravene section 45 (at paras [21]-[22]).
IV Submissions for the
parties
[13] Counsel for the appellant submitted (1) that under section 45
of the 1923 Act any clause that took away or limited the tenant's right to
claim compensation at waygoing was void; (2) that section 53(1) of the 1991 Act
did not modify that provision; (3) that since clause 19 provided for
termination of the lease without prior notice, it deprived the tenant of the
opportunity to give notice of a claim for high farming; and (4) that the clause
was therefore void ab initio. A consistent policy against the tenant's
contracting out of his rights could be seen in the decision of Crossman J in Re Disraeli Agreement ([1939] 1 Ch 382,
at p 392), in circumstances similar to those of the present case; in the
decision of the House of Lords in Johnson
v Moreton ([1980] AC 37), and in
the decision of this Division in Morrison's
Exrs v Rendall (1986 SLT 227; cf Wallace v Moll 1989 SLCR 21, at p 29).
In Coates v Diment ([1951] 1 All ER 890) Streatfeild
J held that a clause governed by the Agriculture Act 1923 that entitled the
landlord to resume without notice was void ab
initio, but added obiter that the
clause would have been void also under the Agricultural Holdings Act 1948. Since the corresponding provisions of the
Scottish Acts of 1923 and 1949 were in similar terms to those of the English
Acts of 1923 and 1948, this court should take the same view of section 64(1) of
the 1949 Act and its successor, the present section 53(1) of the 1991 Act.
[14] Counsel for the landlords submitted (1) that while section
53(1) of the 1991 Act was a consolidating provision, its origins were not in
the 1923 Act and it should not be construed by reference to that Act; (2) that
section 53(1) did not necessarily nullify any provision of the lease, and in
any event did not nullify any such provision ab initio; (3) that on the facts, the landlords' notification of 30
September 2004 that they would irritate the lease if a future rent was not paid
timeously would have given the tenant sufficient time to make a high farming
claim; and (4) that Palmer's Exrs v Shaw (supra) should be re-considered since it
proceeded on an erroneous agreement of the parties that the validity of the
irritancy clause in that case depended on the law as it stood at the date of
the lease, and since section 45 of the 1923 Act did not make the clause in that
case void ab initio, but made it
invalid only if it excluded or limited the tenant's claim when that claim
actually arose.
V Conclusions
The interpretation of section 53 of
the 1991 Act
[15] In Palmer's Exrs v Shaw (supra), I described the history of the emergence and demise of the
claim for high farming. The tenant in
this case did not practise high farming and we can take it that at the date of
the lease there was not the remotest possibility that he would. Even if he had practised it, he would have
had no claim for compensation on that account because no record of the holding
had been drawn up (1991 Act, s 44(2)(b)). Therefore the termination of the tenancy with
immediate effect by notice in terms of clause 19 did not exclude or curtail any
such claim.
[16] The tenant can therefore avoid the irritancy only if clause 19
was void ab initio. In my opinion, it was not.
[17] The proposition underlying the case for the tenant is that
section 45 of the 1923 Act had the effect that a contract or agreement of the
kind to which it referred was void ab
initio. Counsel for the landlords
challenges this proposition. For the
present, I shall disregard the point because in my view section 45 of the 1923
Act has no bearing on this case.
[18] I do not accept the submission for the tenant that the
substance of section 45 of the 1923 Act has been continued in the 1948, 1949
and 1991 Acts. As counsel for the tenant
accepted, the 1948 Act was not a consolidation.
I agree with the Land Court (Note,
p14) that section 53 should be construed without reference to the different
wording of section 45 of the 1923 Act.
Section 9(1) of the 1948 Act did not declare that any agreement to which
it related would be void. It provided inter alia that where the tenant was
entitled to compensation under the provisions to which it referred, he would be
so entitled "notwithstanding any agreement to the contrary." To confirm the change,
section 9(3) expressly provided that section 45 of the 1923 Act would "cease to
have effect." Section 9 was in
substance re-enacted in the consolidations of 1949 and 1991.
[19] The present section 53(1), so far as relevant to this case,
provides that where the Act provides for compensation to be paid to a tenant,
the tenant shall, in the absence of "express provision to the contrary," be so
entitled "notwithstanding any agreement."
The words "express provision to the contrary" seem to refer to those
provisions of the Act that disqualify the tenant from compensation because the
preconditions of his claiming it have not been met; for example, where the
landlord has not given the necessary consent to the improvement in question
(1991 Act, s 37) or where a record has not been drawn up (s 44(2)).
[20] I reject the submission that section 53(1) renders clause 19
void ab initio. Re Disraeli Agreement (supra),
on which counsel for the tenant relied, is beside the point, because it was
decided under section 50 of the Agricultural Holdings Act 1923, which
corresponded with section 45 of the Scottish Act of 1923. For the reasons that I have given, I consider
the present Scottish legislation supersedes the provisions of 1923. Neither Johnson
v Moreton (supra) nor Morrison's Exrs v
Rendall (supra) has any
particular relevance to the present question, in my view. We are concerned here with
a straightforward question of construing section 53.
[21] In my opinion, there are two possible constructions. On the construction proposed by counsel for
the landlords, the section means, in the context of this case, that clause 19
is valid and effective, but because it entitles the landlords to terminate the
lease with immediate effect, and in that event to make it impossible for the
tenant to claim compensation for high farming in accordance with the statutory
provisions, the section will entitle the tenant to make his claim otherwise
than in accordance with those provisions, and in particular to do so outwith
the time limit laid down by 44(2)(a). On
this construction, there would be no time limit within which the tenant would
be required to intimate his claim.
Counsel for the landlords suggested that he would have to do so within a
reasonable time. That, I think, is an
unsatisfactory principle that would create uncertainty for both parties. That is undesirable in an area of law where
the legislation has always given priority to the prompt resolution of waygoing
claims.
[22] The alternative construction, which I prefer, is that the
irritancy clause is valid, but if the landlord should seek to enforce it in a
way that prevents the tenant from claiming compensation in accordance with the
relevant statutory provisions, the section will make the clause unenforceable
to that extent only.
[23] If the tenant in this case had had a claim for high farming,
the section would have prevented the landlords from enforcing clause 19 by an
irritancy that had immediate effect; but since it is accepted on the tenant's
behalf that he had no such claim, section 53(1)(a) of
the 1991 Act, in my opinion, does not come into play.
[24] I should add, however, that although clause 19 gives the
landlords the power to terminate the lease forthwith, it does not, in my view,
prevent them from terminating it at a deferred date. If the tenant had had a possible high farming
claim, clause 19 would, in my opinion, have entitled the landlords to give a
notice of irritancy intimating that the irritancy would take effect on a
specified date that was more than one month later. That date would be the date of termination of
the lease (1991 Act, s 85(1) sv "termination"). Therefore the notice would have given the
tenant the necessary time within which to intimate his claim. A division of the Land
Court has taken a similar approach to
the construction of a resumption clause that entitled the landlords to resume
"at any time or times" (Broadlands
Properties Ltd v Mann, 2006 SLCR (1) 1).
It held that the landlords were entitled to give notice of resumption
specifying that the resumption would take effect at a date that would enable
the tenant to make a timeous claim for compensation.
[25] I should also mention the obiter
dictum in Coates v Diment (supra) on which counsel for the tenant relied. In that case Streatfeild J held that a
resumption clause in a 1939 lease that entitled the landlord to re-enter
without notice had the effect of limiting the tenant's right to compensation
and therefore to contravene section 50 of the English Act of 1923 which, in his
view, made such a clause void ab initio
(ibid, at p 894A). That was in keeping with Re Disraeli Agreement (supra).
[26] Streatfeild J then considered obiter what effect the then current provision, section 65(1) of the
consolidating Agricultural Holdings Act 1948, would have had on the clause if
it had applied (ibid). He interpreted section 65(1) to mean that any
agreement that deprived the tenant of, or curtailed, his right to compensation
must be "unenforceable" (at p 897B). He
then concluded that the effect of that subsection was to make the clause in
question void (at p 897E-F).
[27] Although the obiter
dictum of Streatfeild J on this point has passed without adverse comment by
the English writers for over 50 years (eg
Muir Watt and Moss, Agricultural Holdings,
14th ed (1998), paras 12.7;
13.2; 13.5), I consider that it is unsound.
The terms of section 33(1) and (3) of the Agriculture Act 1947 were
identical to those of sections 9(1) and (3) of the Agriculture (Scotland) Act
1948 (supra); and the terms of
section 65 of the Agricultural Holdings Act 1948 were identical to those of
section 63 of the Scottish Act of 1949, which I have discussed. For the reasons that I have given in relation
to the Scottish legislation, I consider that section 65 of the English Act of
1947 was materially different from its predecessor in the English Act of 1923
and fell to be construed without reference to it. By the same reasoning I consider that if
section 65 of the English Act of 1948 had applied in that case, it would not
have made the clause in question void ab
initio. It would have made the
clause unenforceable to the extent that, when the time came, the operation of
it excluded or limited the tenant's claim.
The landlords' argument that they
gave timeous notice on 30
September 2004
[28] On
the view that I have taken in this case, this question does not arise. I should say however that I do not accept the
submission for the landlords. The
question as to the enforceability of the clause in this case can arise only
when the landlord seeks to enforce it.
It is not until that date that the effect of the irritancy on the
tenant's claims can be assessed. The
landlords' notice of 30
September 2004 was no more than a warning to the tenant as to what they
would do if there was a further default.
In this respect the case is distinguishable from Palmer's Exrs v Shaw (supra),
where the irritancy clause itself gave the tenant the benefit of a three months
default period during which the clause could not be enforced and therefore gave
the tenant sufficient time in which to make the relevant claim.
Did Palmer's Exrs v Shaw proceed on
an erroneous agreement?
[29] On the view that I have taken, the question of the soundness of
the parties' agreement in Palmer's Exrs v
Shaw (supra) does not arise. The submission of counsel for the landlords
on this point was (1) that section 45 of the 1923 Act did not make a contract
or agreement of the kind to which it referred void ab initio, the validity of it being a matter to be determined in
the circumstances prevailing at the termination of the lease; and (2) that in
any event the effect of sections 9 and 10 of the 1948 Act was that the validity
of a pre-1948 Act provision of that kind was thenceforth to be determined in
accordance with section 9 of that Act and its successors.
[30] On the first point, the wording of section 45 of the 1923 Act
suggests to me that the voidness of the contract or agreement to which it
referred was to be determined at the date on which it was entered into. That was the view of the corresponding
English provision taken in In re
Disraeli's Agreement (supra) and
it has been accepted without criticism by the writers (eg Muir Watt and Moss, op cit,
paras 12.7, 13.2; and the 11th (1959), 12th (1967) and 13th (1987) editions of
that work, all of which were edited by the late Mr J Muir Watt). I
incline to the view that the parties' agreement in Palmer's Exrs v Shaw (supra,
at para [6]) was correct.
[31] In Cathcart v Chalmers
(supra) the House of Lords took a
similar approach to section 36 of the 1883 Act.
In that case the offending clause had the effect of depriving the tenant
of his right to make his claim for compensation at any time before the
determination of the tenancy. Although
at the date of the lease it could not be known whether the tenant would have
any such claim at his waygoing, both the Inner House and the House of Lords appear
to have considered that the clause was void ab
initio.
[32] On the second point, I doubt whether the effect of section 10
of the 1948 Act was that if a claim for compensation under a pre-existing
tenancy were to be made thereafter, a lease provision that was void under the
1923 Act was no longer to be treated as such, except in relation to a Part 1
improvement already begun.
[33] This is a difficult point that may still have some practical
significance. It arose as a side issue
in this case and was not dealt with in detail by counsel for the tenant in his
reply. In these circumstances, I am not
inclined to try to reach a hard and fast conclusion on it. It can be considered fully if and when it
should be necessary to decide it.
VI Decision
[34] I propose to your Lordships that we should refuse the appeal
and return the case to the Land
Court to proceed as accords.
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lord Nimmo Smith
Lord Kingarth
|
[2007] CSIH 62
XA132/05
OPINION OF LORD NIMMO
SMITH
In the Appeal by
ROBERT L DOWNIE (AP)
Tenant and Appellant;
against
THE TRUSTEES OF THE EARL
OF STAIR'S 1970 TRUST
Landlords and Respondents:
_______
|
For the appellant: Sutherland; Wright, Johnston
& Mackenzie LLP
For the respondents: Sir Crispin
Agnew of Lochnaw, QC; Turcan Connell
26 July 2007
[35] I am in entire agreement with the Opinion of your Lordship in
the chair, to which there is nothing that I wish to add.
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lord Nimmo Smith
Lord Kingarth
|
[2007] CSIH 62
XA132/05
OPINION OF LORD KINGARTH
In the Appeal by
ROBERT L DOWNIE (AP)
Tenant and Appellant;
against
THE TRUSTEES OF THE EARL
OF STAIR'S 1970 TRUST
Landlords and Respondents:
_______
|
For the appellant: Sutherland; Wright, Johnston
& Mackenzie LLP
For the respondents: Sir Crispin
Agnew of Lochnaw, QC; Turcan Connell
26 July 2007
[36] For the reasons given by your Lordship in the Chair I agree
that this appeal should be refused.
