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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Justice Clerk
Lord Kingarth
Lord Wheatley
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[2007] CSIH 74
XA165/06
OPINION OF THE LORD JUSTICE
CLERK
In the APPEAL
from the Sheriffdom of South Strathclyde, Dumfries and Galloway at Airdrie
by
GRAHAM McDONALD
Defender and Appellant;
against
MANUS O'DONNELL
Pursuer and Respondent:
_______
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For the appellant:
Henderson; Thorley Stephenson
(for McWhinney Richards, Airdrie)
For the respondent:
Simpson; Brodies (for John G
O'Donnell, Glasgow)
25 October 2007
Introduction
[1] The pursuer owns
Braeside Farm, Moodiesburn. In 1989 the
then proprietors of Braeside gave the defender an oral lease of Woodcroft Field,
extending to 33.633 acres, which forms part of the farm. The lease ran from year to year. The anniversary date was
7 February. The subjects were let to
the defender to be used by him for the business of a riding school. In connection with that business the defender
was allowed to graze his horses on the subjects and to crop hay for their winter
feed.
[2] Mr Leon
Newman bought Braeside later that year. Thereafter
the defender moved a static caravan onto the subjects and went to live
there. He also erected sheds and placed
some shipping containers on the land for the purposes of the riding
school.
[3] In 1992 the
pursuer bought Braeside from Mr Newman.
He allowed the lease to continue.
In 1994 a dispute arose between the parties about the defender's alleged
breaches of his obligations to maintain and repair the subjects. The pursuer's solicitors served a notice to
quit on the defender. The defender's
solicitors contested it by counter-notice in terms of section 22(1) of the Agricultural
Holdings (Scotland) Act 1991 (the 1991 Act). The pursuer applied to the Scottish Land Court for its consent to the operation of
the notice to quit, but did not pursue the application.
[4] On 13
July 2004
the pursuer's solicitors served on the defender a notice to quit. This notice was not in the form required by
section 21 of the 1991 Act. It referred
to the defender's alleged breaches of the lease and intimated that the pursuer
was terminating the lease on the ground that the breaches had not been
remedied. It concluded as follows:
"In
addition, since the current lease is held by you on a tacit relocation basis,
our client gives you notice that he intends to terminate the lease as at the 31st of
March, 2005 at the latest."
[5] Counsel agree
that the subjects consist of two fields.
On the first field there are the caravan, the sheds and the
containers. The riding tuition takes
place on this field. It is set out with
jumps. The second field was formerly
used for the growing of the hay. In
recent years the horses have grazed on it.
At January 2006 the defender had ten horses grazing there. Although the riding school operated seven
days a week, most of the teaching was done at weekends.
The action
[6] This is an
action of declarator and removing. The
declarators sought need not concern us.
The crave for removing is founded on the notice to quit of 13
July 2004. The principal line of defence is that the
subjects are an agricultural holding within the meaning of the 1991 Act and therefore
that the notice to quit is invalid.
The legislation
[7] The relevant provisions of the 1991 Act are as follows.
"1(1) In this Act ... 'agricultural holding' means
the aggregate of the agricultural land comprised in a lease, not being a lease
under which the land is let to the tenant during his continuance in any office,
appointment or employment held under the landlord.
(2) In this section ... 'agricultural land'
means land used for agriculture for the purposes of a trade or business ... " ...
85(1) In this Act, unless the context otherwise
requires -
... 'agriculture' includes horticulture, fruit
growing; seed growing; dairy farming; livestock breeding and keeping; the use of land as grazing land, meadow land,
osier land, market gardens and nursery grounds;
and the use of land for woodlands where that use is ancillary to the
farming of land for other agricultural purposes; and 'agricultural' shall be construed
accordingly ...
'livestock'
includes any creature kept for the production of food, wool, skins or fur, or
for the purpose of its use in the farming of land ... "
The sheriff's decision and reasoning
[8] Sheriff JC
Morris QC held a proof before answer at Airdrie sheriff court. By interlocutor dated 10
January 2006
he held inter alia that the lease was
a lease of an agricultural holding and that the notice to quit specified the
wrong date of ish, namely 31 March instead of 7 February. He assoilzied the defender.
[9] The sheriff
found that the permission to the defender to graze his horses and to crop hay
for winter feed was given "in connection with" the business of the riding
school (finding in fact 6). He also
found that "the purpose of the lease was for the running of a riding school
with an entitlement to graze the horses on the subjects and to crop hay for the
winter feed of the same" (finding in fact 17).
In view of his findings that the defender's horses grazed on both
fields, the sheriff concluded that the defender was using the subjects as
"grazing land." That, in his view, came
within the definition of agriculture in the 1991 Act (s 85(1), sv "agriculture," supra). Furthermore, the
defender was using the land for the purposes of the "trade or business" (s
1(2), supra) of a riding school. On both of these points, the sheriff based his
decision on Rutherford v Maurer ([1962] 1 QB 16), which was
followed in Scotland in Crawford v Dun (1981 SLT
(Sh Ct) 66). These are in
essence the submissions for the appellant.
[10] In findings 21
and 22 the sheriff found that since most of the tuition was done at weekends,
the horses spent most of their time grazing and that at that time the horses
were grazing on the second field during the winter. He concluded his findings in fact with the
following finding:
"23 That the subjects are used to a substantial
extent for the grazing of horses, consequently the predominant use of the
subjects is for an agricultural purpose."
[11] On the view
taken by the sheriff, the other questions in the case were superseded, but he
indicated inter alia that if the
lease was not an agricultural lease, the notice of 13 July
2004 would
have effectively terminated it "certainly after 7 February
2006 and arguably
after 7 February 2005."
The sheriff principal's
decision and reasoning
[12] By
interlocutor dated 24 August 2006 Sheriff Principal BA Lockhart allowed
an appeal by the pursuer and inter alia granted
decree of removing.
[13] Relying on Howkins v Jardine ([1951] 1 KB 614, Jenkins
LJ at p 628), the sheriff principal considered that the important question was to
identify the substantial purpose of the lease.
He considered that that test had been applied in Monson v Bound ([1954] 1
WLR 1321) and Deith v Brown ((1956) 167 EG 513). He distinguished Rutherford v Maurer because
the purpose of the let in that case was for grazing horses and was therefore,
in his view, agricultural. The point in
that case was whether "the purposes of a trade or business" required to be
agricultural purposes. Rutherford v Maurer was
not inconsistent with the three cases to which he had referred. The sheriff principal also distinguished Crawford v Dun (supra). It related to a question of resumption and
the interpretation of the forerunner of section 21(7) of the 1991 Act.
[14] Taking this
approach, the sheriff principal held that the substantial purpose of lease was for
the non-agricultural use of the subjects as a riding school.
[15] On the
question of the notice to quit dated 13 July 2004 the sheriff principal took a similar
approach to that of the sheriff. That
notice made clear that the pursuer was not prepared to countenance a
continuation of the lease. That was
sufficient to prevent the operation of tacit relocation at the next
anniversary, namely 7 February 2005.
Although the notice gave the wrong date of ish, it gave the defender 6
months and 23 days notice that the lease would not be renewed at the next
anniversary. There was no prescribed
form of notice in a common law action of removing. The notice effectively terminated the
lease. If he was wrong in that
conclusion, he agreed with the sheriff's view that the lease was certainly
terminated at 7 February 2006.
[16] These are in essence
the submissions for the respondent.
The appeal and the
cross appeal
[17] The defender
has appealed against the interlocutor of the sheriff principal on the basis
that the sheriff's interlocutor should be restored simpliciter. The respondent
has cross appealed against the interlocutor of the sheriff principal on the
basis that it leaves undisturbed the sheriff's purported finding of fact 23 (supra) which, so long as it remains
unaltered, stands in the way of a finding that the subjects are not an
agricultural holding.
Conclusions
(1) Are the
subjects an agricultural holding?
[18] In my opinion,
the approach of the sheriff principal is correct. If the lease is to constitute a lease of an
agricultural holding, the land in question must be land used for agriculture
(1991 Act, s 1(2)). But in the absence
of a statutory provision to the contrary, the tenant may use the land only for
the purpose for which the lease is granted.
The subjects in this case were let for the purpose of their being used
for the operation of a riding school.
That purpose, it is agreed, was non-agricultural. The permission that the lease conferred on
the defender to graze his horses on the subjects does not, in my opinion,
affect that conclusion.
[19] It is obvious
from the sheriff's findings 6 and 17 (supra)
that the grazing and cropping were ancillary to, and dependent on, the
operation of the riding school. In these
circumstances they should not, in my view, be regarded as agricultural uses of
the land.
[20] I shall assume
for the present that the grazing of land by any kind of animal constitutes
agriculture, a point to which I shall return.
Even on that assumption, I consider that the entitlement of the defender
to graze his horses and to crop hay for their feed was only a subordinate
element of the commercial purpose of the tenancy.
[21] On the view
that I have taken, it is the purpose of the lease that defines the nature of
the tenancy at the outset. It is
possible that actual use may later become relevant; for example, if the tenant
substantially abandons agricultural use of the holding (eg Wetherall v Smith [1980] 1 WLR 1290; Hickson
and Welch v Cann (1977) 40 P & CR 218).
In this case, however, the originally agreed use has continued
throughout. Therefore, even if actual
use were to be the criterion, it is clear that the character of the let in this
case remains commercial.
[22] On my interpretation
of the sheriff's findings 6 and 17, I cannot accept his finding 23 (supra).
It is a finding of mixed fact and law.
In that finding the sheriff concluded that the subjects were used "to a
substantial extent" for the grazing of the horses largely on the basis that the
horses grazed all the time, whereas the riding school was operated mainly at
weekends. He therefore saw grazing as
being the predominant use. That, in my
view, is a fallacious approach. The
grazing was part of a commercial enterprise.
The land was grazed only because the horses were part of that enterprise. Therefore, no matter how extensive the amount
of the grazing, the grazing was always ancillary to the commercial purpose of
the lease. The sheriff erred, in my
opinion, in concluding that grazing was the predominant use. This is clearly a commercial lease.
[23] The sheriff's
finding 23 was not disturbed by the sheriff principal. Since it is essential that we should put it
right, I think that we should substitute the following finding:
"23 That the grazing of the subjects by the
defender's horses is ancillary to the defender's use of the subjects for the
operation of a riding school. The
purpose of the let, and the use of the subjects, taken as a whole, is commercial."
On this view, it follows that the sheriff's findings in law,
the most important of which was that the tenancy was an agricultural tenancy in
terms of the 1991 Act, were unsound. The
sheriff principal was right, in my view, to set them aside by sustaining the
pursuer's pleas in law to the extent that he did.
[24] Counsel
referred us to two cases involving leases of land for commercial activities
involving horses. In McClinton v McFall ((1974) 232 EG 707) an
area of 56 acres was let on what bore to be an agricultural tenancy with
permission to the tenant to run a stud farm.
The tenant grazed stallions, mares and foals on the land and cropped
hay, all for the purposes of the stud farm.
He allowed a farmer to have summer grazing for 10 to 20 cattle in
exchange for his topping and fertilising the land. The Court of Appeal decided that the uses of
the land for the pasturing of the cattle, the grazing of the horses and the
making of hay were agricultural and that the other activities in connection
with the stud farm were not inconsistent with, and did not impede, the
agricultural uses. Such non-agricultural
uses therefore did not prevent the land from being agricultural land within the
corresponding English definition. I find
the logic of this decision unconvincing; but it may be that it can be
distinguished on the basis that the tenancy was expressly granted as an
agricultural tenancy and that the running of a stud farm was a permissible
rather than an obligatory use of the land.
[25] In Deith v Brown (supra) the tenant ran a riding school on the subjects of let, which
included a cottage, stables, outbuildings and 12 acres of land. She also kept some poultry and pigs. According to her own evidence, she had
several acres under tillage, had sold oats as well as feeding them to her
ponies and had sold eggs. She claimed an
agricultural tenancy. Pearce J said that
the primary consideration was the substantial purpose for which the premises
were let. Looking at that purpose, he
held that the tenancy was not agricultural.
Compared with the takings from the riding school, the takings from all
other sources were trivial. In any
event, he doubted whether these matters were proper to be considered. I agree with the approach taken by Pearce J
in that case. The same approach was
taken by the Court of Appeal on a similar question in Russell v Booker ((1982) 263 EG 513).
[26] The case for
the defender has throughout been founded on the decision of the Court of Appeal
in Rutherford v Maurer (supra), which was followed by the sheriff principal in Crawford v Dun (supra). The sheriff considered himself bound by that
decision. In my opinion, Rutherford v Maurer is
materially distinguishable from the present case and cannot form a proper basis
for our decision. In Rutherford v Maurer, a
field was let to the owner of a riding school for the grazing of his horses; but
the riding school itself was situated elsewhere. The lease forbade the use of the field for
riding or any other purposes. Grazing
was therefore the sole purpose of the lease.
In this case the purpose of the lease is commercial.
[27] Since I am of
the view that the land in this case was neither let nor used for agriculture,
that is sufficient to dispose of the appeal.
If I am right, it follows that we need not decide either of the two
questions raised by Rutherford v Maurer (supra); namely, whether the grazing of
land by animals of any kind constitutes agriculture, and whether the trade or
business to which the statutory definition refers must be agricultural. However, since the sheriff followed Rutherford v Maurer on the former point, and since
counsel for the appellant has submitted that Rutherford v Maurer decided it correctly, I should say
that I take a different view.
[28] In Rutherford v Maurer (supra) the horses that were to be grazed
on the field were not "livestock" within the statutory definition, which was
the same as the definition in section 85(1) (supra). The Court of Appeal's
reasoning was that because the definition of agriculture included "the use of
the land as grazing land" and because the field in question was used for
grazing, the field was therefore used for agriculture (eg Willmer LJ at p 28).
That, in my view, is a non
sequitur. Because agriculture
includes grazing, it does not follow that all forms of grazing constitute
agriculture. In my opinion, the grazing to
which the definition refers should not be considered in isolation. It has to be seen in the context of the
various activities that the definition is said to include and in the context of
the definition of livestock (supra). If the decision in Rutherford v Maurer was sound, it would follow that if a
commercial zoo were to be given a tenancy of ground for the grazing of camels,
the lease would be a lease of an agricultural holding. That conclusion, I suggest, is not in
accordance with common sense.
[29] I find support
for the view that I have taken in the reasoning of the Lands Valuation Appeal
Court on a similar point, although on different legislation, in Forth Stud Ltd v Ass for East Lothian
(1969 SC 1), where it rejected a claim by a stud farm for the agricultural
exemption from rating. I also find
support in the decision of the Divisional Court in Belmont Farms Ltd v Minister of Housing and Local Government
((1962) 13 P & CR 417). In that case
the court rejected the contention that the proposed use of part of a farm for
the breeding of horses and the exercise and training of them for showjumping
would constitute agriculture under the similar definition of agriculture in the
Town and Country Planning Act 1947.
[30] Crawford v Dun (supra) related to the validity of a proposed resumption of part of
a holding for use as a riding school.
That question depended on whether the proposed use was
non-agricultural. The case is distinguishable
in this respect; but since the sheriff principal decided that case on the view
that the grazing of the resumption land by horses used in the riding school
would constitute agriculture, I consider that the case was wrongly
decided.
(2) Is the notice
invalidated by the date of removal?
[31] The notice to
quit specified 31 March 2005 as the date of removal. The specification of that date was based on a
letter to the defender from Mr Newman's solicitors dated 23
March 1990
by which they made an offer of let to him from 1 April 1990.
The sheriff found that that letter was of no effect and that the true anniversary
date was 5 February. Counsel for the
defender submitted that even if he was wrong on the primary question, the
action must nonetheless fail because the pursuer had no record for a removing
based on a termination of the lease at any date other than 31
March 2005.
[32] If this had
been a tenancy of an agricultural holding, the pursuer's notice to quit would
have been invalid. But since the lease
in this case was, in my opinion, a commercial lease running from year to year, relocation
could be prevented in any given year by any overt intimation by either party
that he did not consent to the prolongation of the lease (Signet Group plc and C & J Clark Retail Properties Ltd, 1996 SC 444).
[33] The pursuer's
notice to quit constituted such an intimation.
Whatever the specified date of ish, it notified the defender that the
pursuer would not consent to a prolongation for a further year. It was not suggested by the counsel for the
defender that the period of notice was insufficient; and since the notice
specified a date of removal that was later than the true anniversary date, the
defender was not prejudiced in any way by the error.
[34] In my opinion,
counsel for the pursuer did not require to amend his pleadings expressly to
aver the date found by the sheriff to be the correct anniversary. The pursuer's acceptance of that date in
consequence of the sheriff's findings was no more than a variation or
modification of his case on record. It
was not a fundamentally new case. (Burns v Dixon's Iron Works Ltd 1961 SC 102). Nevertheless, counsel for the pursuer moved
for leave to amend to the effect that if the lease ran to 7 February in each year,
the notice was effective to terminate it at 7 February 2005, et
separatim 7 February 2006.
That issue was thoroughly aired before the sheriff; counsel for the
defender could not suggest that the defender was in the least way prejudiced by
the proposed amendment, and on any view the date of ish is now long past. I can see no reason to refuse the amendment.
Decision
[35] I propose (1) that
we should allow the Record to be amended in the terms proposed by counsel for
the pursuer; (2) that we should vary the
sheriff's findings in fact by substituting a new finding 23 in the terms that I
have proposed; (3) that we should vary the
interlocutor of the sheriff principal to the extent of making that substitution; and (4) that we should refuse the appeal and
allow the cross appeal.
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lord Kingarth
Lord Wheatley
|
[2007] CSIH 74
XA165/06
OPINION OF LORD KINGARTH
In the APPEAL
from the Sheriffdom of South Strathclyde, Dumfries and Galloway at Airdrie
by
GRAHAM McDONALD
Defender and Appellant;
against
MANUS O'DONNELL
Pursuer and Respondent:
_______
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For the appellant: Henderson; Thorley Stephenson (for McWhinney Richards,
Airdrie)
For the respondent:
Simpson; Brodies (for John G
O'Donnell, Glasgow)
25 October 2007
[36] For the
reasons given by your Lordship in the chair I agree that the amendment proposed
by counsel for the pursuer should be allowed, that the sheriff's interlocutor
should be varied by substitution of a new finding 23 as proposed, that the
court should adhere to the interlocutor of the sheriff principal, and that the
appeal should be refused and the cross appeal allowed.
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SECOND
DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lord Kingarth
Lord Wheatley
|
[2007] CSIH 74
XA165/06
OPINION OF LORD WHEATLEY
In the APPEAL
from the Sheriffdom of South Strathclyde, Dumfries and Galloway at Airdrie
by
GRAHAM McDONALD
Defender and Appellant;
against
MANUS O'DONNELL
Pursuer and Respondent:
_______
|
For the appellant:
Henderson; Thorley Stephenson
(for McWhinney Richards, Airdrie)
For the respondent:
Simpson; Brodies (for John G
O'Donnell, Glasgow)
25 October 2007
[37] I agree with
your Lordship in the chair and with the course proposed, and have nothing to
add
