Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 120
A306/05	OPINION OF LORD BRODIE in the cause ALLAN MacCOLL (AP) Pursuer; against (FIRST) THE CROFTERS COMMISSION and (SECOND) KAREN MacGILLIVRAY (AP) Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuer: Sandison; Currie Gilmour & Co

Second Defender: Sir Crispin Agnew of Lochnaw, Bt.QC, Robert Sutherland; Anderson Strathern (for MacPhee & Partners, Solicitors, Fort William)

20 August 2009

Introduction

Parties and their respective positions

[1] The pursuer is the brother and executor-nominate of the late John James MacColl, otherwise known as Iain MacColl ("the late Mr MacColl"), conform to Confirmation in his favour issued on 2 August 2001. The late Mr MacColl died on 22 August 2000. By that time he was divorced. He had formerly been married to Mrs Marjory Jean Gerrand or Paterson or MacColl ("Marjory MacColl"). He had no children. He had for a number of years been in poor health. Although they had formerly been close, in the years immediately prior to his death the late Mr MacColl had not been on good terms with the pursuer. At the time of his death the late Mr MacColl was the owner of a croft, subject to the provisions of the Crofters (Scotland) Act 1993 and known as 16 Moss and Blain, Arisaig and Moidart, Invernesshire ("the croft"). He had purchased the croft in 1980. The croft extended to some 1.7 hectares. It bordered the River Shiel. It consisted of croft land with a share in common grazings. No croft house was erected on the croft land. In 1996 the late Mr MacColl entered into an arrangement in relation to the croft which involved the second defender, Ms Karen MacGillivray. It is the position of the second defender that, at the time it was entered into, the arrangement was that the late Mr MacColl would let the croft to the second defender for a term of seven years from the date of entry at an annual rent of £2,714.28 with a payment of £6,000 as compensation for permanent improvements. It is the position of the pursuer that in truth the arrangement was that the agreed payments, amounting as they do to just a few pence short of £25,000, were to represent payments towards the ultimate purchase by the second defender of the croft, the apparent let being a sham transaction. This dispute of fact is at the heart of this litigation. The first defender, the Crofters Commission, has not entered appearance.

The Minute of Agreement

[2] The croft was at one time held by the late Mr MacColl and Marjory MacColl on a joint title. It would appear that after their separation there was litigation between them in relation to aliment. On 14 and 31 October 1994 they executed a Minute of Agreement making provision, inter alia for the transfer of Marjory MacColl's interest in the croft to the late Mr MacColl and a mutual acceptance of the provisions of the Minute in full and final settlement of all claims including financial provision on divorce. Clause (Seventh) of the Minute was in these terms:

"In the event of Mr MacColl or his Executor or Executors selling said croft or any part thereof within five years of the earlier date of execution hereof and obtaining therefor a price which includes development value in addition to crofting value as ascertained by an agreed valuation of the property, Mrs MacColl will be entitled to a payment equivalent to one half of the amount by which the sale price (including development value) exceeds the said crofting value, less one half of the conveyancing costs of the transaction."

Statutory background: the Crofters (Scotland) Act 1993

[3] In terms of section 1 of and schedule I to the 1993 Act, the first defender is a body corporate. It has nine members, otherwise commissioners, of whom the quorum is three. The first defender has the functions of reorganising, developing and regulating crofting in the crofting counties of Scotland. In terms of section 3(3) of the Act a "crofter" is the tenant of a croft. One of the purposes of the Act is to promote the occupation and working of croft land by crofters. Section 5 makes provision for the statutory conditions to which the tenancy of a croft shall be subject. Section 6 makes provision for the rent payable as one of the statutory conditions. That rent may be as agreed in writing between the landlord and the crofter and the rent so agreed shall be the rent payable by the crofter so long as the agreement subsists and thereafter and so long as there is no new agreement between the landlord and the crofter or no different rent shall have been fixed by the Scottish Land Court in exercise of the jurisdiction, conferred by section 6(3) of the Act, to fix what is a fair rent. Once the fair rent has been fixed by the Land Court, the section 6(3) jurisdiction may not however be exercised again to alter the rent, except by mutual agreement between the crofter and the landlord, for a period of seven years from the term at which it first became payable. Similarly, the section 6(3) jurisdiction may not be exercised to alter a rent fixed by agreement for a period of seven years from the term when it first became payable or for such longer period as may have been agreed upon between the crofter and the landlord.

[4] In terms of section 12 of the Act a crofter may, failing agreement with the landlord as to the acquisition by the crofter of croft land tenanted by him, apply to the Land Court for an order authorising him to make such an acquisition. In terms of section 13, on such an application the Land Court may authorise acquisition subject to terms and conditions and at a consideration referred to in section 14 of the Act as the crofting value of the croft land. Effectively, the crofting value is fifteen times the proportion of the fair rent attributable to the croft land. A fair rent may be fixed in the course of an application under section 12. Whereas the Land Court has a discretion not to authorise acquisition of the croft land, a crofter is entitled to acquire his croft house. In the event of a crofter acquiring croft land in terms of section 13(1) and then proceeding to dispose of it, other than by lease or to a member of his family, within five years of acquisition, section 14(3) provides that he will be obliged to pay to the former landlord a sum equal to one half of the difference between the market value and the crofting value.

[5] Among the powers conferred on the first defender by the 1993 Act in order that it might carry out its functions, are the powers related to the supervision of the letting of crofts as provided by section 23. Section 23(3) provides:

"(3) The landlord of a croft shall not, except with the consent in writing of the Commission, or, if the Commission withhold their consent, except with the consent of the Secretary of State, let the croft or any part thereof to any person; and any letting of the croft otherwise than with such consent shall be null and void."

[6] A croft that is not in the possession of a crofter is vacant. In terms of section 23(5) of the Act where a croft is vacant the Commission may after the expiry of one month from the occurrence of the vacancy give notice to the landlord requiring him to submit proposals for re-letting the croft within a period of 2 months and if no proposals are submitted or the proposals are not acceptable to the Commission it may let the croft to such person as it thinks fit. Where a crofter becomes owner of his croft (as the late Mr MacColl is understood to have done in 1980) that does not change its status but, notwithstanding that the owner remains in occupation to the extent of working the croft land, the croft becomes vacant in terms of section 25(5) of the Act. As Mr MacAskill, a former chairman of the first defender, put it during his evidence, when a tenant of a croft becomes the owner, the first defender continues to have exactly the same control as when he was still a tenant. However, in practice, and this would seem to be borne out by the experience of the late Mr MacColl, as long as a former crofter who has become owner of his croft or a member of his family continues to occupy and work it, the first defender will not seek re-letting proposals: McCuish and Flyn, Crofting Law, para 9.18.

The section 23 application

[7] It was within this statutory and contractual context that the late Mr MacColl made an application to the first defender for its consent to the letting of the croft to the second defender, as required by section 23(3) of the 1993 Act. A copy of that Application is 7/7 of process. It is signed both by the late Mr MacColl and the second defender. It is dated 15 April 1996. Objections to the grant of consent were lodged with the first defender by, among others, the pursuer as an individual, and a hearing directed by the first defender in relation to the application, taking the form of a public meeting, was held on 11 September 1996 at Acharacle Hall, chaired by one of the first defender's Commissioners, Mr William Ritchie. Some 47 persons attended the meeting. They included the late Mr MacColl; his solicitor, Mr W Gordon Seaton; Marjory MacColl; the pursuer; the second defender; the second defender's father, Allan MacGillivray; Mr Alan Hunter, an official of the Scottish Office Agriculture Environment and Fisheries Department who had provided a report to the first defender on the proposed let; and Mr. John Toal, Crofting Development Officer, Lochaber Limited, who on 11 October 1996 was to write a letter to Mr Ritchie which is 7/10 of process. Among the others present were a number of local crofters. Notwithstanding the objections, having considered the applications of the late Mr MacColl to re-let the croft and assign his tenancy of the common grazing, the first defender granted its consent with effect from 28 May 1997 at a meeting held on 17 October 1996. The first defender intimated its consent to the late Mr MacColl by letter dated 21 October 1996. The first defender entered the name of the second defender as tenant in the Register of Crofts maintained by it in terms of section 41 of the 1993 Act.

The action: remedy and averments

[8] In this action the pursuer seeks reduction of the consent determined on 17 October 1996 and intimated to the late Mr MacColl by letter dated 21 October 1996. He contends that the consent was impetrated from the first defender by fraud. As I have indicated, the first defender has not entered appearance. The second defender has entered appearance and contests the grant of decree of reduction.

[9] As already touched upon, the fraud alleged by the pursuer is that the ostensible let said to have been agreed between the late Mr MacColl and the second defender at an annual rental of £2,714.28 for the first seven years, with a sum of £6,000 to be paid in respect of permanent improvements, was a sham transaction. In truth, he avers, these payments, totalling £25,000, were payments towards the ultimate purchase of the croft by the second defender. Specifically, the pursuer avers that at the public meeting and hearing on 11 September 1996, which formed an important part of the process by which the first defender made its decision as to whether to grant consent to the letting, the second defender knowingly made material and false representations about the nature of the arrangement between her and the late Mr MacColl in relation to the croft. The second defender represented that the payments which she had agreed to make to the late Mr MacColl were simply fair rent payments and that it was coincidence alone that they and the permanent payments amounted in total to £25,000. Those statements were, the pursuer goes on to aver, untrue, the truth being that the payments which the second defender had agreed to make to the late Mr MacColl had been agreed between them to represent payments towards the ultimate purchase by her of the croft. The pursuer claims that in granting the necessary consent the first defender was misled. In response to the averment of the second defender that the first defender wrote to her and others attending the meeting by letters dated 21 October 1996 which included the statement:

"The Commission also noted the rental agreed between both parties for the croft tenancy. We recognise however, that the agreed sum to be payable over a staggered period is a fair assessment of compensation payable in respect of the tenancy of the croft".

the pursuer avers that assuming the first defender to have been given information to that effect that information was equally materially incorrect. The pursuer avers that in the circumstances the grant of consent was and is invalid. He therefore seeks reduction of the consent. Further, so the pursuer avers, the involvement of the second defender was a device designed to conceal the interest of her father in the croft from both the first defenders and the public.

[10] In her averments the second defender explains that the arrangement between her and the late Mr MacColl arose from discussions between the late Mr MacColl and her father, Allan MacGillivray, as a result of which the late Mr MacColl agreed to let the croft to the second defender. At that time the croft consisted of bare croft land on which was positioned a caravan in which the late Mr MacColl had resided before he moved to a council house in Acharcle following a heart attack. The late Mr MacColl took advice from a solicitor, Mr Gordon Seaton, then of Anderson Banks & Co, Oban, who advised that if a low rent was agreed the second defender would be able to buy at the current rent multiplied by a factor of 15 under the provisions of section 14(2) of the 1993 Act. Mr Seaton further advised that a reasonable value of the croft, payable by an incoming tenant, would be about £25,000. Allan MacGillivray and the late Mr MacColl then agreed that the second defender would take the tenancy of the croft for a one-off payment of £6,000 and seven payments of £2,714.28 per annum as rent. The second defender was not party to these discussions but knew that her father was arranging the crofting tenancy for her and that there would be a payment of £6,000 and rental for seven years of £2,714.28 per annum. In this way the late Mr MacColl was able to receive the fair value of the croft in the knowledge that the second defender could buy it at the end of seven years for 15 times such fair rent as was then fixed. Allan MacGillivray agreed to make these payments on the second defender's behalf. The second defender offers to prove that the first defender was not misled, and that it appreciated that the payments represented the price for the permanent improvements. In response the pursuer avers that the arrangements now put forward by the second defender in her pleadings were not disclosed to the meeting on 11 September 1996.

[11] The second defender avers that, in any event, the pursuer is personally barred from raising the action. He is to be taken to be eadem persona with the late Mr MacColl who was party to the arrangement with the second defender. The second defender has acted on the faith of the agreement. She has taken entry to the croft. She has paid rent and the capital sum. She has re-fenced and re-seeded the croft and undertaken drainage work, all at a cost to herself. Following upon a demand being made by the pursuer for arrears of rent, which were then paid in the sum of £10,571.40, the second defender has, to the knowledge of the pursuer, built a house on the croft. The croft with the new house now has a value of about £300,000. The second defender further avers that the pursuer took no steps to challenge the first defender's grant of consent prior to what is described in the second defender's pleadings as "the incompetent Land Court action" raised on 5 June 2003.

[12] This action is ancillary to other proceedings in dependence before the Scottish Land Court but presently sisted. On 3 June 2003 the pursuer, as executor-nominate of the late Mr MacColl, made an application to the Land Court, which was received on 5 June 2003, seeking an order that the second defender did not have a valid tenancy of the croft. This application is "the incompetent Land Court action" referred to by the second defender. The application was made on the basis that the consent of the first defender had been impetrated by fraud as a result of the materially untrue representations made to it at the public meeting given the true nature of the arrangement between her and the late Mr MacColl. After hearing submissions the Land Court determined that it had no power to set aside or otherwise overlook the effect of the consent granted by the first defender and sisted the proceedings in order to allow this action to be raised and determined. This explains why the only operative conclusion in the summons is for production and reduction of the consent, and why the issue of the validity of the tenancy is not taken up in this action.

[13] The second defender has taken a number of pleas in defence. Some of these were discussed on Procedure Roll before Lord Malcolm. By interlocutor dated 21 August 2007 Lord Malcolm repelled the second defender's first (action incompetent as the matter should be presented as an application for judicial review), second (pursuer having no title to sue given identity of interest as between pursuer and the late Mr MacColl), seventh (decree should be conditional on reimbursement of unjust enrichment consequent on reduction of let) and eighth (pursuer should be ordained to lodge caution as security for reimbursement) pleas-in-law and quoad ultra allowed proof before answer.

The proof

Representation and witnesses

[14] I heard proof on 24 February 2009 and the following days. The pursuer was represented by Mr Sandison, Advocate. The second defender was represented by Sir Crispin Agnew QC Bart. and Mr Robert Sutherland, Advocate. In the course of the proof the pursuer led the evidence of the second defender; her father, Mr Allan MacGillivray; Mr Duncan MacPhee, solicitor and partner in MacPhee & Partners (who had acted for the second defender and her father); Mr Gordon Seaton, solicitor and partner in Anderson Banks (who had acted for the late Mr MacColl); and the pursuer. The second defender led the evidence of John Archie MacAskill, former chairman of the first defender (interposed prior to the pursuer). A number of matters were agreed by Joint Minute.

Assessment of the witnesses

[15] Taking the witnesses in the order in which they gave evidence, my impression of the second defender was of a somewhat nervous but honest witness who, at the relevant time, had limited understanding of or interest in the matters focused on in this litigation. As with all the other witnesses she had difficulty in recalling the detail of events that had occurred many years ago. In 1996 she was a young woman with a practical interest in crofting and a wish to have a house to live in but with limited financial resources. She was content that matters of business be dealt with by her father who was a shopkeeper as well as a crofter and who would be providing the finance for such interest as she was to acquire in the croft. All negotiations with the late Mr MacColl were in fact carried out by her father, Allan MacGillivray, as was the substance of any discussions and exchanges of information with her and her father's solicitor, Duncan MacPhee. This of course has an adverse impact on, if not exactly her reliability, at least her ability to give independent evidence on the true nature of the agreement arrived at between her father and the late Mr MacColl. However, insofar as her evidence related to her own understanding and state of belief I accepted it. Although now retired, Allan MacGillivray has been a businessman. In his evidence he said that the late Mr MacColl "always ran things by me" which would seem to point to someone with a recognised business acumen. That would accord with how Mr MacGillivray struck me when listening to him. He has and in 1996 had some knowledge of crofting law and practice. He explained in his evidence that he was the owner of a croft, having previously been a sub-tenant (in the report of the public meeting the second defender is recorded as having described her father as tenanting two crofts). He took the advice of his solicitor, Mr Duncan MacPhee, on the proposal put to him by the late Mr MacColl in April 1996, shortly after that proposal was made and I would expect him to have been alive to all the issues by at least that time. At the beginning of his re-examination Mr MacGillvray gave an answer which epitomised the difficulty I had in coming to a view on the effect of his evidence. Mr Sandison had drawn to Mr MacGillvray's attention the discrepancy in meaning as between two expressions: "a fair rent" and "a fair arrangement". Mr MacGillivray replied "I am only a crofter. It is the same thing in my language." If by this remark he intended to portray himself as someone lacking in appreciation of subtleties and nuance, and it was my impression at more than one point in his evidence that that was his intention, then I am unable to accept that. Mr MacGillivray seemed to me to be being very careful as to how his answers might bear on the parties' respective cases. I consider that Mr Sandison was justified in saying that, at least on occasion, Mr MacGillivray appeared to be trying to avoid giving direct answers to questions. It has accordingly seemed to me to be appropriate to regard Mr MacGillivray's evidence with a degree of circumspection, as Mr Sandison proposed I should. That said, if by explaining that "I am only a crofter", Mr MacGillivray meant that he was not a lawyer and therefore not accustomed to make the sort of distinctions that lawyers would make, I accept this to be so. Although parties have respectively adopted the apparently sharp alternatives of an agreement to sell and an agreement to let, there would seem to me to be scope for ambiguity when what is being discussed is a verbal agreement between two laymen for the acquisition of an interest in a croft, the tenure of which is subject to regulation in terms of the 1993 Act. Both solicitors, Mr MacPhee and Mr Seaton, were heavily reliant on file notes and correspondence for their evidence. I found Mr Seaton to be somewhat defensive, perhaps because the focus was on a transaction with which he was associated and which was being impugned as a sham. He, in my opinion unnecessarily, asserted repeatedly that he could not be expected to remember details after such a long passage of time. Mr Sandison came to submit that while Mr Seaton had been generally frank in giving his evidence, he had been guarded when referred to a passage in his file note, 6/7 of process. He had been reluctant to acknowledge the significance of the word "technically" in the expression "technically arrears of rent have built up". This, submitted Mr Sandison, indicated that Mr Seaton was conscious that he had been a party to the misleading of the first defender. I accept as accurate Mr Sandison's description of how Mr Seaton gave his evidence at that point. I would not, however, go beyond describing him as appearing somewhat defensive. I did not take Mr Seaton to have implicitly accepted that he had been party to misleading the first defender and as far as his evidence is concerned I consider that he, like Mr MacPhee, was doing his honest best to assist the court. There was similarly no question in my mind as to the veracity, reliability and fairness of Mr MacAskill.As for the pursuer, he accepted that he was upset at what had happened. He clearly had not approved of every aspect of his late brother's behaviour. He accepted that he considered that his late brother had been deceitful but he also explained that he did not consider that his brother had been treated justly by Mr MacGillivray in the matter of payment of rent. The pursuer described himself as coming from crofting people and it may be that he has an emotional as well as financial interest in the outcome of the litigation. Notwithstanding that and the attack on his credibility which Sir Crispin made in final submissions, particularly in relation to his knowledge of the nature of the arrangement between his late brother and the second defender, the pursuer gave me the impression of an honest witness whose evidence, such as it was, I was prepared to accept. That said, it appeared to me that the pursuer had only a limited amount to contribute to resolution of factual issues.

The issues

[16] The issues arising from the pleadings and as they developed in the course of the proof appeared to me to be the following: (1) what was the nature and terms of the agreement identified as "letting proposals" in the Application signed by the late Mr MacColl and the second defender on 15 April 1996 and received by the first defender on 22 April 1996 ("the agreement"); (2) what was the second defender's understanding of the agreement as at 11 September 1996 when she spoke at the public meeting at Acharacle; (3) having regard to the whole circumstances, did the information put before the meeting by the second defender amount to a fraudulent misrepresentation; (4) can it be inferred that the first defender was materially misled by the information provided to it by or on behalf of the second defender with the result that it granted its consent in terms of section 23(3) of the 1993 Act; and (5) in all the circumstances but in particular by reason of the second defender having altered her position as a result of any act or omission attributable to the pursuer, is the pursuer personally barred from insisting on the first conclusion?

Issue (1): The nature and terms of the agreement
The evidence and inferences relied on by the pursuer

[17] On Mr Sandison's approach the true nature of the arrangement between the late Mr MacColl and the second defender was the primary issue which should determine the disposal of the case. It had been the focus of much of the evidence and both counsel made detailed submissions under reference to that evidence.

[18] It was Mr Sandison's submission that the evidence demonstrated that the arrangement entered into in April 1996 was one whereby in return for payment of £6,000 as a lump sum and seven annual payments of £2,714.28 the second defender or her nominee was to become the owner of the croft by a voluntary conveyance and in the meantime was to have possession of it. While the late Mr MacColl was deceased and he had not left behind any direct evidence of the arrangement that he had entered into, such as a letter, he could speak through the file notes of his solicitor, Mr Seaton. It was clear from these file notes that the late Mr MacColl wished to dispose of his whole interest in the croft. As is recorded in the file note, 6/13 of process, the late Mr MacColl met with Mr Seaton on 29 June 1995. Mr Seaton noted that:

"You have been working the croft but because of your ill-health, particularly your heart condition you now want to sell the croft but you believe you are prevented from doing so in terms of clause seventh [of the Minute of Agreement with Marjory MacColl]."

Thus, it was clear that at that date, the late Mr MacColl wished to sell rather than to let the croft. The late Mr MacColl met with Mr Seaton again on 3 April 1996, as noted in 6/12 of process where it is recorded:

"you would like the croft to go to Karen MacGillivray... You would like her if possible to have a lease for seven years as this will enable her to get all the grants and loans that are required."

According to the file note, Mr Seaton then explained the pitfalls including:

"the severe risk there would be if you leased the land to Miss MacGillivray in that you would be setting up a croft tenancy. This was still a registered croft even although you owned it. This would give Miss MacGillivray the right to purchase the croft at fifteen times the rent. This was something which would have to be avoided. It may be possible of course to put the rent at such a level that it would amount to a purchase at full value."

Thus, submitted Mr Sandison, had it not been for the Minute of Agreement, the late Mr MacColl would have proceeded to sell at an agreed consideration. By April 1996 he clearly wished to get rid of the croft and had identified someone to whom it might be transferred.

[19] There are no more file notes for the period prior to the public meeting on 11 September 1996. On 30 March 1998, as recorded in 6/10 of process, Mr Seaton met with the late Mr MacColl. The file note includes the following:

"We will recall the agreement you had with Karen. The deal was £25,000 over seven years. She has paid £6,000 for machinery etc. The rent is £2,7643.00 (sic) payable over seven years but there is nothing in writing and you now want something in writing. She is still due £19,000."

Thus, submitted Mr Sandison, there was an agreement previously entered into whereby the second defender would get title. As Mr Seaton had confirmed in evidence this was not a reference to the statutory right to purchase in terms of section 12 of the 1995 Act. Mr Seaton had not been surprised by what the late Mr MacColl had said to him on 30 March 1998. He had been of the view from the outset that the agreement involved the transfer of the property in the croft to the second defender. Mr Seaton wrote to the late Mr MacColl by letter of 17 May 1999, 7/18 of process. Having referred to the fact that he had obtained a copy of the Minute of Agreement between Mr MacColl and Marjory MacColl, Mr Seaton put forward two options. In both of these options he makes reference to the "balance of the price" to be paid by the second defender. There was no reference to an agreement to the lease being transferred into an agreement to transfer ownership, as had been suggested by Mr MacGillivray in his evidence. Rather, what had previously been referred to as "rent" was now referred to as "the balance of the price". Number 6/7 of process indicates that Mr Seaton met with the late Mr MacColl on 20 April 2000. This was the last meeting between them recorded by a file note before the late Mr MacColl's death. The file note includes the following:

"You are still due £16,000 from MacGillivray... Agreeing that we would approach him on that basis simply because technically arrears of rent have built up here. Reminding Mr MacColl, of course, that although there is formal tenancy here the whole background to this was that the land was being sold to Karen MacGillivray but because of the Separation Agreement with your ex-wife that could not be achieved within a five year period. Therefore it was agreed to enter into the tenancy over a seven year period and the rental was 1/7^th of the £25,000 which was agreed. £6,000 was paid up front for the equipment with the balance of £19,000 being paid over this period."

As I have already noted, it was Mr Sandison's submission that the manner in which Mr Seaton responded to being questioned on this file note indicated that he was conscious that he had been a party to the misleading of the first defender. What appeared in this file note, submitted Mr Sandison, chimed with every other document which had been produced. While there may be no single "smoking gun", as Mr Sandison put it, what was there was clearly "warm barrelled". There was no document pointing to an evolving agreement, as had been argued for on behalf of the second defender.

[20] Mr McPhee, acting on behalf of the second defender and Alan MacGillivray wrote to Mr Seaton by letter dated 9 April 2002, 6/21 of process. In that letter he explained that the second defender had made an application to the Land Court to fix a fair rent and that the Land Court needed to be advised in as much detail as possible as to what had been the terms of the Agreement between the late Mr MacColl and Alan MacGillivray. The letter includes the following:

"It is our understanding that an agreement was reached between our clients and Mr MacColl that he would sell the croft at 16 Moss to Mr Alan MacGillivray for the sum of £25,000. For various reasons the agreement was not to be implemented immediately."

Thus, Mr Sandison emphasised, there was no question of an evolving agreement at that stage which, was, of course, some 18 months after the late Mr MacColl's death. Similarly, in his letter to Mr McGillivray of 30 May 2001, 7/38 of process, Mr McPhee stated: "... the Agreement contemplated a purchase on the passing of the fifth anniversary". Now, Mr Sandison submitted, Mr McPhee may have meant the seventh anniversary but it was quite clear that a purchase had been contemplated from the beginning. In the submissions on behalf of the second defender to the Scottish Land Court in support of her application for the fixing of a fair rent, 6/20 of process, it was stated that:

"The rent was agreed as part payment of the purchase price of the croft in accordance with an agreement made between the Applicant and the then landlord, Mr John MacColl."

No reference was made to an evolving agreement in the Answers lodged on behalf of the second defender to the second Land Court application, at the instance of the pursuer, the purpose of which was to set aside the tenancy. That was despite the averment on behalf of the pursuer in his application, 6/17 of process, that "the Crofters' Commission were unaware of the said purported agreement for purchase". The only person who talked about an evolving agreement in evidence was Alan MacGillivray. Mr MacGillivray's evidence that the agreement to sell only developed at a later date should be taken with a pinch of salt given the terms of Mr Seaton's file note of 11 December 1998, 6/8 of process which states that:

"[Mr MacGillivray] offered Mr MacColl £3,000 some time ago but only on the basis that there was something in writing setting out that Karen will become the owner of the croft in seven years time"

and the file note of 7 June 2000, 6/6 of process, where it stated that "you also take the view that the rent was fixed on the basis of a purchase price". Mr MacGillivray had denied that he had ever said that but it was significant that Mr Seaton had not been challenged about that in cross-examination. Thus, submitted Mr Sandison, all the file notes and correspondence were to one effect. There was nothing pointing the other way. Thus, it should be held that there was an agreement reached prior to 11 September 1996 that the croft would be acquired by the second defender for payment of a lump sum of £6,000 and seven subsequent annual payments of £2,714.

The evidence and inferences relied on by the second defender
[21] Sir Crispin submitted that the evidence was that the arrangement originally was that the late Mr MacColl and the second defender would enter into a lease of the croft. He accepted that the evidence disclosed that this evolved into an arrangement whereby in due course the second defender would get title to the croft with, in the shorter term, title being taken in the name of Mr MacGillivray (this on the advice of Mr MacPhee). However, this evolved arrangement was only arrived at after the second defender had taken up the lease and after the decision of the first defender to grant its consent in terms of section 23 of the Act.

[22] It was relevant to a consideration of what contract was entered into that both the late Mr MacColl and the second defender wanted a lease in place, albeit for different reasons. The late Mr MacColl required a lease to avoid having to share the value of the croft with his ex-wife and the second defender needed a lease to access crofting grants. It is therefore inherently unlikely that they would deliberately have agreed to sell the croft and disguise the contract. It is much more likely that they would both want to enter into a proper lease. Mr MacPhee had said that in view of the second defender's intentions for the croft it was better for her to do what she did, and that it would have been unwise for her to purchase. Mr MacPhee had frequently come across an initial agreement to let and a later agreement to purchase later. Mr MacPhee and Mr Seaton had confirmed that it was harder for owner occupiers to get grants than for a crofter.

[23] It was significant that the late Mr MacColl, having consulted Mr Seaton in June 1995 and been advised he could not sell his croft because of his wife's claim, next made contact with Mr Seaton to explain that he wanted to lease the croft to the second defender and that the late Mr MacColl and Mr Seaton then discussed various options, which included the idea of a lease at a premium with a high rent and perhaps an option to purchase at a later date. Sir Crispin submitted that the gloss Mr Sandison had tried to put on the file note, 6/12 of process, was not warranted and in any event the note was quite capable of being interpreted as disclosing a genuine intention to set up a lease to fit the circumstances. The "the croft to go to Karen" could well mean the crofting tenancy to go to her, because a crofting tenant has better rights than an owner occupier. The evidence shows that following upon this meeting the late Mr MacColl and Mr MacGillivray agreed that the second defender should have a lease that followed one of the models suggested by Mr Seaton. Mr MacGillivray had discussed this proposal with Mr MacPhee, who had faxed an outline of the agreement to Mr Seaton. The file note of 12 July 1999, 7/76 of process, makes clear that Mr MacPhee's fax related to a lease. Thereafter the late Mr MacColl and the second defender completed an application form and applied for the consent of the first defender. In this context Sir Crispin referred to the principle that there is a strong presumption that a written document embodies the agreement of parties: Rehman v Ahmad 1993 SLT 741 at 749. Mr Seaton gave clear evidence that there was never any suggestion by his client, the late Mr MacColl, that there was anything other than a lease in place with an agreement that title would be transferred at the end of seven years. While Mr Seaton was clear about an agreement to transfer title at the end of seven years he agreed in cross examination that he could not be sure whether this agreement was made at the same time as the lease agreement or subsequently. His evidence that the late Mr MacColl contacted him in 1998 to complain that the rent had not been paid supported the view that the late Mr MacColl considered that he had a lease. This was supported by Mr Seaton's various letters and file notes:

"The rent is £27643.00 (sic) payable over 7 years but there is nothing in writing and you now want something in writing ... your first aim is to have an agreement with Karen regarding rent and provision made in the event of your death"

- file note of 30 March 1998, attendance with the late Mr MacColl, 6/10 of process (this in the context where the first rent payment would have been due on 28 May 1998):

"Karen will become the owner of the croft in seven years time ... You are of course aware that Karen is the tenant and of course there was a difficulty she could still exercise an option to purchase at 15 times the rent but you could not afford 15 times the current rent"

- file note of 11 December 1998, attendance with Allan MacGillivray, 6/8 of process; "rent now in arrears" - file note of 12 July 1999, attendance with Allan MacGillivray, 7/76 of process; "arrears of rent have built up here" - file note of 20 April 2000, attendance with the late Mr MacColl 7/73 of process; and "rectify the position regarding arrears of rent due at this time" - letter of 17 May 2000 from Mr Seaton to Allan MacGillivray, 7/17 of process.

[24] In Sir Crispin's submission, there was no substantial evidence to suggest the late Mr MacColl viewed the agreement as anything other than a lease from the outset. While Mr Sanderson had put a gloss on the various file notes as showing an intention to sell, the files notes and letters were all equally supportive of an agreement to lease with an agreement that Karen MacGillivray could get title after seven years, and a subsequent development that when the late Mr MacColl became free from the fetters of his agreement with his wife he wanted to bring the sale forward. Alan MacGillivray should be accepted when he said that the sale issue arose only after Karen MacGillivray had taken entry to the croft with the consent of the Crofters Commission. The court should accept the evidence of Mr MacGillivray that the late Mr MacColl approached him to ask if Karen MacGillivray would like a lease of the croft and that a rent of £100 was discussed. This was consistent with the fact that the late Mr MacColl knew he could not sell the croft. Mr MacGillivray's evidence was that after the late Mr MacColl had been to see Mr Seaton he came up with the proposal of a single payment of £6,000 and then £2,714 per annum in rent. That was consistent with the advice that Mr Seaton had given. The court should accept Karen MacGillivray's evidence that she left the negotiations to her father. That was consistent with a daughter aged 25 who is to get the whole deal paid for by her father. As far as she was concerned she was getting a lease of the croft, which would allow her to access grants. What appeared in the file notes and correspondence was not inconsistent with this in that at the time they were generated there was in place a verbal agreement that title to the croft would be transferred to Karen MacGillivray after 7 years and there were discussions to shorten this period. While Mr Seaton and Mr MacPhee both thought this agreement was in place from the outset, they both agreed in cross-examination that they could have been mistaken.

[25] Sir Crispin accepted that there was evidence that in due course the second defender was to get title to the croft, although after advice from Mr MacPhee, it was decided that it would be better if title was taken in Mr MacGillivray's name. He submitted that the court should accept the evidence of Mr MacGillivray that this arrangement arose after the second defender had taken up the lease of the croft. He had given evidence that the late Mr MacColl approached him to suggest that he would be prepared to treat some of the rent payments as payments to an ultimate purchase price, following comments at the meeting about the high rent. Mr MacGillivray was not clear if this was six months or so after the meeting or after the second defender had taken over the croft. This was understandable given the passage of time. Mr MacGillivray gave evidence that in late 1998 or early 1999 the late Mr MacColl approached him to ask if the second defender would now like to take title. This was consistent with the fact that the late Mr MacColl was by then in a position to sell without having to make a payment to Marjory MacColl. This evidence was not inconsistent with what is shown by the file notes and correspondence. By late 1998, Sir Crispin suggested, the evidence indicated that there was in place a verbal agreement to transfer title to the second defender at the end of seven years with the rental being treated as going towards the price. He submitted that such an agreement did not mean that the original agreement was not a lease and that the lease did not continue but were the court to reach the view that there was, from the outset, an agreement that at the end of the seven years title to the croft would be transferred to the second defender that does not mean that the lease was not truly a lease. It should be analysed as a lease with an option to take title. The evidence was consistent with there being an agreement in two parts, namely an agreement to lease the croft to the second defender and an agreement that at the end of seven years title would be transferred to her. Sir Crispin referred to file notes 6/10, 6/8, 6/7, 6/6 and 6/5 and letters 7/18 and 7/17 of process. The recorded exchanges make clear that all parties understood there to be a lease in place and the purchase discussions were going around that lease. Those involved were not lawyers but lay people and whatever they might have thought about the ultimate right to a transfer to title at the end of seven years, through all the productions there is a consistent theme that there was a current lease. Mr MacPhee and Mr Seaton both said it was their understanding that there was a lease and an agreement to transfer title at the end of seven years to the second defender. It is not surprising that parties might have agreed to such a transfer for a nil value, where the second defender could in fact have bought the croft at the end of the seven year period for a nominal value.

[26] Sir Crispin submitted that the averment in the Land Court application for fixing a fair rent, 6/20 of process:

"The rent was agreed as part payment of the purchase price of the Croft in accordance with an Agreement made between the Applicant and the then Landlord, the late Mr MacColl"

was equally consistent with a dual agreement, where it is recognised that the rental payments will equal the value of the subject with the result that no price will be paid on the ultimate disposition. This averment was made in late 2001, by which time is it clear that the late Mr MacColl had agreed to the transfer of title and that payments to rent would be deducted from the ultimate purchase price. The averment is equally consistent with a subsequent agreement that the rent would be treated as reducing the ultimate purchase price. It was to be remembered that there was no evidence from the person who drafted this averment or took instructions on it. Mr MacPhee said that although he signed the application it was probably drafted by an assistant.

[27] Given this evidence the court should hold that that there was no sham, but a genuine agreement to lease the croft to the second defender with rent at £2,714 for seven years, even if there was a collateral agreement re transferring title to her at the end of the period. Even if, in law it was not a lease the evidence all supported the view that the parties thought that they were entering into a lease which included a right to have title passed at the end of seven years.

Submissions on the legal effect of the evidence
[28] Sir Crispin submitted, as his principal position, that the reality was that what had been agreed was a lease. That it was a lease with option to buy or an underlying agreement that there would be a conveyance for nil value at the end of the lease does not mean that the agreement was not a lease. Leases with an option to buy during the currency of the lease are not uncommon: Sea Breeze Properties Ltd v Bio-Medical Systems Ltd 1998 SLT 319, McCall's Entertainments (Ayr) Ltd v South Ayrshire Council (No 1) 1998 SLT 1403, McDougall v Heritage Hotels Ltd 2008 SLT 494. A lease with a right to demand a conveyance at any time for nothing more than the current rent is valid: Bissett v Magistrates of Aberdeen (1898) 1 F 87. A rent may be fixed at a figure that may ultimately have the effect of giving the landlord the value of the subjects by instalments so that the purchase can be at a nil value but that does not mean that it is not "rent". Provided there is an annual payment "the mode or principle according to which the amount of that return is calculated does not make it the less rent": Glasgow Tramways Co v The Corporation of Glasgow (1897) 24 R 628 LP at 638. Mr Sandison brushed aside the presentation of the agreement between the late Mr MacColl and Allan MacGillivray as a sham; it is to be ignored. A contract for the purchase of heritage by instalment, which is what had been agreed here, was not a lease: Caledonian Railway Co v Morrison (1898) 25 R 1001 and Lowe v Gardiner 1921 SC 21. It did not matter how the parties chose to describe it.

Finding on Issue (1)
[29] I have already touched on some of the difficulties associated with determining the nature of the agreement arrived between the late Mr MacColl and Allan MacGillivray. The late Mr MacColl is deceased. I do not regard Allan MacGillivray as a credible and reliable witness on this matter. He is all too conscious of his interest in the outcome. Both the late Mr MacColl and Mr MacGillivray were laymen. They had received legal advice from well qualified sources prior to 11 September 1996 and I take them to have been aware of the more important features of crofting tenure, but I would not expect them to be overly concerned with the distinctive features of lease on the one hand and sale on the other. Mr Sandison was no doubt right when he submitted that a hybrid halfway between sale and lease is unsupported by authority but that is the approach of a lawyer. Laymen might take a different view or simply not apply their minds to the question. The matter is complicated because where the property in question is a croft the distinction between the right of a proprietor and the right of a tenant and therefore the distinction between what is acquired on a sale and what is acquired on a lease requires to be understood in the light of the extensive protection given to the tenant of a croft and the regulatory powers of the first defender. Citing Fulton v Noble 1983 SLT (Land Court) 40, MacCuish and Flyn supra at 9.01 observe that even without proceeding to purchase a crofter can now be regarded as part-owner of his subjects due to his interest in the permanent improvements and to his right to share in the development value. Other than the Application for section 23 consent and the subsequent registration of a tenancy by the first defender, the agreement entered into between the late Mr MacColl and Allan MacGillivray was never expressed in writing and although it was his position that the first defender had been misled by what was essentially a sale being put before it as a lease, I did not understand Mr Sandison to concede that his client, as the executor of the late Mr MacColl, could necessarily be required to implement a contract of sale if called on to do so by the second defender.

[30] In my opinion, notwithstanding the evidential difficulties I have mentioned, it can reasonably be inferred from the evidence that while the late Mr MacColl and Mr MacGillivray came to an agreement that was intended to confer on the second defender the advantages enjoyed by a tenant under a crofting tenancy the agreement was not simply for the lease of the croft. Nor was it an agreement to lease that evolved into an agreement to sell. To the extent that Allan MacGillivray suggested in his evidence that this was how things developed, I do not find him to be credible. I am therefore prepared to uphold Mr Sandison's submission to the extent that the arrangement entered into in April 1996 was one which included the elements that in return for payment of £6,000 as a lump sum and seven annual payments of £2,714.28 the second defender or her nominee was to become the owner of the croft by a voluntary conveyance and in the meantime was to have possession of it. Implicit in such an arrangement would seem to be an obligation on the part of the late Mr MacColl to grant a conveyance for no further consideration once the lump sum and the seven annual payments had been made, on being called upon to do so, and an entitlement on his part to require the second defender to accept title and so relieve him of the burdens of ownership of the croft, again on being called upon to do so. I leave aside the question whether, on the material before me, that arrangement would have been or is enforceable, having regard to the terms of the Requirements of Writing Act 1993. However, as previously indicated, I further hold that the late Mr MacColl and Mr MacGillivray also intended to create a relationship that conferred on the second defender the advantages enjoyed by a tenant under a crofting tenancy at least for a period of seven years at the identified rent and they took the necessary formal steps to achieve what they intended. That is demonstrated by the application for section 23 consent, under reference to what could then be no more than letting proposals, and what followed from that, including entry of the name of the second defender as tenant in the Register of Crofts maintained by the first defender in terms of section 41 of the 1993 Act. To say that the late Mr MacColl and Mr MacGillivray "also" intended to create a crofting tenancy is to suggest that there was something additional and subordinate about this aspect of the transaction but I would not see that to be an accurate way of looking at the matter. For a landlord who is himself in possession of croft land, as was the position of the late Mr MacColl, much of the value of his holding lies in his ability to create a tenancy in favour of a suitable tenant. Integral in the arrangement that he came to with Mr MacGillivray was that the second defender was to be his tenant. Whatever precisely a "sham" might be and whatever the legal consequences of it being a sham, I do not find the tenancy, as constituted by the Application, the consent of the first defender, the registration in terms of section 41 of the Act and the second defender taking occupation of the croft to be a sham as discussed by Lord Diplock in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802. In a question as between the late Mr MacColl and the second defender I cannot see the effect of what they did to be other than the creation of tenancy. That does not, however, determine the issue between the parties. I must go on to consider the question as to whether the consent of the first defender was impetrated by fraud. If it was and if, as a result, the consent falls to be reduced, then irrespective of what the late Mr MacColl and the second defender did there is no tenancy for that is the effect of section 23(3) of the 1993 Act.

Issue (2): The second defender's understanding of the agreement
[31] I accept the evidence of the second defender as credible and, in relation to her knowledge and belief at relevant times, reliable. Accordingly, I find that her understanding as at 11 September 1996 was that her father and the late Mr MacColl had come to an agreement shortly before 15 April 1996 whereby she would become the tenant of the croft and thereafter work it as a crofter; that she would be able to build a house on the croft and that as a crofter she would be able to apply for grants to assist her to do so; that the rent would be £2,714 for a term of seven years; and that the Mr MacColl would receive a payment of £6,000, in respect of the equipment on the croft. The payments of rent and the £6,000 would be made by her father. She simply had not thought about what would happen at the end of the seven year term of the lease. She had no notion of becoming the owner of the croft. The second defender had not had any direct discussions with the late Mr MacColl. She, together with her father, had attended a meeting with Mr MacPhee in his office but she had not participated in the discussion. She had understood the purpose of the application being made to the first defender being to do with her "suitability for the croft".

[32] Insofar as what I have summarised as having been the second defender's knowledge and belief differs from what I have found to be the elements of the arrangement entered into on her behalf with the late Mr MacColl, I have not accepted Mr Sandison's invitation to find that the second defender "knew the truth".

Issue (3): Did the information put before the meeting by the second defender amount to a fraudulent misrepresentation?
[33] As Sir Crispin submitted, fraud consists in a false representation made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false, with the intention that the party should act in reliance upon the representation. The locus classicus for a definition of fraud is a passage of the speech of Lord Herschell in Derry v Peek (1889) 14 App Cas 337 at 374. It is in the following terms:

"First, in order to sustain an action of deceit there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved where it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made."

[34] Sir Crispin went on to emphasise that there is a general presumption against fraud, and the person averring fraud must prove what he avers: Gibson v National Cash Register Co, 1925 SC 500 at 504 and 510, Martyn v Westbrook (1862) 7 LT 449, Walker & Walker, Evidence, (3^rd edit), paragraph 3.7. Further he must prove that there is no innocent explanation: Spence v Crawford 1939 SC (HL) 52 at 69. He stressed that it was the second defender who is averred to have made the fraudulent representation. No other case is pled. It is therefore for the pursuer to prove that the second defender knew that the agreement was not a lease and accordingly that she knew what she said at the Acharacle meeting was false. Fraud is a personal matter.

[35] For his part Mr Sandison had submitted that the second defender had known the truth about what was proposed and had not told the truth at the meeting. However, even in the absence of intention to deceive, it may be a fraudulent misrepresentation if a person makes a statement, which is material in the sense of being made in respect of a matter of interest, with no actual belief in its truth: H & J M Bennett (Potatoes) Ltd v Secretary of State for Scotland 1986 SLT 665.

[36] As evidence of what had been said at the meeting on 11 September 1996 there was available an audio recording which had been made of the proceedings, 7/227 of process. There was also a report prepared on behalf of the first defender and put to it at its later meeting on 17 October 1996 when it considered the late Mr MacColl's application for consent, a copy of which was 6/1 (also 7/14) of process. Number 7/79 of process was the manuscript note made by Mr Seaton both as an aide-memoire of what to say and a record of what had transpired. For whatever reason, the quality of the audio recording was very poor and after listening to the passage between Mr Ritchie and the second defender recorded at paragraph 4.4 no further use was made of the recording during the proof other than Mr Sandison offering witnesses the opportunity of listening to parts of it if they wished. No one took advantage of the offer. In the result 6/1 of process, which was agreed by Joint Minute to be the report on the meeting, was taken by witnesses as an accurate summary of what had been said.

[37] Paragraphs 2.1 to 2.6 of the report on the meeting record what was said by the late Mr MacColl and by Mr Seaton on his behalf. What was proposed was referred to as a "tenancy" or "re-letting". It is recorded that:

"Mr Ritchie questioned the amount to be paid for permanent improvements (£6,000) and the figure of £2,714.28 to be paid for seven years. He asked Mr Seaton if this was a rent for the croft or the total value for the improvements. Mr Seaton explained that the rent was to be £2,714.28 for the first seven years. The value of £6,000 was obtained by Mr MacColl. Mr Seaton then presented Mr Ritchie with a copy of the valuation (Appendix 1) which shows the value of machinery, equipment and permanent improvements. Mr Ritchie clarified the fact that the valuation figure is £8,895 but the agreed figure is £6,000 and that £2714.28 is rent. When asked what the rent was before he purchased the croft, Mr MacColl stated that he could not remember and did not know what the average rent may be for crofts in the area. Mr Ritchie asked Mr MacColl if he thought the rent was a fair rent and Mr Seaton stated that it was agreed between the landlord and proposed tenant. He pointed out that after seven years they could approach the Scottish Land Court to fix a fair rent, should either parties [sic] be unhappy with the arrangement."

[38] Paragraph 4.4 of the report on the meeting is in the following terms:

"When asked by Mr Ritchie how they decided on the rent to be paid, Miss MacGillivray explained that it was agreed by Mr MacColl and herself and feels that it is a fair rent. She then went on to agree that it was a lot of money but she is prepared to pay it as she is very keen to get a croft. Mr Ritchie asked Miss MacGillivray if it was just a coincidence that the total to be paid (ie £6,000 plus £2,714.28 x 7) amounted to £25,000 and she replied that it was."

[39] Strictly speaking, I would not regard what the second defender said at the meeting as accurate. She had not agreed "the rent" with the late Mr MacColl in the sense of negotiating with him directly. The arithmetic which brought out a figure of close to £25,000 was not "a coincidence". The sum of £2,714.28 was not a "fair rent" if that expression is understood as being a reference to an annual payment for the right to occupy the croft and nothing more than that, and it certainly was not a "fair rent" as that expression is used in section 6(3) of the 1995 Act. I accept the second defender's evidence. I find it credible that the second defender felt, in her words, "very nervous" when required to answer questions at the meeting. In his letter of 11 October 1996 (7/10 of process) John Toal describes her as "unnerved by the occasion" and "her responses ... scarcely audible and generally inadequate." I rather doubt whether she understood what she was being asked or the significance of her answers. For my own part it is not clear what precisely Mr Ritchie meant when talking about "a coincidence" and "fair rent". Having regard to her understanding of what had been agreed between her father and the late Mr MacColl, I would not regard the second defender as having knowingly answered Mr Ritchie's questions inaccurately.

[40] Turning to the more general tenor of what the second defender said, insofar as I have found that the agreement between the late Mr MacColl and Allan MacGillivray was for the acquisition, over time and probably after seven years, of the whole of the late Mr MacColl's interest in the croft, then her use of language exclusively referable to a tenancy was not accurate either. However, for the reasons already given, I do not regard that as an instance of dishonesty on her part or as evincing a deliberate intention to mislead. Neither do I see it as amounting to recklessness. I accept that what the second defender had understood had been arranged on her behalf was something that, should the first defender regard her as a suitable tenant and give its consent, amounted to a crofting tenancy. The rent might be high but that is what her father was prepared to pay to secure it. That is what she believed and therefore in relation to the general tenor of what she had to say I do not regard her as having made a false representation either intentionally or recklessly.

[41] I have mentioned the second defender's answers to the specific questions asked by Mr Ritchie which I do not see as having been accurate and, when it came to "fair rent" and "coincidence" may be regarded as having been given carelessly because the second defender did not really know the truth of the matter. Fraud consists of making a representation, which is in fact false, in the absence of an honest belief in its accuracy. Mr Sandison submitted that even if the second defender did not know that the statements made by her were false they should nevertheless be treated as fraudulent because she lacked an honest belief as to their accuracy. He founded on Lord Davidson's opinion in H & J M Bennett (Potatoes) v Secretary of State supra as demonstrating that even someone who is responsible and reputable can come to make a statement which can be regarded as a fraudulent misrepresentation. In that case Lord Davidson drew on what had been said by Lord President Inglis in Lees v Tod (1895) 9 R 807at 854 in a passage which included the following:

"A statement on a matter of indifference both to the speaker and the listener, even though the speaker has no actual belief in the truth of the statement, provided he does not believe it to be false, will not infer dishonesty on his part. He is not seeking to mislead anybody. But a statement of facts made regarding a matter of interest both to the speaker and listener stands in a very different position. If the speaker, having no actual belief in the statement, though not believing it to be untrue, volunteers the statement, inconsistent with facts, to the person interested in the statement, and likely to act on it, he is dishonest and guilty of deceit, because he produces, and intends to produce, on the mind of the listener a belief that he does not himself entertain."

I cannot regard the exchange between Mr Ritchie and the second defender as one relating to "a matter of interest both to the speaker and the listener" as that expression was used by Lord President Inglis, irrespective as to whether "the listener" is seen as Mr Ritchie, the other people in Acharacle Hall at the time or the members of the first defender to whom Mr Ritchie would report, or, indeed, that the second defender produced or intended to produce on the mind of her hearers a belief that she did not herself entertain. I see that this begins to encroach on the question of causation which I still have to address but on the separate question of whether the second defender was guilty of making a fraudulent misrepresentation I consider that she was not. While her answers may not have been strictly accurate I do not consider that in answering as she did, the second defender had any conscious intention to deceive or that authority requires me to treat her answers as if she had such an intention. The question remains was the first defender (or anyone else) deceived?

Issue (4): Was the first defender misled into granting its consent?
[41] Certain matters would appear to be self evident. The first defender believed that the late Mr MacColl and the second defender wished to enter into a lease. That is what was stated in terms in the Application dated 15 April 1996 and were it otherwise the first defender would not have granted its consent under section 23(3). The late Mr MacColl and the second defender did not say that they had entered into a tenancy or lease, which of course would have been invalid without consent. Rather they put forward "letting proposals". These included the financial terms of the proposals. For all that what were presented were letting proposals, I consider that few present at the meeting on 11 September 1996 and certainly not Mr Ritchie, will have believed that the financial terms reported as having been agreed between the late Mr MacColl and the second defender related exclusively to rent and the capital value of what were described as permanent improvements. A reasonably well informed crofter present at that meeting, Mr Ritchie and those who constituted a quorum of the first defender on 17 October 1996 will have understood that the payment of £6,000 related to what, prior to the creation of a tenancy, attached to the landlord's interest and that what was described as rent was, in large part, a payment for securing the benefit of occupation of the croft rather than rent simpliciter or, as Mr Sandison put it, an annual payment simply for location of the croft. The pursuer in evidence gave an answer which seemed to confirm that he himself was of the view in 1996 that what had been agreed was a purchase rather than a lease, although his later answers were not consistent with that and it is possible that initially he may not have understood what he was being asked.

[42] On my assessment of the whole of the evidence I do not consider that the first defender, or any reasonably well informed person who was present at the meeting at Acharacle, was misled as to what was proposed by the late Mr MacColl and certainly not by anything said by the second defender. I see that as confirmed, in particular, by the evidence of Mr MacAskill, the then chairman of the first defender, who although not present on 11 September 1996, participated in the meeting of the first defender on 17 October 1996 when it was decided to consent to the letting proposal put forward by the late Mr MacColl. Mr MacAskill confirmed that in addition to a report on the meeting at Acharacle, 6/1 of process, the material available to the Commission at its meeting on 17 October 1996 included a letter from Messrs Macleod and MacCallum, Solicitors, acting for Marjory MacColl, dated 3 October 1996, voicing her suspicion that the "proposed Assignation" of the croft by her husband was being done to defeat her financial claim, 7/9 of process; and a letter from John Toal, Crofting Development Officer, Lochaber Limited, dated 11 October 1996, 7/10 of process, referring to what had happened at the meeting at Acharacle on 11 September and supporting the proposal to let to the second defender. In his letter Mr Toal drew attention to the high rental figure. He mentioned that at the Acharacle meeting the second defender had been asked to explain her acceptance of what "might be considered an excessive rent" and went on to describe her as having been unnerved by the occasion to the extent that "her responses were scarcely audible and generally inadequate". He offered the view that:

"... what is happening in this instance is that the price that the two parties have agreed the croft to be worth is included in the rent, and payment is being spread over a seven year period rather than as a single payment. I realise that an independent price was established for the permanent improvements on the croft but it is my understanding that this did not include [a site prepared for a house] and had it done so the price would have been much higher. I think the valuation of the croft has to be realistic. [The late Mr MacColl] has stated that he could put the croft on the open market and let the market determine the price. I think I would be correct in stating that there is little that the Commission can do to prevent this going to the highest offer and if that person is prepared to live on the croft this will be accepted by the Commission. It is conceivable that Mr MacColl would fetch a much higher price and there is no guarantee that the croft would go to a suitable young local person. The current proposal ensures that it does."

Mr MacAskill explained that the rent for a croft was usually an insignificant sum: £10 per year, for example. In this case it was evident to Mr MacAskill that the consideration or compensation for the grant of a tenancy (described by Mr MacAskill as the "transfer or re-letting of the croft") was the total sum of £25,000. He looked at what was described as rent as basically a spread-out payment of compensation with the option of reverting after seven years to a restricted fair rent. The figure for "rent" might truly represent rent or it might have been fixed with other purposes of the parties in view. The first defender was not particularly interested in the figure for rent. From the perspective of the first defender that was really a matter for the parties to the tenancy and their professional advisers. The ownership of a croft can be transferred but that was not a matter for the first defender. The first defender did not regard what was proposed here as a purchase because the first defender is not concerned with purchases. Its concern was with a proposed letting and the suitability of a proposed tenant. The Application had been referred to an assessor who had recommended a directed hearing (7/84 of process). In assessing the second defender as a prospective tenant the first defender had the reports from Mr Hunter of the Scottish Office Agriculture Environment and Fisheries Department, dated 3 June 1996, 7/127 and 7/128 of process. The first defender would have had regard to the report on the Acharacle meeting and nothing was highlighted in that report as being untrue but, without wishing to miscall anyone, it did not necessarily accept that everything said at a directed hearing was necessarily true. Mr MacAskill accepted in cross-examination that at no point had a transfer of ownership "emerged" but when asked what would have been his view had he appreciated that the proposed arrangement included a transfer of ownership he responded by saying that he still would have concentrated totally on the case before him, as presented by the parties.

[43] I see Mr MacAskill's evidence as consistent with the terms of the first defender's decision letter of 21 October 1996 (7/16 of process) which included:

"The Commission also noted the rental agreed between both parties for the croft tenancy. We recognised however, that the agreed sum to be payable over a staggered period is a fair assessment of compensation payable in respect of the tenancy of the croft".

[44] What I take from the whole evidence, reinforced and confirmed by that of Mr MacAskill is that the material elements of the agreement entered into by the late Mr MacColl and Mr MacGillivray on behalf of the second defender prior to submission of letting proposals would have been evident to any interested and reasonably informed person who attended the meeting on 11 September 1996 and certainly to those commissioners who constituted the quorum of the first defender on 17 October 1996. I do not consider it at all likely that they would have been misled by what the second defender said in answer to Mr Ritchie. With all respect to the second defender I doubt whether much weight would have been given to what she said in relation to the terms of the proposed tenancy. In relation to the specific answers given to Mr Ritchie which I have identified as being open to being regarded as inaccurate, I doubt whether anyone who knew Mr MacGillvray would have thought that he would have left the second defender to negotiate on her own behalf but in any event that fact, by itself, was not material. Neither was her opinion as to whether the rent was "fair", whatever precisely was meant by that. No one, certainly not the members of the first defender, would have believed that it was no more than coincidence that the payments totalled almost exactly £25,000.

[45] I accordingly conclude that the first defender's consent was not impetrated by fraud on the part of the second defender because nothing said by the second defender misled the first defender, or any other interested person. However, as I have already indicated, I further conclude that while she may have been guilty of inaccuracy, this is not a case where the second defender has been shown to have been guilty of fraudulent misrepresentation, either by reason of knowingly have made a false statement or by reason of having a made a statement without belief in its truth.

Issue (5): Personal Bar
[46] Sir Crispin submitted, under reference to Gatty v Maclaine 1921 SC (HL) 12 at 7 and William Grant & Sons Ltd v Glen Catrine Bonded Warehouse Ltd 2001 SC 901, that the pursuer should be held personally barred from presenting this action and the conclusion for reduction accordingly refused, first, because the late Mr MacColl had allowed the second defender to act to her prejudice on the basis that there was a lease in existence and, second, because the pursuer, as executor, in the knowledge that it was claimed that the second defender had a right to get title with the rent being offset against the ultimate purchase price, disputed the right to get a title, and enforced the obligations under the lease, by demanding arrears of rent under threat of removal proceedings. Sir Crispin emphasised that this was not a situation where either party had been induced to enter into the contract by the fraud of the other and so suffered loss and therefore was seeking reduction of the contract. Rather, both parties were equally involved in the representation to the first defender that this was a lease. To the knowledge of the late Mr MacColl, and on the faith of the agreement, the second defender had taken entry to the croft; bought the sheep; and re-seeded and re-fenced the croft. An initial payment of £6,000 was made on her behalf; as was a further £3,000 following a demand for payment of rent. The late Mr MacColl had known that the second defender was applying for planning permission and for grants to build a house on the croft, because notice had to be served on him as the landowner. As far as the pursuer himself was concerned, he knew that there was to be a lease to the second defender as he had attended the meeting and spoken at it. In evidence he said that he understood at the time that the second defender was to get a lease and that Allan MacGillivray was to buy. He said he was suspicious from the beginning. From his telephone conversation with Mr Seaton on 10 October 2000 he knew that there was an agreement to sell the croft to the MacGillivrays with the value of the rent being taken as the price and that it was almost implemented. He was told that if the family agreed to the agreement being implemented, then Mr Seaton could act in the executory, but if they were not willing to let the sale proceed then he could not act. It was not credible that the pursuer did not know of the agreement to transfer title to the second defender from this discussion with Mr Seaton. He confirmed to Mr MacPhee that he knew about the contract. Mr MacPhee when writing letters at the time is unlikely to have referred to a contract if that had not been discussed. The pursuer was not credible when he said in evidence that a contract was not discussed. The history had been explained by Mr Seaton in his letter of 1 June 2001 to the pursuer's solicitors, Messrs MacLeod & MacCallum, 7/67 of process. It simply cannot be true that the pursuer only found out about the "fraud" when he saw the Scottish Land Court application, 6/20 of process, which stated that the payments were part payments of the purchase price. The pursuer had all the information he needed, well before the Land Court application was lodged. He nevertheless confirmed to the croft on the basis that it was tenanted by the second defender; and demanded payment of arrears of rent of £10,571.40. He had objected to the second defender's grant application on grounds that arrears of rent had not been paid and thereafter confirmed to the Scottish Executive Rural Affairs Department that the arrears had been paid. He defended the application to fix a fair rent on the basis that the seven-year contractual period had not expired. On the faith of what she believed the pursuer to accept was a crofting tenancy the second defender had proceeded to build a house on the croft land.

[47] Mr Sandison recognised that in the event that the consent of the first defender was reduced and possession of the croft reverted to the pursuer, consideration would have to be given to an equitable adjustment as between the parties given the expenditure by and on behalf of the second defender and the benefits which had accrued and would accrue to the estate of the late Mr MacColl. However, that had nothing to do with the antecedent question as to whether the fraudulently induced consent should be reduced. Neither did the late Mr MacColl's involvement in deceiving the first defender mean that his executor could not found on the true position and thereby "repent" on his behalf. Notwithstanding the first defender's decision not to appear in the action there was a public interest in setting aside a consent given by a public body as a result of fraud. A consideration of purely private interests could not be conclusive: cf R (Burns) v County Court Judge of Tyrone [1961] NILR 167. The pursuer as executor had acted on the basis that there was a crofting tenancy. That was what he had initially believed. There was not a shred of evidence that he had so acted at a time when he knew what he now asserted was the true position. His solicitors had repeatedly asked to be provided with a copy of any written contract that the second defender or Allan MacGillivray had entered into with the late Mr MacColl. It had not been forthcoming.

[48] Given that my conclusion on the issue of fraudulent impetration of consent is in favour of the second defender the question of the pursuer being personally barred does not arise. It is nevertheless appropriate that I express my opinion. Putting it shortly, I agree with Mr Sandison's submissions on the point. As held by Lord Malcolm, the pursuer has title to sue. The action is however in respect of an alleged fraud perpetrated on a public body. Purely private interests are therefore not conclusive in resolving the questions raised. There may, as Mr Sandison suggested, be a place for repentance and I do not immediately see why someone who has been party to a fraudulent scheme which has induced a dupe to enter into a transaction to his prejudice should be prevented from attempting to undo the damage simply because a fellow participant in the fraud might suffer loss thereby. I do not view this as a case where considerations of personal bar as discussed in William Grant & Sons Ltd v Glen Catrine Bonded Warehouse Ltd supra have a place. During the late Mr MacColl's lifetime any alteration in the second defender's position must be taken to have been in reliance on such contract as she had entered into with him rather than anything else and in relation to the period after the pursuer had confirmed to the late Mr MacColl's estate, I accept his evidence that he initially believed that there was a lease and accordingly anything done by the second defender materially to alter her position during the period of the executory occurred when the pursuer was ignorant of what in the action he asserts to have been the true position.

Disposal
[49] I would propose to uphold the fourth and fifth pleas-in-law for the second defender and to repel the second plea-in-law for the pursuer. If anything arises in relation to these proposals parties may apply to have the case brought out by order. I will reserve all questions of expenses meantime.