Richard Walter Morrison-low V. The Executors Of Thomas Herbert Paterson
| Jurisdiction | Scotland |
| Judge | Lord Brodie,Lord Bonomy,Lord Justice Clerk |
| Judgment Date | 09 February 2012 |
| Neutral Citation | [2012] CSIH 10 |
| Court | Court of Session |
| Docket Number | XA82/10 |
| Published date | 09 February 2012 |
| Date | 09 February 2012 |
| SECOND DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Justice Clerk Lord Bonomy Lord Brodie | [2012] CSIH 10 XA82/10 OPINION OF THE LORD JUSTICE CLERK In the appeal by RICHARD WALTER MORRISON-LOW Appellant; against THE EXECUTORS OF THOMAS HERBERT PATERSON Respondents: _______ |
Alt: Sir Crispin Agnew of Lochnaw QC; Balfour & Manson
9 February 2012
CONTENTS
| Paragraph | ||
| I | INTRODUCTION | 1 |
| II | THE RENT REVIEW LEGISLATION | 4 |
| The history of the rent review provisions | 4 | |
| Section 13 before 2003 Act | 9 | |
| Rent assessment before the 2003 Act | 10 | |
| 12 | ||
| Section 13 as amended by the 2003 Act | 15 | |
| Rent assessment since the 2003 Act | 17 | |
| III | THE SINGLE FARM PAYMENT | 18 |
| IV | THE PROCEEDINGS IN THE LAND COURT | 22 |
| The evidence of comparables | 22 | |
| The Land Court's findings in fact regarding the SFP | 27 | |
| The Land Court's conclusions on the SFP issue | 32 | |
| The Land Court's conclusions on the rental value | 38 | |
| Open market lettings | 39 | |
| Rents agreed with sitting tenants | 40 | |
| Budgets and potential earning capacity | 43 | |
| V | THE APPEAL AND THE CROSS APPEAL | 44 |
| VI | CONCLUSIONS | 46 |
| Introduction | 46 | |
| The open market basis of valuation | 48 | |
| Problems of interpretation | 52 | |
| Distortion | 53 | |
| Best evidence | 56 | |
| Open market lettings of 1991 Act tenancies | 56 | |
| Meaning of "agricultural holding" | 57 | |
| Conclusions on best evidence | 63 | |
| The Land Court's interpretation of the evidence | 67 | |
| SFP entitlement | 70 | |
| The Land Court's general approach | 70 | |
| The primacy of the open market test | 78 | |
| Near relative successor tenants | 87 | |
| European Court of Justice | 88 | |
| Marriage value | 90 | |
| Scarcity | 96 | |
| Is the result realistic? | 99 | |
| VII | PROPOSED REFERENCE TO THE EUROPEAN COURT | 101 |
| VIII | THE CROSS APPEAL | 102 |
| Ground 1 | 102 | |
| Grounds 2 and 3 | 103 | |
| Ground 4 | 104 | |
| Ground 5 | 105 | |
| IX | DISPOSAL | 106 |
____________
I INTRODUCTION
[1] This is an appeal from an Order of the Scottish Land Court dated 2 June 2010 made under section 13 of the Agricultural Holdings (Scotland) Act 1991 (the 1991 Act), as amended. By this Order the Land Court determined the rent that was to be payable for Moonzie Farm, Cupar (the holding) as from 4 December 2008 (the review date). The appellant and the respondents are respectively the landlord and the tenants of the holding.
[2] The annual rent at the review date was £22,000. The landlord proposed that the reviewed rent should be £32,000. The tenants proposed that it should be £10,266.74. The Land Court determined that it should be £20,800.
[3] The difference between the parties' figures relates for the most part to a controversy as to the relevance of the Single Farm Payment (SFP) in the calculation of the rent. This point is the basis of the landlord's appeal. The tenants have cross-appealed on a number of more detailed valuation points.
II THE RENT REVIEW LEGISLATION
The history of the rent review provisions
[4] On the conferment of security of tenure on the tenants of agricultural holdings by the Agriculture (Scotland) Act 1948 there had to be a mechanism for periodic rent reviews. The relevant provisions of the 1948 Act, re-enacted in the consolidating Agricultural Holdings (Scotland) Act 1949 (the 1949 Act), required that a rent review, when duly called for by either party, had to be carried out by an arbiter. The arbiter's statutory remit was to determine "what rent should be payable in respect of the holding" (1949 Act, s 7). In making that determination the arbiter had a wide discretion that entitled him to take into account the sitting tenant factor (Guthe v Broatch, 1956 SC 132) and the tenant's personal circumstances (eg Crown Estate Commrs v Gunn, 1961 SLCR App 173).
[5] The Agriculture Act 1958 (the 1958 Act) abolished this vague criterion and replaced it with that of open market value. It provided that a reviewed rent was to be "the rent at which having regard to the terms of the tenancy (other than those relating to rent), the holding might reasonably be expected to be let in the open market by a willing landlord to a willing tenant," there being disregarded in addition to certain specific matters "any effect on rent of the fact that the tenant who is a party to the arbitration is in occupation of the holding" (1958 Act, s 2).
[6] The scarcity of open market lettings caused by security of tenure and the increasing competition for such tenancies as were offered on the open market, even on a limited partnership basis (infra), resulted in the notorious distortion of open market values that affected rent reviews throughout the 1970s and the early 1980s, to the disadvantage of sitting tenants (eg Kilmarnock Estates and Tenants, 1977 SLCR App 141).
[7] The Agricultural Holdings (Amendment) (Scotland) Act 1983 (the 1983 Act) mitigated the open market test by providing that at a rent review the rent should be assessed by reference to a hypothetical open market that was not distorted by scarcity of lets or other factors. This amended provision was continued in section 13 of the consolidating 1991 Act.
[8] Section 13 was amended significantly by the Agricultural Holdings (Scotland) Act 2003 (the 2003 Act) (s 63; Sched 1, para 15).
Section 13 before the 2003 Act
[9] Since some of the problems in this case result from the draftsmanship of the 2003 Act, I quote the relevant provisions of section 13 as it stood on the eve of the 2003 Act.
"13(1) ... the landlord or the tenant of an agricultural holding may, whether the tenancy was created before or after the commencement of this Act, by notice in writing served on the other party, demand a reference to arbitration of the question what rent should be payable in respect of the holding as from the next day after the date of the notice on which the tenancy could have been terminated by notice to quit (or notice of intention to quit) given on that date, and the matter shall be referred accordingly.
(2) On a reference under subsection (1) above, the arbiter shall determine, in accordance with subsections (3) to (7) below, the rent properly payable in respect of the holding as from the 'next day' mentioned in subsection (1) above.
(3) For the purposes of this section the rent properly payable in respect of a holding shall normally be the rent at which, having regard to the terms of the tenancy (other than those relating to rent), the holding might reasonably be expected to be let in the open market by a willing landlord to a willing tenant, there being disregarded (in addition to the matters referred to in subsection (5) below) any effect on rent of the fact that the tenant is in occupation of the holding.
(4) Where the evidence available to the arbiter is in his opinion insufficient to enable him to determine the rent properly payable or he is of the view that the open market for rents of comparable subjects in the surrounding area is distorted by scarcity of lets or by other factors, the rent properly payable for the purposes of this section shall be the rent which he would expect to be paid, in a market which was not affected by such distortion, having particular regard to the following -
(a) information about open market rents of comparable subjects
outside the surrounding area;
(b) the entire range of offers made as regards any lease of subjects which are comparable after regard is had to the terms of that lease;
(c) sitting tenants' rents fixed by agreement for subjects in the surrounding area which are comparable after regard is had to any element attributable to goodwill between landlord and tenant or to similar considerations; and
(d) the current economic conditions in the relevant sector of agriculture ... "
Rent assessment before the 2003 Act
[10] By the 1980s the open market letting of agricultural holdings to individuals was almost unheard of. Occasionally, leases were granted to participating partnerships in which the landlord or his nominee had a direct interest (eg Buccleuch Estates and Kennedy 1986 SLCR 1); but in almost every case the lease was granted to a limited partnership, usually after strong competition.
[11] The partnership arrangement, whether limited or participating, in effect circumvented security of tenure and gave the landlord the assurance that the tenancy would last no longer than the term of the partnership, or of any period of tacit relocation that might supervene (MacFarlane v Falfield Investments Ltd 1998 SC 14). Nevertheless such a letting was a true letting of an agricultural holding. When it was concluded in open market competition, the rent was potentially a relevant indicator of open market value in a sitting-tenant rent review (Buccleuch Estates and Kennedy, supra), subject always to a possible adjustment for inter alia the less advantageous position of the farming partner under a partnership arrangement.
[12] One of the primary objectives of the 2003 Act was to put the tenanted sector of Scottish agriculture on a new footing by making it possible for landlords to let agricultural land on two forms of limited duration tenancy as well as on the traditional secure tenancy, now known as "a 1991 Act tenancy." The new forms of tenancy made it possible for landlords to let for fixed periods without having to resort to the limited partnership contrivance.
[13] The 2003 Act dealt with a recurring source of trouble where claims were made to 1991 Act tenancies in cases where the landlord had granted a grazing let (eg Bell v Inkersall Investments Ltd 2006 SC 507; Loudon v Hamilton 2011 SC 255) or had entered into a written lease from year to year when he was unaware of the legal consequences. It provided that a 1991 Act tenancy could be created only if the parties entered into it in writing before its...
To continue reading
Request your trial
-
Alastair Eric Hotson Salvesen V. John Riddell+andrew Riddell+the Lord Advocate
...consequences that I have described in this and other cases and need not repeat (cf paras [7]-[8] supra; Morrison-Low v Paterson's Exrs, 2012 CSIH 10; Loudon v Hamilton 2011 SC 255, at paras [12]-[15]), and is exposed to the tenant's contingent right to buy. [82] In this way the Parliament c......
-
Anthony Tortolano V. Ogilvie Construction Limited
...injury litigation between him and the defenders. SECOND DIVISION, INNER HOUSE, COURT OF SESSION Lord Justice Clerk Lady Smith Lord McEwan [2012] CSIH 10 PD736/11 OPINION OF LORD McEWAN in the reclaiming motion ANTHONY STEPHEN TORTOLANO Pursuer and Reclaimer; against OGILVIE CONSTRUCTION LIM......
-
William John Auchnie+henry Auchnie V. Duncan Henry James Auchnie+george Allan Auchnie
...the history of the introduction of the single farm payment entitlements scheme and relied heavily on the case of Morrison-Low v Paterson 2012 S.C. 373, [2012] CSIH 10 and, in particular, the judgement therein of Lord Justice-Clerk Gill (as he then was). He also referred to the case of Simps......