Scottish Court of Session Decisions

At advising on 1st March 1962,—

LORD JUSTICE-CLERK (Thomson).—The pursuers who are the proprietors of certain heritable subjects entered into negotiations with the defenders with a view to the latter taking a lease of the premises. The pursuers say that in the course of these negotiations details of the subjects and date of entry were discussed and agreed. There was, it is said, no detailed discussion about the rent but the defenders' representative "informed the pursuers that the University desired to rent the subjects and that the University would pay a reasonable or fair market rent." The pursuers agreed to these proposals. It is further averred that no agreement was reached between the parties as to the duration of the lease. The pursuers go on to say that they gave notice to their tenants to vacate their premises and that they wrote to the defenders telling them that they had done so and asking them to confirm "the said agreement." The defenders' representative wrote in reply that he had noted that the pursuers had given notice of termination of tenancy and confirmed "that the University will take over the tenancy of the subjects as at Whitsunday next on terms and conditions to be agreed between the parties."

The next thing that happened was that there were negotiations as to what constituted a reasonable rent. The parties were unable to agree as the pursuers refused to accept the figure put forward by the defenders. The defenders thereupon refused to proceed further.

It was agreed that there are four cardinal elements in a lease, the parties, the subjects, the rent and the duration. One would have thought that it followed that there must be consensus in idem on each element before it could be said that the parties were at one. The pursuers' argument is, however, that provided that there is agreement as to the parties, the subjects and the rent, there is a specialty of the law of leases whereby the law will infer a lease for a year, even though agreement as to duration has not been reached. The appeal to this specialty depends on the pursuers establishing that there was at all events agreement as to parties, subjects and rent. In my opinion, there was no consensus in idem as to rent. Accordingly, the pursuers have not reached the stage at which they can invoke the specialty. Even if there may be circumstances in which parties can be said to have agreed on rent, if what they have done is to stipulate for a fair rent, or a reasonable rent, or a market rent, and to make it clear that they are agreed that the figure is to be fixed by the Court, or some other agreed machinery, that was not the situation here. It is clear from what is said that the reference to a "reasonable or fair market rent" was nothing more than a convenient formula to be used as a guide to the negotiations. The parties went on to attempt to negotiate such a rent, but the negotiations broke down. The pursuers had their figure and the defenders would not agree to it. They put forward in reply, first one figure, and then a higher figure, which was still substantially less than the pursuers' figures. The upshot was, as the pursuers' record itself puts it, "In the circumstances the pursuers could not accept the defenders' offer. The defenders thereupon … refused to proceed with the lease." I find it impossible on these averments to hold that there was consensus as to rent. It is the more difficult to reach any such conclusion as there was no agreement between the parties as to the duration of the lease, and duration must always be an element in agreeing rent. The pursuers cannot at this point invoke the doctrine that the lease must be taken to be for a year, as that doctrine begins to operate only when the rent has been agreed.

Accordingly, there being no consensus as to rent, there was no contract of lease, and the pursuers' case on this aspect is irrelevant.

Strictly speaking, that is sufficient for disposing of this branch of the case. However, as the specialty point was fully argued, and as it commended itself to the Sheriff-substitute, it is perhaps desirable that I should make some observations on it.

The justification for this argument is sought in what the Sheriff-substitute accurately describes as "a consistent expression of opinion" stretching from Craig's Ius Feudale down to Rankine "to the effect that where no ish is expressed the lease is to be deemed to last for a year." I do not propose to examine these statements in detail. The contrast and the difficulty is brought out clearly by Stair, II, ix, 16, where he says "ordinary tacks must contain an express and terminate endurance, otherwise they are null, not only as to singular successors but even as to the setter and his heirs, because they are not constituted habili modo; and therefore, if they have no time, they last but for a year; and if they have no determinate time of ish, they last no longer"; just what reprieves a lease, which is silent as to term of possession, is not explained by any of the authors nor is any difficulty hinted at. This is the more surprising as the antinomy is obvious. The defenders say that the decisive matter is actual possession. This is understandable. If the parties have gone to the length of the lessor's ceding and the lessee's accepting possession without stating any term of endurance, they have accepted the respective obligations of landlord and tenant for some period, and, in these circumstances, it is right that the law should imply a term. For an agricultural lease nature herself lays down an annual cycle, and it is clearly to the interests of both parties that the farm should be worked. The practical advantages of some such exception are obvious. Its theoretical justification is that in such a situation, where possession has been conceded and accepted, neither party can well say that he has not agreed to enter into the relationship of landlord and tenant to some effect and to some extent. The parties by their conduct have unequivocally shown that they have agreed on some period of possession. There is, as it were, consensus that there is to be a period although its duration has not been agreed.

The defenders say that it is only in such circumstances that the exception operates, but, of course, in the present case, as there has been no possession, the pursuers have to find some other basis. Pressed to its logical extreme, the pursuers' argument would lead to remarkable results.

It would appear to involve that, if the parties sitting round the negotiating table agreed as to subjects and rent, and then broke off negotiations because one was prepared to agree only to a period of five years, while the other refused to entertain any period but ten, they had bound themselves to a year. Even counsel for the pursuers rather boggled at this. The situation, in his view, was rather this. The parties were agreeable to a lease of the subjects and to the rent and impliedly to the defenders' possession for a period the duration of which was not discussed, therefore, by operation of law, the pursuers were entitled to possession at any rate for a year. Even in this modified form, the proposition remains remarkable and would introduce a new terror into negotiations. But even on that modified presentment, in the absence of possession as showing consensus, there must have been consensus in the negotiations not only as to the parties, subjects and rent, but as to the acceptance of the mutual relationship of landlord and tenant on the footing that there was to be possession whether its duration was explicitly defined or not. In that way, there can be said to be a "lease," although the precise length of time for which it is to last is not explicitly agreed to.

The averments here show that in the present case this stage had never been reached. There is absolutely nothing to show that the defenders ever contemplated, much less that they agreed to, obtaining possession for any period whatever. I find it quite impossible to hold that, in the absence of express agreement to take possession or implied agreement evidenced by actual taking of possession, the law will compel a prospective tenant, who has either disagreed with his prospective landlord as to the duration of the lease or has not reached the stage of discussing that topic, to take possession for a year. I read the exception set out by the institutional writers as a practical step to meet an emergency situation arising where there is agreement that the tenant is to have possession. What the exception does is to put a time limit on that possession. I cannot read it as intended to impose possession where there has been no agreement or, worse still, disagreement as to whether there is to be possession at all.

[His Lordship then dealt with another matter with which this report is not concerned.]

LORD PATRICK .—I agree with your Lordship that the averments of the pursuers show that, in this case, the relationship of landlord and tenant was never established between them and the defenders. Possession was never given and taken. No agreement was reached as to the duration of the lease about which they were negotiating. From the averments it would rather appear that they had in view a lease for a number of years. As to the rent, the representative of the defenders said that they would pay a reasonable or fair market rent. No machinery was provided by which that rent could be assessed, and indeed it is difficult to see how it could be assessed until agreement was reached as to the duration of the lease. The rent for a short lease is seldom the same as that for a long one. Nor did the parties intend that the rent should be assessed by some outside agency, since they proceeded to attempt to fix it by negotiation. They were unable to agree, and the defenders put an end to the project of a lease.

The parties, the subjects, the duration, and the rent are the four essentials of a lease. This is not a case where only one of the essentials, the duration, is uncertain. It is a case where the parties have failed to agree upon two of the essentials which are interlinked, the amount of rent being influenced by the duration. In these circumstances, there was, in my view, no concluded contract of lease.

[His Lordship then dealt with a matter with which this report is not concerned.]

LORD MACKINTOSH .—[After dealing with other matters with which this report is not concerned, his Lordship continued]—

The Sheriff-substitute's allowance of proof covered the whole of the averments on record, his view being that the pursuers had made averments of a valid contract of lease which were sufficiently relevant to allow of their being remitted to a proof before answer. On this part of the case, I am in disagreement with the learned Sheriff-substitute, for I think that the pursuers' averments about the lease, i.e., their averments in condescendences 2 and 3, show that no binding contract of lease was ever entered into between the parties, because agreement was not reached, either on the rent to be paid, or on the duration of the let. The rent and the duration are cardinal parts, or essentials as they are sometimes called, of any lease, and, unless there be agreement between the parties on both or either of these essentials, there can be no binding lease, at any rate where matters are entire and no possession of the subjects has been given or taken. So far as the matter of the rent in the present case is concerned, the pursuers aver that they instructed certain property valuers "to negotiate a reasonable rent with the defenders." There is no averment that the defenders ever agreed to pay any negotiated reasonable rent, or that any standard was ever agreed to upon which such a rent could be fixed. On the contrary, the parties in their negotiations about rent were, and remained to the end, completely at variance as to what the rent for these subjects should be, and it was because the parties could not agree on the rent that the negotiations for this lease ultimately broke down. Furthermore, the amount of the rent necessarily would depend to a material extent on what was to be the duration of the lease, and as the pursuers aver in condescendence 2 that "no agreement was reached between the parties as to the duration of the said lease" it is not surprising that the parties never reached any consensus in idem on the matter of the rent to be paid for the subjects. That being so, it seems to me quite clear that in the matter of this lease the parties never got beyond the stage of negotiation and that no binding contract of lease was ever entered into between them. In these circumstances, I think that the learned Sheriff-substitute erred in remitting the pursuers' averments about the lease, i.e., those in condescendences 2 and 3, to probation. In my opinion, these averments are wholly irrelevant and the action should now be dismissed quoad the third, fourth and fifth craves of the writ, i.e., quoad the pursuers' alternative or secondary case.

The foregoing is enough for the decision of this case, and I do not find it necessary to express a concluded opinion on the question which was much canvassed in the debate before us, namely, whether in a verbal lease, where no ish has been agreed upon between the parties, the law will in all cases imply that the lease, if otherwise sufficient, is a valid lease for a year. Suffice it to say, that no case was brought to our notice where a lease which had no express term of duration was upheld as valid even for a year except where the relationship of landlord and tenant already existed, i.e., where the tenant was already in possession. As at present advised, I hold the view that evidence of intention can be allowed in to make good the want of an ish in a verbal lease (as was done in the old case of Redpath v. White ) only where the tenant had already entered into possession, but, as already stated, I do not find it necessary in this case to express any concluded opinion on that matter.

LORD STRACHAN .—[After dealing with a matter with which this report is not concerned, his Lordship continued]—

In regard to the pursuers' alternative case I am of opinion that, for the reasons stated by your Lordships, the pursuers have not relevantly averred that the parties reached agreement as to the rent to be paid under the proposed lease. It has been authoritatively recognised that the rent is one of the cardinal parts of the contract of lease, and where parties have failed to agree upon the rent it may be that that failure is by itself sufficient ground for holding that there was no concluded contract of lease, particularly in a case where no possession has followed. In the present case, however, I do not find it necessary to rest my conclusion upon that one ground alone. In considering whether the pursuers' alternative case is relevant, I prefer to proceed upon their averments as a whole. In particular, I think that it is necessary to bear in mind what has been averred as to the duration of the alleged lease. In condescendence 2 the pursuers have expressly averred that "No agreement was reached between the parties as to the duration of the said lease." That is a further failure to agree upon a cardinal part of the contract, for it is equally well recognised that the duration of the contract is a cardinal part of a lease.

A further point of importance in the pursuers' case on record is the absence of any averment of actings by the parties such as would indicate a concluded intention to enter into the relationship of landlord and tenant. In many cases the ceding and taking of possession has indicated such an intention, but there is nothing like that in this case.

The pursuers' averments therefore disclose (1) that there was no agreement as to rent, (2) that there was no agreement as to duration, and (3) that no possession followed upon the communings of parties. In those circumstances, I am clearly of opinion that there are no relevant averments of a concluded contract of lease at all, and I think that the alternative case should be dismissed at this stage.

The Sheriff-substitute has held that in regard to the duration of the alleged lease "the old rule" must be followed. That so-called rule is expressed in Professor Rankine's book on Leases in the following terms:—

"When no period is specified the rule has been said to be to construe the term as being for one year only, or, if the lease implies a longer duration, then the shortest that the words admit of."

Much of the argument in the present case centred on that rule and especially on the question whether it is applicable only in cases where possession has followed. I find it unnecessary to decide that latter question for, in my opinion, the rule is not applicable at all in the present case. From the way in which it is expressed in Rankine and in the older writers, it seems plain that it applies only where there is a concluded intention to enter into the relationship of landlord and tenant. There must be a lease. If there has been no concluded intention to enter into a lease it would be contrary to all principles to imply an intention that there was to be a lease for one year. It is to be noted that Professor Rankine's book (at p. 115) also contains the following sentence:—

"The absence of an ish, may, however, have another result; it may go far to show that the transaction was never intended as an assurance, but only as a revocable lease or licence."

In the present case, the failure to agree upon the duration when taken along with the other features to which I have already referred simply shows that there was no concluded intention to enter upon a lease at all, and, in my opinion, there is therefore no room for the application of the rule referred to.