Scottish Court of Session Decisions

This is a petition for judicial review of a decision by the Secretary of State for Scotland dated 28 July 1998 to appoint an arbiter in terms of section 62 of the Agricultural Holdings (Scotland) Act 1991. The petitioners are the heritable proprietors of an area of land known as Montreathmont Moor in Angus. In April 1991 they granted a lease of those subjects to a limited partnership named Montreathmont Farms. A contract of limited partnership was entered into dated 4 and 19 August 1992. In terms of said contract the Earl of Southesk was the limited partner and a company D Geddes (Farms) Limited ("Geddes") was the general partner. By letter dated 5 November 1996 the agent for the limited partner intimated to Geddes that the partnership was to be dissolved on 28 November 1997. By letter dated 26 November 1997 Geddes intimated a claim on behalf of the limited partnership as tenant in accordance with the provisions of the 1991 Act and acknowledged that 28 November 1997 was the date of termination of the lease. The limited partnership ceased to occupy the subjects of let on 28 November 1997. It was submitted and not disputed that the lease came to an end on the dissolution of the partnership as there was then no corporate persona to hold the lease.

The case before me concerned the said letter intimating a claim on behalf of the tenant for compensation in respect of improvements made during the period of let. Section 62 of the 1991 Act provides as follows:-

Counsel for the petitioners submitted that the scheme laid down by section 62 envisaged that determination of any disputed claim for compensation for improvements by a tenant should be by arbitration. Such a resolution need not be resorted to if within four months after termination of the tenancy the claim is settled by the parties. (S 62(4). That four month period may be extended by two successive periods of two months, provided that application is made to the Secretary of State within the four or two month periods. In this case only the four month period was relevant and no such application had been made within that time limit. Counsel further submitted that if the claim was not settled within four months then it ceased to be enforceable unless either (a) within one month after the expiry of that term or (b) within such longer term as the Secretary of State might in special circumstances allow either (i) an arbiter had been appointed by agreement or (ii) an application for such appointment had been made to the Secretary of State.

In the present case, if the lease terminated on 28 November 1997 then the four month period expired on 28 March 1998. The claim had not been settled by then. Therefore the application for the appointment of an arbiter should have been made before 28 April 1998. No arbiter was appointed by agreement. There was no dispute that if the case terminated in November 1997 no application for appointment of an arbiter was made by 28 April 1998. Therefore, the only basis for such an application having been made and entertained was that the Secretary of State considered there were "special circumstances" which warranted the extension of the one month period.

The first application to the Secretary of State appeared in a letter from a solicitor for Geddes dated 28 May 1998 (No 6/3 of process). Prior to that the tenants' claim had been the subject of discussion between the parties and by 6 May the landlord had informed the solicitor for the tenants that the claim was no longer enforceable since no application had been made to the Secretary of State by 28 April. The letter of 28 May (No 6/3 of process) was the first step taken to retrieve the position so far as the tenants' claim was concerned. In that letter the proposition was advanced for the first time that the lease had not expired on 28 November 1997 but on 30 March 1998. Certain arguments were advanced in support of that proposition. In addition, it was submitted in the letter that if that proposition was erroneous "special circumstances" existed as to why an arbiter should be appointed out of time. No specification of these "special circumstances" was given.

In the event, the Secretary of State appeared to have dealt with the matter as if the lease did terminate on 28 November. His answers to the petition make that clear. It is further clear he made his decision to appoint an arbiter not on the argument as to the later date of termination but on the basis that "special circumstances" for extending the period provided for in the statute existed. On that basis he exercised his discretion. In any event, it was submitted that the actions of the tenants prior to the letter of 28 May were entirely consistent with the tenancy having terminated on 28 November. In particular, the tenants actually quit the subjects on that date. It was suggested that the argument expressed in the letter of 28 May was simply an attempt to get out of the consequences of having allowed the relevant time periods to have elapsed. The relevant letter communicating the Secretary of State's decision to appoint an arbiter in terms of his discretion under section 62(5) was dated 28 July 1998, (No 6/5 of process). It is in the following terms:-

Counsel for the petitioners submitted that on a proper reading of that letter the Secretary of State must have accepted that the tenancy expired in November 1997. Otherwise he would have had no right to exercise his discretion under Section 62(5). He further submitted that the Secretary of State failed to keep separate the two issues of whether the four month period had actually elapsed and whether to exercise his discretion. Further, he referred in the context of "special circumstances" to "exchanges between the parties". That, submitted counsel was an irrelevant consideration. The scheme of section 62 envisaged that negotiations between the parties would take place and, indeed, the four month period was provided for that purpose. It appeared that the "special" circumstance was that the application was only one month late. In that context, counsel submitted that mere delay could not constitute "special circumstances" since the need to consider such a question only would arise if there had been delay. There must be a specific reason for the delay, such as illness of a party, to bring that part of the section into play. No explanation for the delay was given. It followed that the fact that that application was late and the fact that it followed negotiations were not "special" circumstances. They were ordinary circumstances which would follow every such application. In these circumstances, therefore, the Secretary of State misdirected himself and his decision should be reduced and the remedies sought in Article 4 of the Petition should be granted.

Counsel for the Secretary of State advanced first an argument related to a distinction in the petition between the Secretary of State's decision that "special circumstances" existed and his decision to appoint an arbiter. In my opinion, nothing turns on such a distinction as the one decision would necessarily follow the other. Counsel then went on to outline the scheme of the 1991 Act and in particular the role of the Secretary of State in that scheme, under reference to sections 61 and 62 and the case of Padfield v Ministry of Agriculture 1968 AC 997.

In the end of the day, his submission came to be, and it was not disputed that this was the real question in the case, whether there was sufficient material before the Secretary of State to entitle him to conclude that there were "special circumstances" such as to entitle him to exercise his discretion in the way that he did. In this connection it was pointed out that from various sources the Secretary of State had before him various documents prior to coming to his decision on 28 July. He had sight of Nos 7/1 to 7/8 of process which disclosed the whole history of the actings of the parties in this matter. It was submitted that such material informed him (a) that notice in terms of section 62(2) of the Act had been given, (b) that a detailed and complex claim had been submitted by the tenants at an early stage, (c) that such claim related to the conversion of a one-time military installation into a viable arable unit, (d) that the landlord and tenant had entered into protracted negotiations by correspondence over the issues of valuation, (e) that any delay in making application in terms of section 62(5) was de minimis, being only one month from the last day of the four month period, (f) that no prejudice was occasional thereby to the landlord and (g) that a dispute had in fact arisen as to the correct date of termination of the lease in law. In these circumstances, bearing in mind the policy of the Act there was a sound case for finding "special circumstances". The actings of the parties had at all times been designed to make expedition and the tenant's claim could not be said to be "stale". Further counsel submitted that it was too restricted a view to look at the letter of the Secretary of State without reference to all the material be had before him as above detailed. It was for the Secretary of State to exercise his judgment in the matter. He is the official who appoints such arbiters regularly and his is the expertise in the field.

Counsel for the tenants adopted the arguments presented on behalf of the Secretary of State. She emphasised the point that this was not a stale claim and pointed out that from the material available to the Secretary of State it was apparent that the parties were in fact still in active negotiations on the matter as late as 6 May, that is after the expiry of the relevant period. She also emphasised, in that context, the fact that this was an unusually large and detailed claim which would in the nature of things take time to resolve.

The decision review of which is sought is a decision of the Secretary of State to appoint an arbiter to settle a dispute between landlord and tenant as to a claim for improvements made during the tenancy. Such an appointment was made by the Secretary of State outwith the normal time limits provided by the Act of 1991. The Secretary of State is empowered with a discretion to make such an appointment out of time only of he takes the view that "special circumstances" exist for so doing. That was his view. As I have said, in my opinion, nothing turns on any distinction between his decision that "special circumstances" existed and his decision to exercise his discretion to make the appointment.

After discussion, the question in the case came to be whether there was sufficient material before the Secretary of State to entitle him to decide that there were "special circumstances". In my opinion it is for the petitioners to establish that the Secretary of State had insufficient material before him to entitle him so to hold. It is further my opinion that they had failed to do so. They relied solely on the terms of the letter communicating the Secretary of State's decision without reference to any other material that had been submitted to him. Bearing in mind that it is not my function to replace the decision of the Secretary of State with my own, I take the view that he was entitled to find that the circumstances surrounding the application made to him were sufficiently "special" in the proper sense of the word to enable him to exercise his discretion in the way that he did. In taking that view, I have had regard not just to the

terms of the letter communication his decision but to all the information which he had concerning the application. In particular, he had before him the documents referred to by counsel which disclosed the nature of the claim made by the tenants, the extent of the negotiations and the timescale involved. He was also aware that by the time that the application was made to him a dispute had arisen between the parties as to the proper date of termination of the base.

I therefore sustain the pleas-in-law for the respondents and refuse the prayer of the petition.