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Cite as: 2001 SCLR 766, [2001] ScotCS 129

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OUTER HOUSE, COURT OF SESSION

A545/01

OPINION OF LORD GILL

in the cause

ROBERT JAMES NICOLSON

Pursuer;

against

TAIT & PETERSON and

GEORGE SHOLTO PETERSON and ERIC SPENCE PETERSON, as the whole partners thereof and as individuals

Defenders:

________________

Pursuer: Anderson, Q.C.; Balfour & Manson, (for Neil Risk, Solicitor, Lerwick)

Defenders: Hanretty; Dundas & Wilson C.S.

29 May 2001

I Introduction

[1] The pursuer is a crofter in Shetland. He sues a firm of solicitors for damages on the grounds of breach of contract and of negligence. The point that I have to decide is whether the pursuer's claim, if he had one, has been extinguished by prescription under section 7 of the Prescription and Limitation (Scotland) Act 1973, as amended.

II The history of events

[2] The following is a summary of the pursuer's averments supplemented by details that are set out in the documents to which both counsel have referred. Although numerous averments of the pursuer are said by the defenders to be not known and not admitted or are covered by general denials, I understand from counsel for the defenders that for the most part this summary does not raise any disputed factual point of any significance. There is however one factual point averred by the pursuer which may be contentious, namely the date on which the pursuer regained the use of the land for grazing.

The common grazings

[3] The pursuer's croft is in the township of Toft, Delting. Before 1976 he held as a pertinent of his croft a one-third share in an area of 81.5 acres of grazings that formed part of the scattald of the township. The landlords of the grazings were Mr Charles G C Laurenson and Mr T J Hoseason-Brown. As it happens, one of the other two shareholders in the grazings was Mr Laurenson; but neither party has taken any point about that in the present action.

The proposal for temporary development on the grazings

[4] In 1976 BP Petroleum Development Ltd (BP) and Shell UK Ltd (Shell) were constructing the Sullom Voe oil terminal at Calback Ness, Shetland. They proposed to build a temporary village for construction workers on the grazings. Shetland Islands Council offered to buy the grazings from the landlords with a view to letting the land to BP or to Shell.

[5] The essentials of the agreement between the Council and the landlords must have been concluded and acted upon some months before the formal agreement was entered into because although the Council's formal offer was dated 10 March 1977, it provided for entry and vacant possession as at 28 November 1976. It was a condition of the offer that the landlords would apply to the Scottish Land Court for resumption of the land for the purpose of its being used as a temporary village and that the three crofters having interests in the grazings would grant discharges upon receipt by them of specified sums of money. The pursuer avers that these sums were to be payable for the "suspension" of their grazing rights for the duration of the proposed lease. The offer further provided for the eventual re-purchase by the landlords of such parts of the subjects as were relinquished by the tenants under the proposed lease, with the exception of an area extending to a maximum of five acres. The land to be re-purchased was to be valued at agricultural use value, there being disregarded the planning permission for the construction of the temporary village, any extension of such planning permission, any increase in the agricultural use value as a consequence of the granting of the planning permission and any increase in agricultural use value as a consequence of the reinstatement works. The offer further provided that if the landlords exercised their option to re-purchase the land they were to be bound jointly to recreate in favour of the three crofters grazing rights in respect of the land, under exception of the five acres area, on terms not materially different from the grazing rights enjoyed by them at the date of the missives. The pursuer's pleadings imply that the landlords accepted the offer in these terms.

The resumption

[6] On 17 December 1976 the landlords applied to the Land Court for resumption of the grazings with effect from Martinmas 1976. The pursuer and the other two crofters formally consented to the resumption on certain conditions relating to the future use of the land.

[7] The defenders acted as solicitors for both the landlords and the pursuer in relation to the resumption application.

[8] The Land Court dealt with the application without a hearing. On 16 March 1978 a Divisional Court authorised the resumption, subject to the crofters' conditions and with effect from Martinmas 1976, for the purpose of the landlords' selling the land to the Council so that the Council could lease it for the construction of the temporary village. The Court found the crofter respondents entitled to the agreed sums in full satisfaction of any claims that they had for compensation under the Crofters (Scotland) Act 1955 and for any shares in the value of the resumed land to which they were entitled under the Crofting Reform (Scotland) Act 1976; and it ordained the crofters, subject to those conditions and to payment of the agreed sums, to surrender the land to the landlords. In the pursuer's case the agreed sum was £2500.

[9] Neither party has raised any question as to the validity of the Court's backdating the order.

[10] The conditions on which the resumption was authorised included the following:

"... (Secundo) (1) that the said lease [sc the proposed lease to BP or to Shell] shall endure for a period not extending beyond the Thirtieth day of September, Nineteen hundred and Eighty-four; (2) on relinquishment of part or parts of said subjects by the said lessees, the said subjects shall be re-established for grazing purposes in accordance with seeding recommendations by the North of Scotland College of Agriculture, and fencing recommendations by the Department of Agriculture and Fisheries for Scotland, and let to the said respondents in the same pro indiviso proportions as at present enjoyed; and (3) that eventually the whole subjects will be so returned to grazing purposes with the exception of an area or areas of ground extending in aggregate to a maximum of five acres, said excepted area or areas retained by Shetland Islands Council or their successors as heritable proprietors of the said subjects as one unit and to be situated as close as practicable to the A968 Firth/Toft road; ... "

The terms of condition (Secundo) suggest that both the crofters and the Court contemplated that, except in relation to the specified five acres, the resumption would be only temporary.

The reconveyance of the land and the removal of the pursuer

[11] I infer that the Council thereafter granted a formal lease of the land to BP in accordance with the understanding on which the resumption had been authorised.

[12] According to the pursuer's averments, BP relinquished the subjects on or about 30 September 1984. The Council thereafter reinstated the land to grazings and reconveyed it to the former landlords in accordance with the missives of 1977. In about 1985 the pursuer recommenced the use of the land for grazing. These averments are said by the defenders to be not known and not admitted. The defenders offer no alternative account of this part of the history.

[13] In or about September 1992 one of the proprietors of the land, Mr Hoseason-Brown, raised a summary cause action for removal of the pursuer from the land. The action was sisted to enable the pursuer to apply to the Land Court for enforcement of conditions (Secundo) (2) and (3) of the order of 16 March 1978. The pursuer lodged the appropriate motion with the Land Court on 30 August 1993. On 29 November 1993 the other landowner, Mr Laurenson, lodged a motion with the Land Court for leave to move for a re-hearing of the resumption application on the grounds that the 1978 order had proceeded on essential error; that Mr Hoseason-Brown had without reasonable excuse failed substantially to fulfil or comply with conditions imposed in Mr Laurenson's interest; and that owing to a change of circumstances the 1978 order was no longer appropriate.

[14] These motions were heard together by the Full Court. On 6 July 1994 the Full Court issued an order refusing the pursuer's motion, granting Mr Laurenson's motion for leave to move for a re-hearing but refusing a re-hearing, and disposing of certain other matters. In a Note annexed to that order the Court held inter alia that conditions (Secundo) (2) and (3) of the 1978 order were ultra vires and invalid (cf Nicolson v Hoseason-Brown and Anor., 1994 SLCR 74).

[15] The Court's reasons for holding as it did were that after the resumption the land ceased to be subject to the Crofters Acts and therefore that it was not open to the Court to impose conditions that purported to continue its jurisdiction over the land beyond that date. Since it was outwith the power of the Court in 1978 to impose the conditions, it was outwith its power in 1994 to enforce them. The Court did not find it necessary to decide whether or not the intention underlying the conditions was that the grazings rights to which the crofters were to be restored should be rights governed by the Crofters Acts.

[16] In the light of the 1994 order the pursuer withdrew his defences to Mr Hoseason-Brown's action.

The raising of this action

[17] The pursuer thereafter raised this action. In taking the plea of prescription, the defenders refer to the date of signeting as being the date on which the action was raised; but counsel for the defenders accepts that for the purposes of the plea of prescription the relevant date is the date of citation. Counsel agree that that date is 25 May 1998.

III The grounds of action

[18] The material averments are as follows:

"COND. 6 The clear intention of the proprietors of said subjects and also of the crofters, including the pursuer, was that upon reinstatement by British Petroleum Development Ltd or Shell UK Ltd, after their purpose had been served, the grazing rights would be recreated as pertinents of the crofts. The effect of the said Order of 16 March 1978 was to deprive the pursuer of his grazing rights in perpetuity. At the time of said original application in December 1976 the defenders were acting as solicitors for both the heritable proprietors of said subjects and also for the pursuer. The pursuer had a number of meetings with George Peterson of the defenders at that time. At no time did Mr Peterson advise the pursuer that the effect of the application would be permanently to deprive the pursuer of his grazing rights in said subjects. As a result of the defenders' failure properly to advise the pursuer of the consequences of said original application, the pursuer has suffered loss, injury and damage as hereinafter condescended upon.

COND. 7 The said loss, injury and damage was caused by breach of contract on the part of the defenders. It was an implied term of the parties' contract that the defenders, having accepted instructions from the pursuer, would exercise the degree of care and skill to be expected of reasonably competent members of their profession. Any solicitor of ordinary skill acting in the field of crofting law and exercising reasonable care would have appreciated the consequences of resumption of said subjects by the proprietors. Any such solicitor would have explained to the pursuer that the consequences of resumption would be permanently to deprive the pursuer of his grazing rights. Any such solicitor would have ensured that in the event of the pursuer giving up his grazing rights in perpetuity, the full amount of compensation was obtained. It was the duty of the defenders to take reasonable care to give the pursuer proper legal advice so as to protect his interests in the grazing rights. In all of these duties the defenders failed and accordingly were in breach of contract.

COND. 8 Separatim, the pursuer's loss, injury and damage was caused by the fault of George Peterson. It was his duty to exercise the degree of care and skill to be expected of a reasonably competent member of his profession. Reference is made to the averments concerning duties of care in the preceding Article of Condescendence. In these duties the said George Peterson failed and thereby caused the pursuer said loss and damage. But for his said failures in duty, the pursuer's said loss and damage would not have occurred.

COND. 9 As a result of the defenders' said breach of contract et separatim negligence, the pursuer has suffered loss and damage. The loss of grazing rights in perpetuity is valued at £9250 per year ... "

[19] I think that on a fair reading of these pleadings the pursuer is alleging that Mr Peterson committed breaches of duty, both contractual and delictual, in relation to his advice to the pursuer concerning the resumption; that the resumption order per se deprived the pursuer of his rights in the land; and therefore that on the date of the order, namely 16 March 1978, the pursuer suffered loss when, contrary to the understanding on which he consented, he lost his grazing rights permanently and received inadequate compensation for doing so.

[20] The defenders admit that it was the clear intention of the proprietors and the crofters that when the grazings were reinstated the grazing rights would be recreated as pertinents of the crofts. They also admit that the effect of the order of 16 March 1978 was to deprive the pursuer of his grazing rights in perpetuity (Ans. 6). For the reasons that I shall give, I do not consider that this admission is well founded.

IV Resumption of croft land

[21] The question when the pursuer's alleged loss was sustained depends to a great extent on the wording of certain of the resumption provisions of the Crofters Acts.

The power to resume

[22] Section 12(1) of the Crofters (Scotland) Act 1955 which, as amended, was in force when the resumption application was made and granted, provided as follows:

"The Land Court may, on the application of the landlord and on being satisfied that he desires to resume the croft, or part thereof, for some reasonable purpose having relation to the good of the croft or of the estate or to the public interest, authorise the resumption thereof by the landlord upon such terms and conditions as they may think fit, and may require the crofter to surrender his croft, in whole or in part, to the landlord accordingly, upon the landlord making adequate compensation to the crofter either by letting to him other land of equivalent value in the neighbourhood or by compensation in money or by way of an adjustment of rent or in such other manner as the Land Court may determine."

Decrofting

[23] Resumption under the Crofters Acts has throughout had the effect that the resumed land ceases to be croft land. The Crofters (Scotland) Act 1961 (s.18; First Sched, Pt II, para 11(b)) added subsection (4) to section 12 of the 1955 Act. As amended by the Crofting Reform (Scotland) Act 1976 (Sch. 3), subsection (4) provided as follows:

"The provisions of the Crofters (Scotland) Acts, 1955 and 1961, shall cease to apply to any land on its being resumed in pursuance of an order authorising its resumption made under this section by the Land Court, without prejudice, however, to the subsequent exercise of any powers conferred by any enactment for ... the enlargement of existing crofts."

This provision did not change the law on the point. It merely confirmed it as a necessary consequence of certain other provisions of the 1961 Act under which resumed land would otherwise have constituted a vacant croft (cf. Secretary of State for Scotland v Shareholders in Lealt and Culnacnock Common Grazings, 1982 SLT (Land Ct) 20).

Conditions

[24] Section 12(1) of the 1955 Act entitled the Land Court to authorise a resumption on such terms and conditions as it might think fit; but such terms and conditions had to be legally valid, fairly and reasonably related to the resumption and not in conflict with the other provisions of the section. The question that was later to arise in this case was whether section 12(1), read with section 12(4), excluded the imposition of a condition that purported to continue the Court's jurisdiction over the land after its resumption.

[25] Four years after the resumption order in this case, a similar point was decided by the Full Court in Secretary of State for Scotland v Shareholders of Lealt and Culnacnock Common Grazings (supra). In that case two areas of common grazings had been resumed by the landlords under an order of the Court made in 1954. The resumption had been authorised for the purpose of the landlords' letting these areas to a third party. The order was backdated to 1952, the date on which the third party had been given occupation of the land. A formal lease was granted in 1958. It too was backdated to 1952. In 1961 the third party ceased to use the resumed areas and renounced the lease. In 1981 the Land Court heard motions by the former croft tenants of the resumed areas for a re-hearing of the original applications for resumption. The crofters moved for a re-hearing with a view to their having the 1954 orders recalled and the land brought back into crofting tenure. The Full Court refused the motions on the view that once a crofter surrendered land in pursuance of a resumption order, the land passed unconditionally out of crofting tenure. It therefore could not revert to crofting tenure if the purpose for which the resumption was authorised were later to fail.

[26] In 1994 when the present matter became contentious, the Full Court followed that decision.

Crofter's share in the development value of the resumed land

[27] Until 1976 the crofter whose land was resumed under section 12 of the 1955 Act received compensation for the loss of the resumed land on the basis of crofting value. Any gain in the value of the land released by the resumption accrued exclusively to the landlord. The Crofting Reform (Scotland) Act 1976, which came into force on 10 June 1976, conferred on the crofter the right to share in the development value of the resumed land. Section 9(1) of the Act provided inter alia as follows:

"Where the Land Court authorise the resumption of a croft or part thereof under section 12 of the Act of 1955, the crofter shall be entitled to receive from the landlord, in addition to any compensation payable to him under that section, a share in the value of the land so resumed ... "

This right extended to shareholders in common grazings (s. 9(4)).

V The vicennial prescription

[28] Counsel agree that the obligations on which this action is founded are obligations to which section 7 of the Prescription and Limitation (Scotland) Act 1973, as amended, applies. Section 7(1) provides inter alia as follows:

"If, after the date when any obligation to which this section applies has become enforceable, the obligation has subsisted for a continuous period of twenty years -

without any relevant claim having been made in relation to the obligation, and
without the substance of the obligation having been relevantly acknowledged,

then as from the expiration of that period the obligation shall be extinguished ... "

VI The submissions for the parties

[29] This case has been debated on the defenders' first plea-in-law, which is in the following terms:

"Any entitlement on the part of the pursuer to reparation from the defenders having prescribed, decree of absolvitor should be pronounced."

[30] The pursuer avers that it was not until 6 July 1994, the date of the Land Court's decision in this case, that he was aware, or could with reasonable diligence have become aware, that he had suffered the loss complained of. That averment raises a question relating to the five years prescription under section 11 of the 1973 Act. But that question will not arise if the claim has been extinguished by the twenty years prescription under section 7. In the application of section 7 the pursuer's state of knowledge, actual or constructive, is irrelevant.

[31] Counsel agreed that if I were not to sustain the plea of prescription based on section 7 there should be proof before answer on the remainder of the record.

For the defenders

[32] Counsel for the defenders submitted that on the pursuer's own averments and admissions the court should hold that the present claim had prescribed. The pursuer himself averred that the date at which his loss occurred was the date of the order (Cond. 6, supra). That date was more than twenty years before the action was raised. In Beard v Beveridge, Herd & Sandilands WS (1990 SLT 609), an Outer House decision, it was held that iniuria and damnum coincided on the execution of the allegedly defective lease drafted by the defenders, even though no ascertainable loss had occurred at that stage. A fortiori, in the present case the loss was ascertainable as at 16 March 1978, when the order was granted, because on that date the pursuer was permanently deprived of his rights in the common grazings. Doubt had been expressed about Beard (supra) by the Lord Ordinary in Osborne & Hunter Ltd v Hardie Caldwell (1998 SLT 420, at p. 421B), but the decision had not been referred to at the reclaiming motion in that case (1999 SLT 153) and it had not been doubted in any other case.

[33] In any event, condition (Secundo) in the order did not specify at what rent the common grazings would be let after reinstatement nor did it provide a formula by which the rent could be ascertained. The condition was invalid. That too was apparent at the date of the order.

[34] The court should sustain the defenders' first plea-in-law and pronounce an interlocutor of absolvitor or of dismissal.

For the pursuer

[35] Counsel for the pursuer argued that the date from which the prescriptive period was to be held to run was the date on which it first became possible for the pursuer to take action to enforce his claim (Gloag, Contract, 2nd ed, p 738). The pursuer could not have raised an action against the defenders on 16 March 1978 because at that date it could not be said that he had suffered any loss or that it was certain that loss would occur (cf. Johnston, Prescription and Limitation, para 4-45). At that date there was a prima facie valid order of the Land Court granted with the consent of the crofters. Any loss apprehended in 1978 would have been wholly speculative. Its occurrence would have depended on an extraneous event, namely that the landlords would renege on their agreement with the Council and on condition (Secundo) and refuse to restore the pursuer to his rights in the grazings. The agreement and the condition were capable of being fulfilled. All that the landlords had to do was to provide the land for use as common grazings by the former crofters. The common grazings need not be croft land subject to the Crofters Acts.

[36] This case was distinguishable from Dunlop v McGowans (1980 SC (HL) 73); Beard v Beveridge, Herd & Sandilands WS (supra) and Stewart v J M Hodge & Sons (1995, unrepd., cited in Johnston, Prescription and Limitation, loc cit). On the occurrence of the allegedly negligent act in those cases it was inevitable that the pursuer would suffer loss. In those cases the effect of the alleged negligence was patent. In the present case it was latent. In this respect the case was similar to Riddick v Shaugnessy, Quigley and McColl (1981 SLT (Notes) 89), Arif v Levy & McRae (1991, unrepd., cited in Johnston, loc cit) and Duncan v Aitken, Malone & McKay (1989 SCLR 1 (Sh Ct)).

[37] The court should repel the defenders' first plea-in-law and quoad ultra appoint a proof before answer.

VII Decision

[38] Since it is now agreed that in this case the "relevant claim" (cf. Prescription and Limitation (Scotland) Act 1973, s. 7(1)(a)) was made by the pursuer on 25 May 1998, the critical question is to identify the date on which the prescriptive period began to run.

[39] In Dunlop v McGowans (supra) the House of Lords affirmed the general rule that a prescriptive period in a case such as this begins to run when iniuria and damnum concur. The decision as to when iniuria and damnum concur is one that depends in every case on the facts. Whether the pursuer has suffered iniuria is a question that does not arise at this stage. The problem in this case is to identify the nature of the loss and to determine when it was sustained.

[40] The pursuer avers (Conds. 6, 7 and 9, supra) that there were two elements to his loss, namely that the loss of the grazings was permanent and that he received inadequate compensation. The pursuer has pled a relevant case on the first element. Counsel agree that conditions (Secundo) (2) and (3) were invalid, for the reasons given by the Land Court. It follows therefore that the order authorised a resumption that would deprive the pursuer permanently of the grazing rights that he had enjoyed. He had expected that his rights in the land would be temporarily suspended. Instead, the order authorised their being extinguished. I need not consider whether the conditions were also invalid for want of specification.

[41] Moreover the pursuer has pled a relevant case that he sustained the second element of his loss. On his own averments (Conds. 7 and 9, supra) he received a sum in compensation for a temporary loss of his grazing rights that was less than the sums that he would have received under section 12 of the 1955 Act and section 9 of the 1976 Act if he had agreed to renounce his grazing rights in perpetuity.

[42] If I am right in this view, the question then becomes that of identifying the date on which the loss was sustained. That date, in my opinion, was the date on which the resumption order took effect.

[43] In my view, it is clear from the legislation that the resumption order took effect when it was implemented rather than when it was pronounced. A resumption order does not extinguish the crofter's rights in the land. It merely authorises the landlord to resume the land (cf. 1955 Act, s. 12). The landlord may delay in enforcing the order or he may decide not to enforce it at all. So long as the order remains unimplemented the land remains in crofting tenure in the hands of the respondent crofter (Macdonald v Barker 1970 SLT (Land Ct) 2, referred to in Secretary of State for Scotland v Shareholders of Lealt and Culnacnock Common Grazings, supra). Under section 12(4) of the 1955 Act decrofting occurred only when the land was "resumed in pursuance of" the order. Likewise section 12(1) provided that compensation was payable for the permanent loss of the grazings only when the land was surrendered to the landlord. Similarly section 9(1) of the 1976 Act entitled the pursuer to receive a share in the value of the land "so resumed". It follows, in my view, that under these provisions the pursuer would have had the right to compel payment of these sums only when the landlords took possession of the land in pursuance of the order. For the purpose of section 7 of the 1973 Act that, in my opinion, is the date on which the prescriptive period began to run.

[44] It is unfortunate that both parties' pleadings concentrate on the date of the order itself and fail to condescend on the date on which the landlords enforced it. It is unfortunate too that the submissions of both counsel proceeded on the erroneous basis that the pursuer's loss, if sustained, was sustained on the date of the order. This approach led counsel for the defenders to argue, in line with the defenders' admission on record, that on the pursuer's own account the action had been raised more than twenty years after that date; while it led counsel for the pursuer to argue that at that date the pursuer had no enforceable claim and therefore that the prescriptive period had not begun to run. These arguments missed the point, which was to identify the date on which the resumption took effect.

[45] In the hope of saving the time and expense that would be involved in amendment of the pleadings, I invited counsel to submit an agreed note to the court setting out the date on which the crofters gave up possession of the land in terms of the resumption order. Counsel agreed that that was the most expeditious way of dealing with the problem.

[46] The facts on that point have since been investigated and counsel now tell me that the date on which the resumption order took effect is a matter of dispute.

[47] Since counsel have completed their submissions and since there is no minute of amendment before the court, I could decide the case on the present pleadings. If I were to do so, it would be open to me to accept the argument of counsel for the defenders that since the pursuer avers that his alleged loss was sustained on the date of the order, the action is irrelevant because on that account of the facts the claim has prescribed. Moreover, if it had been the case that the resumption order per se deprived the pursuer of his rights in the grazings, I would have accepted the argument of counsel for the defenders that, in line with the pursuer's own averments, the pursuer could have sued in respect of those losses at the date of the order. The loss was then capable of being quantified, if only on the basis of an estimate, by conventional methods of valuation (cf Dunlop v McGowans, supra, Lord Keith of Kinkel at p 81).

[48] In the light of further investigations, counsel for the pursuer has moved for an opportunity to prepare and lodge a minute of amendment on the vital factual question that I have discussed. Counsel for the defenders has opposed this motion. It is clear that the pleadings and submissions for both parties have not focused the true question in issue. I would be reluctant to dismiss the case on the present pleadings when the result would be so obviously contrary to the correct legal position. In the circumstances I think that the just solution is to grant the motion. If a minute of amendment is lodged, I shall hear counsel in due course on the question whether it should be received.

VIII Interlocutor

[49] I shall allow the pursuer until 11 June 2001 to lodge the proposed minute of amendment and shall appoint the case to the By Order roll of 13 June 2001. On that occasion I shall hear counsel on all questions as to further procedure.